A Stronger Financial System

Ever wonder what happens behind the scenes of banks? For example, how does the bank manage its money?

Part of the system involves banks lending money to one another for short terms. The system is known as repurchase agreements, or repos for short. In order to raise money, a bank sells bonds or other collateral to another bank but agrees to buy back the collateral at a later date. Repos are part of a market that involves traders at the various banks trading with each other and shuffling the collateral back and forth.

All was well and good until the recent recession. The banks began to be leery of the solidity of other banks. The time proven system of trading began to fail, leaving even the healthiest of banks with a potential cash shortage.

Anticipating a possible major blow to the Canadian banking system, the Bank of Canada, together with the country's securities industries, began creating a plan to revamp the system and ensure crucial funding for the country's banks.

The plan involves establishing a central clearinghouse. Banks would no longer trade with each other but, rather, with the clearinghouse. This would eliminate questions of stability of other banks. Also, a central clearinghouse would be able to give a bank a clearer picture of their repos transactions, thus affording the bank a better way to manage its capital.

The Bank of Canada hopes that this new system will begin to be implemented by mid-2010 and will increase the overall safety and solidity of the Canadian banking system.

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Canadian Consumers May Rock Economic Recovery

Recent statements by Bank of Canada governor, Mark Carney, reflect a spirit of optimism but also carry an undertone of warning.

Despite the recession, Canadians have amassed greater debt, due, in part, to the low interest rates currently dominating the market. These rates, currently at an historic low of 0.25%, were set by the Bank of Canada as emergency interest rates in order to resuscitate an ailing economy. The rates will rise eventually and Mr. Carney, as well as other leading economists, fear that many Canadians may be caught short. Mortgage rates have been extremely low for months while housing prices have rebounded. This has created a perfect setting for many Canadians to take on large debts. However, as the economy improves, interest rates may rise, at a quicker rate than they dropped. Mr. Carney is cautioning Canadians that purchasing a more affordable home today may be a wise choice.

One of the early warning signs of Canadians over-extending is the rise in personal bankruptcies. The third quarter of this year showed a 41 per cent jump compared to the same period in 2008. Similarly, the delinquency rate of mortgage payments has risen by 50 per cent in the last year.

The governor emphasized the vulnerability of the country's economy due to household defaults. As consumers are the key drivers to the nation's economic recovery, Mr. Carney, therefore, hazards Canadians about avoiding credit risks. Of course, a similar warning has been issued to lending institutions to properly monitor household credit.

Mr. Carney strongly believes the Canadian economy is definitely on the rebound and he expects Canada to outperform the other G7 countries. However, Canadian households will play a vital role in that economic recovery and the governor hopes that Canadians will act with economic responsibility for the collective good of the nation.
 
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Corporate Social Responsibility: Better to Give Than to Receive

In a business world infatuated with inflating the bottom line, it is a comfort to know that many business leaders have not forgotten their own humble beginnings or the needs of those less fortunate than they.
 
Corporate social responsibility has been gaining momentum across Canada the last few years. Witness the fact that the annual summit conference of the Canadian Business for Social Responsibility attracts an overflow crowd of luminaries from the business world. This year's conference was even graced by the attendance of Prince Charles.
 
Business leaders have begun to realize that giving back to the communities that helped them grow is an essential part of the business cycle. Whether management supports charitable work by their employees on company time, makes available products at huge discounts for those in need, or provides services free of charge, all contribute to helping the people that helped the businesses.
 
This is not to say that corporate social actions are totally altruistic. Being socially responsible is a wise investment that is sure to pay high dividends. A public that perceives the human side of a business is far more likely to identify with it rather than with the cold corporate entity that is far removed from society.
 
Of course, it's not just about management rolling up its sleeves. Many companies encourage their employees to join their social action programs. Quite often, small company programs have a way of mushrooming into larger, community-wide programs. If the spirit is right, most people want to take part.
 
Businesses do have to take care, though, not to overextend their kindness. There is an inherent danger that could arise from wanting to "overdo it". Remember that you are operating a business for profit. Make sure that your needs are met and then begin disbursing from that point on.

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Web 2.0: The Evolution of Advertising

Everyone is aware of the power of communication. And, perhaps one of the most influential modes of communication is none other than advertising. Similar to many other trends of the modern world, advertising has undergone considerable change in order to maintain its position of influence vis-à-vis modern society.
 

Advertising, by definition, is a sub-section of public relations (PR). PR has its origins in the early 20^th century. Edward Bernays is generally credited with coining the term and concept of PR. He viewed it as an applied social science to manage and manipulate the thinking and behaviour of the public.
 

Early television advertising concentrated on promoting products by bombarding the consumer. Fill the screen and fill the mind. However, the evolution of modern communication has given way to new methods of influencing the public. It would seem that mega-budgets of advertising creating "in your face" ads may not always be the most effective.
 

The Internet dominates our lives like no other media before it. Instant communications are a way of life. In fact, much of our communication today takes place via the Internet. Therefore, logic would dictate (applying the wisdom of Mr. Bernays) that dominating the Internet is the best way to manipulate public thinking.
 

Advertisers today have learned that their products and services must appear prominently on Internet sites. In this way, we will come to accept, almost naturally, that a certain product or service is part of our daily lives. Social networks like Facebook and Twitter serve as powerful advertising venues. In order to achieve a position of influence, advertisers have to bring their merchandise to the people and make it part of their everyday psyche. Rather than just glamour and glitter, advertising must speak to us on our modern terms so that we, in turn, can continue the chain of communication. As Bernays wrote in his book Propaganda (1928), manipulation of the organized habits and opinions of the masses is "the true ruling power of our country."

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Beam Me Up, Captain Quirk

Advertising is a world of its own. Without a doubt, it has tremendous influence on our daily lives. Certainly, the more effective ads remain in our minds for seemingly an eternity. How many of us can remember jingles or advertisement characters from decades ago? Today, though, there appears to be a metamorphosis in advertising and a change in direction entirely.
 

Do an Internet search for the term "quirky advertising" and discover an entirely new realm. Gone are memorable characters selling products or scenes that evoke a warm, fuzzy feeling. Advertising, today, is moving in the direction of strange and weird. The norm in advertising today is quirky. Rather than extol the virtues of a product, advertisers are attempting to create strange beings, scenes, and concepts that have virtually nothing to do with the product. Rather, they hope that the consumer will easily remember the quirky advertising and associate that with the product. Of course, many a television program today is equally quirky and weird. Shouldn't the advertising complement that?
 

No, it shouldn't! Advertising, primarily on television, has become merely additional entertainment, rather than a medium for promoting sales. Entertainment for the sake of itself is perfectly legitimate but the jury is still out on whether or not these quirky ads have managed to attract consumers. Will a weird ad encourage you to purchase a product or simply tune in for the next installment of the advertisement?
 

With all the competition to produce odd and different types of advertising, it seems that connecting with the consumer – the primary goal – has been ignored. Perhaps, after the dust has settled and some of the strange creatures that inhabit the advertisements have been retired, consumerism will again be the driving force behind advertising.

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Canadian PM: Stimulus Package Temporary

On a recent official visit to China, Canadian Prime Minister Stephen Harper took the opportunity to use a press conference as a venue for giving a Canadian economic update and to send messages home about the Canadian government's stimulus package.
 

The timing of the report may have seemed slightly peculiar but a portion of the diplomatic visit was dedicated to promoting Canadian business, investments and trade with China. Harper hopes that this trip will improve and expand business opportunities with China. Canada's relationship with China is the country's second largest, aside from the U.S. Bilateral merchandise trade with China tops $53 billion a year, although China exports four times as much as it imports from Canada. China has lifted a ban on pork import from Canada, a $50 million potential market, but this is still far from an equal balance.
 

Mr. Harper sent a message home that the government's stimulus program has given a jump-start to the economy but Canadians should be aware that it is a temporary program. The government has warned that stimulus funds must be spent by March 2011 or will be lost. Government officials are quick to point out that termination of the stimulus funds will allow the current projected deficit of $57 billion to be cut in half. Opponents of the government, though, point out that trimming the deficit is not the only issue at hand.
 

The stimulus package was designed to help a recession struck nation by providing employment for Canadians. Critics note that the Harper government has not released figures on how many jobs were created through the stimulus programs. Furthermore, Statistics Canada announced that the economy had grown by only 0.4 per cent in the third quarter, a rate slower than most of the Group of Seven countries.
 

Mr. Harper paints a picture of cautious optimism yet it remains unclear whether Ottawa has indeed managed to invigorate an ailing economy.

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A Province Divided

It would appear that all is not well in Canada's westernmost province. The implementation of the Harmonized Sales Tax (HST) looms on the horizon for July 2010 and the ground underfoot is shaky with protests and counter-protests.
 

Critics of the new tax claim that the Liberal government of Gordon Campbell organized strong support from within the business community to endorse the HST. The business community refutes any such instigation by the government. Business leaders in B.C. claim that, following Ontario's lead in adopting this new tax, they realized that the inherent benefits far outweigh the disadvantages and, thus, have supported the government's tax proposals. They see the new tax as a way to stimulate the province's productivity which, according to experts, has been "dismal" for the last two decades. While big business agrees that there will be short term problems with the HST, they feel that the tax will lead to long term economic improvement in investments, competitiveness, and consumer prices.
 

Consumers are slow to give their endorsement. That which is good for business means taking more from the consumer's pocket. The bottom line is that consumers will now pay more for many goods and services that will carry the HST tag but are currently exempt from PST or GST. This disgruntlement has given way to public protest about other government policies that have not found favour with the public.
 

As a result of the recession, the B.C. government has been forced to curtail some budgets and trim expenses on existing programs. Indeed, with the new budget looming, the public is awaiting the latest round of budget cuts. A prevailing opinion is that the HST was adopted in order to funnel more money into an ailing provincial budget at the public's expense. During the election campaign, Premier Campbell pledged a deficit ceiling of $495 million. As this summer approached, that pledge grew to a whopping $1 billion and the end of summer saw a projection of that estimate being tripled. With numbers like these being bantered about, neither side is quite sure about the true economic state of the province.
 

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Harmony in B.C.? The implementation of the Harmonized Sales Tax (HST)

July 1, 2010 is rapidly approaching in British Columbia. While it will be a national holiday as it is every year, it is also the date that the province will implement the Harmonized Sales Tax (HST). The jury is still out on whether it will be good for the province or not.
 

The answer, at this point, depends solely on who is asked. There are clearly going to be winners and losers in this new tax. The decision to implement the new tax is final. The actual impact is still theoretical.
 

It seems that the majority of the B.C. business community is clearly in favour of the HST. With 130 jurisdictions around the world using an HST style tax, B.C. simply cannot ignore joining the fray, if it wishes to compete for business investment. The province must offer the same tax advantages to the business community, lest businesses move elsewhere to obtain the benefits. Similarly, with e-commerce on the rise, retailers and manufacturers are competing with provinces like Ontario, which voted to adopt the HST.
 

A major challenge lies with the hospitality industry and other business sectors that currently don't have to charge PST, or services that don't have to charge GST. Under the new HST, these businesses and services will have no way getting back the HST. In essence, here will be the new tax burden with no relief in sight. Also, the average consumer will pay more taxes. Consumers cannot claim any portion of the HST but will pay more for products and services that are currently tax exempt but will not be so under the new HST.
 

Economists claim that implementing the HST is the right move for B.C. Come July 2010, B.C. will see if the economists are correct.
 

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Truths About Bankruptcy

For some individuals, there is no alternative. Financial debt can eventually lead to personal bankruptcy. Although the prospect of absolving one's self of debt by this method is a frightening thought, the truth is that there are many misconceptions surrounding the bankruptcy process that serve to make a difficult situation even worse.
 

Many people believe the misconception that filing for bankruptcy requires hiring an expensive lawyer. Truth be told, Canadian law states that lawyers cannot serve as bankruptcy trustees. In fact, small bankruptcies are filed by a trustee and do not appear before a judge. Moreover, if you're worried about protecting your privacy during this difficult time, fear not. Since 1997, personal bankruptcies are no longer advertised in the newspaper so your privacy in this delicate matter is assured.
 

Some have an image of the bankrupt individual sitting penniless in the street, hat in hand. That's a fine cartoon image but not reality. Declaring bankruptcy requires committing to a modest lifestyle for at least nine months. Different provinces have different rules regarding the amount of money you may retain as well as which possessions are protected.
 

A common untruth is that all debts are erased upon declaring bankruptcy. In fact, some debts are not. Child support and alimony are not changed. In many cases, student loans are also not erased.
 

Fearful that you will remain bankrupt for life? Fear not. Once your obligations have been fulfilled, you can be discharged from your bankruptcy. In a majority of cases, this occurs after nine months (but it can be extended if there is reasonable opposition from interested parties). Also, believe it or not, many people can re-establish their credit within one to two years after declaring bankruptcy.
 

No two cases are the same. But, before making a decision about declaring bankruptcy, do not merely visit the local rumour mill. Do the appropriate research carefully.

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Canada Goes Self-Employed

The truth is out. The latest trend in the business world is self-employment.
 

The recent recession has manifested itself in many ways across the nation. For many Canadians who found themselves unemployed as a result of cutbacks, downsizing, etc., the choice was despair or repair. The former meant waiting until something new comes along. The latter meant channeling one's talent and energy into a new venture as one's own boss. Statistics Canada revealed some fascinating employment figures. In April of this year,some 36,000 new full time jobs were created across the country. Nearly all these jobs were from self-employed Canadians. Overall, this translates into one in six Canadians being self employed.
 

Of course, becoming self employed is easier said than done. The process requires a large measure of self determination to make your idea work. In addition, self discipline is required in no small measure.
 

It may seem like a great convenience to get up in the morning and already be at work, if you're working from home. The danger is as great as the convenience. Experts have offered various tips to help you along.
 

It is imperative to make a distinct separation between work and home lives. Temptation to get distracted with household issues is very easy. Making your business succeed requires utmost full time concentration. If you wouldn't run out for milk and the cleaning at your old job, don't do it now.
 

Remember that you used to go to work at an office? Set up a distinct office at home and go there in the morning. Keep regular hours at your office. Get dressed for work in the morning.
 

These are but a few steps in maintaining a work ethic that will enable you to focus on the task at hand; launching a successful new job with an extremely determined boss – you!

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Is There An Employment Boom?

Recently released statistics by Statistics Canada indicated positive employment figures for November 2009. But, is the picture truly as rosy as it appears?
 

According to the figures, Canada's unemployment rate dropped by one-tenth of a percent from October, reducing the rate to 8.5 per cent. Full time jobs increased by 39,000, while part time employment increased by 40,000. While these 79,000 new jobs indicate a strong pick-up in the labour force and, subsequently reflect on a steady recovery of the nation's economy, there are a few factors to consider that may curb the euphoria.
 

First, it should be pointed out that economists agree that this pace of job growth is entirely inconsistent with the current pace of economic recovery.

Next, economists are concerned that the total hours worked declined by 0.3 per cent. In other words, more Canadians are working but less work hours are being paid. Simply put, Canadians are bringing home less money.
 

Another point noted is that almost all the new jobs – 73,000 positions – were in the service sector, primarily in educational services. It is quite possible that this gain may be an abnormal seasonal adjustment. December, therefore, may be far less positive in terms of actual job gains.
 

Economists are also concerned about weak job productivity as a result of various factors compounded to negatively impact workers' motivation.
 

Finally, self-employment fell by 32,000 jobs in November. In theory, this drop can be viewed positively. In a weak economy, self-employment gains are generally discounted. They are viewed as a fallback for unemployed Canadians who have no choice but to start their own businesses in lieu of regular work.
 

Is the Canadian job market truly on the mend? Only time will tell.

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How to Avoid Being Defrauded

As if the recession hasn't presented us with enough business and financial worries, a new item has been added to the worry menu.
 

According to the 2009 PricewaterhouseCoopers' Economic Crime Survey, some 56 percent of companies surveyed have reported falling victim to white collar crime in the last year's survey period. This number reflects a 4 point increase over the last two years. Indeed, the figures are the highest in the last six years. There has been a 10 point increase since 2003.
 

It would appear that difficult economic times increase the incentive to commit fraud as a source of income. The end result is due, in part, to a greater vulnerability of many companies whose control systems have been weakened or even eliminated due to downsizing and cost-cutting. Fewer funds are being allocated for fraud detection, prevention systems and investigation. As a result, financial fraud is increasing both from within and outside organizations.
 

Certain sectors have suffered from fraud the worst in the last year including communication, financial services, insurance, hospitality and leisure. Asset misappropriation and accounting fraud were the most common types of fraud encountered by the companies surveyed.
 

As an end to the recession is not yet in sight according to many experts, it is felt that fraud may continue to increase. Certainly, as many companies are yet to take preventive measures, there are adequate opportunities for the talented white collar criminal.
 

Canadian judges have responded to this increase in fraud crime by handing down severe and harsh punishments for those found guilty. But, the number of crimes reported far exceeds those caught. Businesses would be well advised to keep their eyes open and their systems well protected.

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Focus On One Thing

It sounds like instructions that you might give to a photography student or a line that you might hear during an optometrist's visit. But, it is also the credo of many business entrepreneurs. The secret of success of great companies is to do one thing very well. It is far too easy to go off on several tangents and try to "be number one" in a few ways. But, the business leaders who have made their way to the top will tell the same story. Concentrate your energies on one area and focus your attention in that one direction.
 

For example, sales are crucial to business. But, are great salespeople born or made? Some do have an inherent talent to sell. However, some companies have put their energies into strong sales training. This is a proven investment as salespeople no longer shoot from the hip. Rather, they become part of the sales force that drives the company forward. You focus on building the sales team, complete with team spirit.
 

Apropos team spirit, that may be the area requiring your attention. Employee retention is crucial in the business world. A constant turnover of staff will definitely have a negative impact. A key strategy employed by many experienced employers is to find ways to create an environment that makes employees desire to come to work. The answer is not always money. Making employees an active part of the company is valued highly. Employees' opinions do count. Chances are very good that your staff has terrific ideas about improving the company and its sales. Provide incentives but allow employees to be part of that incentive process. The sense of belonging creates the driving spirit so that everyone is part of the big picture.
 

Think of business success like an arrow. It propels forward only when the point is out front.

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Credit Card Code of Conduct

If you own a retail business, you will understand exactly what the issue at hand is all about. How much of your hard-earned money goes to the credit card companies through fees and charges that seem to keep rising?
 

Canadian Finance Minister Jim Flaherty recently announced the implementation of a voluntary code of conduct for the credit card industry. The new Code of Conduct has come in response to increasing complaints by small businesses about the excessive fees that they are being forced to pay.
 

The voluntary Code of Conduct, which may be revised over the next couple of months according to Mr. Flaherty, lists measures to give merchants freedom of choice in regards to which payment vehicle to use. The Code requires posting of online information regarding the interchange fees charged to retailers. It will also require the credit card companies to give retailers 90 days notice of any fee changes.
 

Responding to the announcement of this new Code, retailers view this as a positive development but would also like Ottawa to create an oversight body to ensure adherence. Creation of a parliamentary committee was one possible suggestion.
 

Mr. Flaherty pointed out that this Code of Conduct is voluntary and he hopes that the credit card companies will respond positively by voluntarily adopting the measures set out for the industry. The alternative, according to the Finance Minister, is to regulate the industry through legislation. But, as the credit card industry has objected vehemently to regulatory legislation, it is hoped that they will adopt the voluntary measures.
 

As other voluntary codes of conduct have been adopted by other industries, retailers hope that the credit card giants will similarly adopt these new guidelines.

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