Low Interest Rates Do Not Mean Easy Money

I was listening to my wake-up radio station this morning, catching the 6:30a.m. news as usual and waiting for the business commentator who follows the sports. Now, I'm sure this guy is well-received in some circles - I mean, the radio station must pay him, right? - but to me his comments are almost always some voodoo interpretation of some tidbit he's spotted in The Globe & Mail prior to going on air.

Today was no exception, when he talked about Bank of Canada's 0.75% interest rate reduction benefiting some people (variable-rate mortgage holders and line-of-credit users for example) but he was pretty certain the central bank erred because in his opinion there is now a big risk of re-creating another credit bubble right before our eyes 'by lending lots of low-cost money to people who don't qualify for loans and can't pay them back' i.e. sub-prime mortgages or similar. What a dope. It doesn't matter a whit how low rates are if no one is lending and if no one can afford to borrow. I couldn't take it any more - grabbed my cell phone from beside the bed and called the station's talkback line with the dual objective of setting him straight and venting a little too.

The fact is, regardless of interest rates set by the central bank, or more relevant - by the big banks at the retail level - the banks simply aren't lending to anybody unless there are existing commitments or platinum-plated collaterals, and even then maybe not. Why? Well, one good reason is the banks' priority is to shore up their capital bases - i.e. conserving cash - which means i) not lending at all, or ii) demanding much higher levels of collateral from customers, or iii) by demanding much higher interest rates from customers, or iv) all the above.

One personal experience from last week is related to my Mom's move to a retirement condo. Mom is moving to a retirement-specific condo building. In order to finance the move in a convenient manner, Mom has lots of assets but asked her bank to loan her $60,000 for 90 days, with her $127,000 GIC they were holding (not her only assets at that bank) as collateral.

The first anomaly was, the request had to be forwarded to head office. Then - more than two days later - the loan was denied flat - for no quoted reason. The capper came when my brother, acting for my Mom, asked the bank to then liquidate the GIC so she could complete the condo transaction and the personal banking manager said to the effect of 'No, you can't liquidate your GIC' even though it is clearly redeemable any time. All of our jaws dropped simultaneously. To make the rest of the story short, my brother, a lawyer, invited the banker to discuss the legality of denying my Mom access to her deposited assets. The banker caved and cashed the GIC. We are still flabbergasted at the actions of that bank.

I really believe the bank's actions in this matter, when extrapolated to a Canada-wide bank-wide context - send the message that it is absolutely focused on preserving its capital, not lending to anyone unless they truly have to, and making sure none of their branch officers make lending decisions that erode their capital positions. No kidding - their investment arm clearly screwed up so big on sub-prime & ABCPs they have to do something to remain on a even keel.

The next case is a well-heeled professional friend whose business-only line-of-credit was coming up for annual renewal. His business is solid as a rock, and growing, and has substantial deposits at his bank, at least three times the amount of the line-of-credit, which he has never drawn against. This time around on the annual renewal, the bank asked him for all his personal statements, including his wife's, and an inventory of everything they have invested, before the bank would consider renewing the business line-of-credit. My friend is pissed off and the bank is adamant. In times of easy credit that would be deemed idiotic and totally unnecessary. In these times of the credit-crunch, it's business as usual.

Of course, when the central bank dropped interest rates by 0.75%, everyone expects the chartered banks to do the same, right? Wrong, and for the second time this year. The banks are absolutely intent on improving their overall loan performance and the way to do that is to levy higher interest charges wherever possible. So when the central bank drops the rate 0.75%, customers simply do not get the whole benefits.

The newspapers are full of reports where banks wouldn't lend (the BCE buyout is such a classic example) to their ultimate relief. Their capital bases are all-important these days.

One of the major objectives - even demands - of central bakers when forwarding billions of bailout dollars is that banks must make loans available, hence keeping the economy moving. The banks' actions couldn't be further from meeting those demands. Truth is, the banks are seizing up the credit markets in a selfish and vain attempt to forestall their own troubles and in the process are paving the road to economic hell for us all.

Don't believe me? Go apply for a loan. Good luck - let me know how it goes.

Young Terrorists Execute Plan for Slaughter - Almost...

Last week's horrible slaughter of innocents in Mumbai at the hands of a band of well-armed & trained youths is yet another wake-up call to the security chiefs of the world's democracies.

The characteristics of the assault are eerily echoed in a story Canadians heard earlier this year: 10-20 young men, all teens & early twenties, burning with a religious zeal learned in the terrorist camps of Afghanistan, training with weapons & tactics in a remote outdoor setting, focused on mass murder and destruction in the name of jihad, targeting the seat of government and other high-profile etablishments, capping their actions with the particularly gruesome objective of decapitating a prime minister.

This is an analogue of the story of the erstwhile Brampton 17 - described by Canadian authorities as dangerous terrorists-in-training and brought to trial on related charges. Interestingly, their defence is largely founded on the premise that they are just boys, goofing around, pretending to be bigger than they could possibly achieve, harmless in a kind of mis-guided boy scout troop way. Their juvenile conversations were pointed out as examples of just how innocent the boys were. My guess is, if we had taped 'down-time' conversations of the Mumbai attackers they'd be just the same - a smattering of boy-talk, boasting of prowess, complaining about food, joking about another's girlfriend, scraps of religious fundamentalist leanings and even confessions of self-doubt and backsliding. These are, after all young men in their teens & twenties - what would we expect them to talk about?

Whatever the fate of the Brampton 17, in the context of the slaughter at Mumbai, it may be a big mistake for peace-loving, complacent, forgiving Canadians to gently chide the judiciary into giving the Brampton boys an easy out. Besides, just because the Crown cannot always get a conviction or even get charges to stick, does not mean there is no cause for alarm and continued vigilance in this country, indeed around the world.

Never Let Truth or Common-Sense Get in the Way of a Good Story

I'm no medical expert but common-sense tells you the stories about re-use of syringes in western Canadian healthcare institutions are very overblown and in all the press I've seen, only one complete explanation was made about what is really at (non-)issue:

1. The syringes are re-used ONLY injecting into IV tubes - NEVER into patients directly.

2. The NEEDLES are NEVER re-used - only the syringe bodies.

It would be a rare and huge malfunction of the whole IV setup that would propel a patient's blood backwards up the IV tube to the injection point, creating the potental for spreading of any blood-borne disease or infection, that would also have to travel up a (NEVER re-used) needle point, into a syringe, and be ignored by an idiot attendant. Possible? - yes. Likelihood? - miniscule, like never.

Anyone with common sense can see this practice would likely never cause a problem - there are no reports of this practice causing any problem - ANYWHERE.This is a tempest in a teapot and needs to simply go away. Perhaps a provincial or federal minister of health will have the good sense to speak to the people, give all the details, tell the whole truth and dispose of this non-scandalous non-story before it gets any larger.

Furthermore, it would be very interesting to learn the source of this story - who decided to make a name for themselves or who wanted a 'scoop' by breaking a big healthcare scandal story.

Healthcare has enough problems without having to fight its way through stupid media coverage like this.

Experts Blame 'Lack of Confidence' for Market Turmoils: "No Shit, Sherlock..."

My point today is about confidence - so many folks will take all the financial pros' statements bemoaning a lack of confidence everywhere as righteous chastisement for liquidating their meager assets in an effort to save something! However, given what we know, and worse - what no one knows about where is the real bottom - isn't a lack of confidence perfectly correct and even smart? What else is recommended by these highly-placed touts? Where is their own money? If they're getting laid as low as many citizens, they have no right to be on their soapboxes at all. In the end,

Mark-to-Market will have its inevitable day, and sooner is better.

It's Hard to Blame Handguns for Problems People Create

The Handgun Problem. Lots of folks talk about ways to reduce or eliminate gun-crime. I agree - control of Handguns is important - after all, Handguns are made specifically to kill people. That's it, that's all - kill people.

So, Step One - let's make sure Handguns are all registered, stored safely, owners rigorously licensed, old ones in the basement are turned in and so on.

Now for Step Two - let's control the people who can't control their use of Handguns. Specifically, with hard & fast irrevocable jail terms - hard time, no parole - for people who have 'em and/or use 'em, just like this:

i) unlawful possession of any Handgun, loaded or unloaded, registered or unregistered - 5 Years;
ii) discharge of any Handgun anywhere except a licensed range - 10 years;
iii) use of a Handgun in commission of any crime - 15 Years;
iv) discharge of a Handgun during commission of any crime - 20 Years;
v) any wounding or killing with a Handgun - 25 Years.

Surely after a few thugs go away for what amounts to a lifetime, even their most cretinous buddies will understand that use of Handguns does not intersect with their own best interests.

That's my 5-25 Plan.