A great article in today’s Financial Post explains how Canada’s really the most fiscally conservative G20 member right now.  Ironic, eh?  Flaherty and Harper don’t want any more government intervention in the markets right now.

Canada has the world’s best and most safe banking system currently.  Corporations here aren’t going bankrupt and can still issue medium-term bonds.

But today Harper and Flaherty suggested they’d consider following in the US footsteps by bailing out part of the auto industry.  The only reason apparently is that with the huge US bailout of the auto industry, if Canada doesn’t do the same thing Canada’s industry would be so much less competitive.  How unfair!

You know, the reason it needs to be bailed out anyway is all about excess.  People don’t need new cars every three years!  And people are sick of buying gas guzzlers!  And we need hybrids and cleaner energy cars anyway!  I say let GM fail… that’s what capitalism is supposed to be about.  GM should have an obligation to its pensioners, of course - but otherwise people need to find work elsewhere.  It’s the way things work.  Maybe I wouldn’t be so harsh if it were an industry like health care, which actually helps people.  But frigging air-polluting, sickness-inducing fat-making machines - let it go.  Cars have hindered society as much as they have helped.  Let a new structure and new, cleaner method of transportation rise up in its place.  Down with GM!

I won’t like it if I see Obama bailing the car industry out.  There’s gotta be a better way.  Maybe bail them out only if they only produce hybrid and fuel-cell…. now *that* would make sense.

So a bailout was finally passed - practically forced - but what difference will it make?  Do you think it’s going to save anything or anyone at this point?  The state of California alone has already said it’s pretty much out of money.  Talking heads and experts are in agreement that we’re basically in a bear market now.  No longer do I hear questions over “whether we are really” in a recession or not.  Over the last two weeks, if you’ve been closely reading the Financial Times and WSJ as I was, you might have felt as scared as I finally did about this mess.

Don’t get me wrong, I haven’t been taken by surprise with this.  I’d been reading about the crash-course the US economy was heading on ever since about 2002 (when I started reading about it; not when the economy took the wrong turn).  August 2007 was just a hint and confirmation of what was coming.

The questions I have now are: (1) why hasn’t the dollar fallen lower? and (2) why isn’t gold up higher?

If you have some good ideas about that, I’d like to know.  One reporter in the Financial Times put it aptly: of course it’s possible for the US government (which is able to print its own money) to bailout some US banks, but what would happen if this scenario played out in Europe?  Deutsche Bank and UBS have holdings and obligations much greater than their respective national governments.  And Germany cannot print its own money.  So Germany could not bailout its own banks.  Do you think it will be the Chinese or Japanese stepping in in such a case?  I think we could definitely see that.  The good thing, though, is that pure real estate speculation, greed and the illusion of the “American” Dream didn’t spread amongst the French and most European countries.  It’s been a product of pure capitalism and its solution will also be a product of such capitalism - i.e., other countries coming in like hawks, like Japan, to buy up the failing entities.

We’re already living in a totally globalized world.  Nations are just names.  Yesterday I fixed my computer by talking to two young kids in the Phillipines and Bangalore.  Most of my house furnishings come from China, some designed in Sweden, others in India.  With an increasingly interwoven world system, there might be less and less places to “hide” your money (ie., keep it safe) in situations such as the US faces today.  I must admit that the media response to the economy currently seems a bit hyperbolic, but nevertheless it’s getting even to me.  I’m thinking it might just be a good time to pay off debt rather than invest.  But some of these income trusts are showing some really good sales, too.

I just found out today that because I’m also a customer of my bank’s investment banking outfit, it entitles me to a better USD-CAD exchange rate than regular customers!  I forgot to ask just how much the benefit was, but I am pleasantly surprised since this is the second time in about a week that my bank has bent over to help me out, and it’s all because I’m becoming a “better customer.”

So if you’re Canadian, consider becoming a customer of your own bank’s investment service.*  If you bank at the Bank of Montreal, sign up with BMO Investorline.  If you’re at Scotia, enrol with Scotia McLeod Direct Investing and link it to your online account.  It can pay off in the long run.  This preferred exchange rate was never advertised at my own bank - as far as I’m aware - the teller just mentioned it now because “I’m a good customer.”

How to be a better customer?  (1) Keep your account open: don’t close it and keep switching banks.  If you want an account with another bank, open one, but keep your previous one active too.  The longer you have an account with your bank, the better your relationship with the bank will be.  (2) Try to keep as many of your products as possible at the same bank.  Money market fund, Foreign exchange account, savings accounts, credit line, credit cards, etc.  Same principle as above.  Have several at several banks if you need to.

*If you’re American, as I understand it most banks or “savings and loans” vehicles don’t also have their own investment bank associated with them.  So I’m not sure how this would work.  You should still look into how you can get preferential exchange rate treatment if you’re a great customer, however.