A few of my friends have taken quite a financial hit these past few weeks/months. It’s upsetting for me and devastating for them. They do not deserve this. The ones I know all worked very, very hard for a long, long time to accumulate more wealth than they needed but it was what they were programmed to do. They complied by the system and it failed them.
You know how it is….stock portfolios, investments, holdings, money. All that paper-value is now down and some of it is way, way down. One friend had an inclination to oil investments and I hope like hell he was not playing the futures market because that ‘game’ went bottoms-up pretty majestically. One minute you are juggling a whole bunch of $50 barrels of oil and the next you are holding barrels worth MINUS $50.00. That is a hard pill to swallow. Easy to explain. Hard to accept. The problem of risk management, even break-even is exacerbated greatly when that happens. Fortunes are lost and will never be recouped.
But it is also true that the ordinary working Canuck has lost a large chunk of paper-value as well. Real estate is where the ordinary citizen saves up wealth in this country. It’s a crazy system of course but that is where we have all ‘lived’ for a long time. Buy a house you can’t afford, pay interest to the bank for twenty-five plus years and you finally pay off that $200K house that now is worth $1.2M. And we all sit there as old people thinking we are geniuses. In reality, we are just old.
A lot of people lived their entire lives for a house.
Of course, they have to sell that home to realize that increase and the next place they buy into will also be inflated by the other old geniuses that previously owned it. And everyone climbs up a bit on the back of the next generation trying to find a place to live. Crazy system.
The Canuck-buck is also down. Most people don’t notice it when that happens…except that it shows up as increased costs for food and imported items virtually 90% of all products sold in Canada are imported or ‘world-priced’. Maybe more.) When your dollar loses value, you lose buying power and less buying power means that you are with less power (duh). So a diminished buck costs you directly but you only see it as ‘inflation’. The government is OK with that. “Hey, we try to fight inflation by increasing interest rates. Not our fault.”
In a global economy, it is not all their fault but much of it is.
Canada’s economy is hit even harder than many in the first world….because the economy is really just the collective attitude of the people. We do not have enough people to keep the momentum going. You can count cows or houses or paper money and think you have metrics on the economy (Stats Can-type thinking) but the truth is that the number of cows and such is simply not as much of a factor as is our collective mood. If we are keen to consume and spend and have fun, make babies, buy new cars and houses, then the economy booms. If we sit at home with a mask on our face, the economy stalls. Attitude is everything in economics.
And our collective attitude right now is depressed and angry, fearful and cautious. We are not looking at a boom just around the corner. Even if Canada ‘bounces’ back from C-19, the disease, the economy will not. It cannot. Many of the middle class have been wiped out – or hit very hard, anyway. Their HUGE RRSP is no longer huge. Their savings are being used to pay down new debts. Their house (houses, cottages, condos and time shares) are all worth less. Many older investors are also leveraged to be playing that game – and now they are on the losing side with the lever working against them. They are facing margin calls and demand loans. Their energies and productive creativity is on life-support.
And many of them are too old to start over.
Covid-19 is more than just a virus, it should be a wake-up call.