Canadian dollar hits 11 year low with no end in sight

The Loonie hit on 11 year low closing the day at 1.3785 / 1USD. Last time the dollar was this low was May 2004.

Apart from immediate consumer impact felt in the purchase of consumer goods and vacations, the depreciating currency is indicative of deeper problems for the Canadian economy. Canada is predominantly a commodity based economy which means when major commodities are slipping so too will the Canadian economy. With oil hovering around $35 a barrel, investment in these particular industries has been muted.

A short term exogenous factor affecting the currency was the recent Federal Reserve (US) interest rate announcement raising the benchmark interest rate to half a percent. On leave for an exchange market when benchmark interest rate increase, the currency is comparatively more attractive and therefore I appreciates vis-à-vis other worldwide currencies. As the American currency appreciated the Canadian currency depreciated.

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Federal Reserve Increases Overnight Rate to .5%

The federal reserve today increased the overnight lending rate by a quarter percentage to 1/2 a percent. This is the first increase in nearly a decade dating back to 2006. Increasing the benchmark rate is an indicator that the American economy is starting to not only improve but is becoming resilient as well.

The increase means major lenders now borrow at a higher rate. Eventually there will be a trickle-down effect that will impact the consumer as well.

The increase coincides with the Fed’s goal of maintaining a 2% inflation target.

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The Economics of Property Law – Coase Law

Here is an article that deals with Coase laws and the economics of property law.

The lack of defined property rights leads to the abuse of certain activities as a result of a differing perceptions regarding how choices affect marginal private benefits and social costs. How does this impact society and what does this say about how private enterprises make choices? let’s use the example of pollution and the effects on property owners.

A particular firm that is polluting the air will continue to do so because to the firm, the private cost of polluting is zero, and the social costs need not be considered. The external costs imposed on society (the social cost of the pollution) will not be factored into cost analysis of the firm.

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Canada Elects New Liberal Majority Government – Markets Respond

On October 19th, 2015, Canadians went to the polls in a national election and ousted the longtime Conservative government for the more left leaning Liberal party. There have been some concerns, particularly in oil-rich Alberta, that a change in government would spell further decline in the energy sector. Prior to the change in government the Canadian economy sank into a recession and stock markets have been volatile largely based on reduction of world energy demand (and the Canadian economy largely being reliant on the commodity sector.)

Stock markets hate uncertainty and uncertainty creates price volatility. Therefore the fact that Canada has a new majority government is positive for the stock market. Any changes that the new government wants to implement will take time.

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Incentives and Profit for Insurance & Drug Companies

Pharmaceutical companies are routinely called out for supposedly holding on to suspected cures because there’s no money to be made. Sometimes drugs are available but because the condition is comparatively rare is costs thousands of dollars for one treatment you’ll need the rest of your life.

How do they get away with it and why does it happen?

From a drug company’s perspective the issue of what to product and research is far more complex than arbitrarily holding back cures. For example, the research required to come up with an approved drug can run into the hundreds of millions. There’s also no guarantee the drugs will in fact be effective, sometimes R&D produces a dud, so that’s millions lost.

It’s no surprise that when a drug is approved drug company’s will want to have a lot of sick people for a long time buying the drug. So this isn’t necessarily a case of having no incentive to produce drugs for problems, but a need driven by the market to find drug treatments that will in turn product a profit.

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Corporate Whining Cartoon from 2009


1842 Businessman: If workers can legally STRIKE, no business will be able to survive!
1887 Businessman: Give BLACKS an entire DOLLAR for a day’s labor? Might as well burn my business to the ground!
1912 Businessman: Worker deaths are TRAGIC, but ANTI-SWEATSHOP laws would be the DEATH of industry in America!
1915 Businessman: When workers can’t be FIRED for joining a UNION, how can ANYONE stay in business?
1924 Businessman: Banning CHILD LABOR would DESTROY the economy! Right, little Timmy?
Small urchan boy, missing a front tooth and two fingers, standing next to 1924 businssman: That’s right!
1938 Businessman: We can’t have a FORTY HOUR WORK WEEK, because if we DO there’ll be no employers LEFT to hire anyone!
1964 Businessman: EQUAL PAY for women AND negroes? Business can’t stay afloat if federal regulations STRANGLE us!
1970 Businessman: HEALTH and SAFETY laws are a formula for MASSIVE PERMANENT UNEMPLOYMENT!
NOW Businesswoman: If the new labor rights law PASSES, then business is doomed! DOOOOOOOOMED!

I believe this is the source:

Tips for Saving Money This Post-Secondary School Year

It’s tough, rising tuition costs will never cease, books will always be new every year, and rent in your city is poised to increase. The opportunity cost of going to school is more than these costs, but the loss of your income for the year as well. So why bother with the all the hassle, just work a while! Get into the trade! Well regardless of how you do the post-secondary school thing, the fact of the matter is, you need something more than your high school diploma to increase your average salary for the rest of your life.

Since post-secondary isn’t free (in North America at least), here are some tips before and during the school years.

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Greece Economic Instability? Let’s Talk About China Instead

The real problem facing the global economy isn’t little Greece and their fits surrounding debt. It’s China, the world’s second largest economy by GDP and their fits surrounding trading with debt. Margin buying seems to be the largest culprit behind the most recent decline over the past month on the Chinese stock exchange. If China’s economy contracts, it is a sign that overall demand in China is down, but also, if the trade surplus is negative, global demand is slowing as well.

Links from around:

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Already Crippled Cities Face Crumbling Infrastructure

Numerous cities and counties in the United States are faced with the continuous looming possibility of having to declare bankruptcy due to rising costs and declining tax revenues. It doesn’t help both state level and federal level coffers when, and if, these municipalities recover, a massive infrastructure expense looms on the horizon.

Or should we say the horizon has already come to the forefront. Infrastructure is crumbling in the USA. Not even looking at the state of education systems, and public infrastructure, the very core of transportation (roads and bridges), and sanitation (stormwater and wastewater), could not only cripple, but destroy some areas.

THe American Society of Civil Engineers released their 2013 infrastructure report card and it’s abysmal. Overall America receives a grade of D+ (somehow passing, and since when is D+ a grade?) but wastewater alone is thought to require, in capital costs alone, around 300 BILLION dollars country wide. You can let infrastructure crumble, but that plan banks on local municipalities putting money away to help cover capital costs. You can’t save money if you don’t make money.

Where WILL the money come from? Simply put, America will do what America does–borrow. Consider the estimated cost is about half of the bailout for the entire financial sector, there’s money out there. Whether America can find the resources to borrow effectively is another story.

Money will find it’s way to pay for infrastructure, probably not all at the same time, but it will likely have a positive impact on the economy. At least in the form of job creation around new infrastructure projects. That would be a much needed stimulus. But, insurmountable debt loads have come to a saturation point–there’s a time when you just can’t borrow huge sums of money anymore without either facing crippling interest rates, sky high inflation, or a devastating combo of both.

Not that infrastructure is required for everyone. Most rural areas rely on private septic systems or none at all. (Some pit the number of people without wastewater system at about 25% on the high end.)

Finding the wherewithal politically to continue considering these issues in advance (or put more poignantly, replacing what’s broken before it breaks) will take guts. All in all, this is one of many pressing needs for America as they start to determine what’s really important and what they really should be spending money on. A growing discontent is going to fuel much needed change, and that will come quickly when the things we take for granted break or crumble.

With notes from Stamford Scientific International specializing in WWTP fine bubble diffusers.

Alberta to Bump Minimum Wage Starting in October

Business’ may cry foul, but Alberta, despite being one of the wealthiest provinces in the country, when the oil price is high, has the lowest minimum wage in Canada. The affects on the economy will be negative, say small business owners and service related industries. Of course, every argument has two sides. Here are some examples where minimum has not crippled the economy, and why it won’t happen in Alberta.

Here are some helpful sources to suggest minimum wage won’t throw the economy into a permanent recession.

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