WHAT IS A CORPORATION?

[Reef Pilot]

Originally Posted by reefermadness

I watched the first part and I have to say it was really good. I like the idea of getting rid of the fractional reserve and central banking systems.

While "printing money" to provide liquidity is necessary at times, we are now in uncharted territory with what the US fed is doing with their endless QE. It was originally intended to stimulate the economy (using the theory that a rising tide will float all boats). But now the current US govt is totally dependent on it to finance their over spending. And any hint to slow down QE (as with the recent taper talks), causes fears of another economic slowdown. So now they are living on monetary heroin, and can't get off it.

Not sure where it will end either. They seem to be unable to cut back spending, but at some point the debt will overrun their ability to pay their obligations, ie default. And when China realizes that, they will stop buying US treasury bonds.

Then interest rates will spike, along with inflation, and the economy will really plummet (and not just a short term cold turkey withdrawal).

That is a possible scenario. We are definitely in uncharted territory now, with US govt spending/debt, and QE. And corporations who created the real money for the govts to spend in the past, aren't growing fast enough (top lines, which create the jobs) anymore to keep up. And eventually their bottom lines will suffer, too.

So, you zombie apocalypse guys might be right after all... I'm just glad that I live in Canada,... but we are not immune either.

[Reef_Geek]

Originally Posted by Reef Pilot

While "printing money" to provide liquidity is necessary at times, we are now in uncharted territory with what the US fed is doing with their endless QE. It was originally intended to stimulate the economy (using the theory that a rising tide will float all boats). But now the current US govt is totally dependent on it to finance their over spending. And any hint to slow down QE (as with the recent taper talks), causes fears of another economic slowdown. So now they are living on monetary heroin, and can't get off it.

Not sure where it will end either. They seem to be unable to cut back spending, but at some point the debt will overrun their ability to pay their obligations, ie default. And when China realizes that, they will stop buying US treasury bonds.

Then interest rates will spike, along with inflation, and the economy will really plummet (and not just a short term cold turkey withdrawal).

That is a possible scenario. We are definitely in uncharted territory now, with US govt spending/debt, and QE. And corporations who created the real money for the govts to spend in the past, aren't growing fast enough (top lines, which create the jobs) anymore to keep up. And eventually their bottom lines will suffer, too.

So, you zombie apocalypse guys might be right after all... I'm just glad that I live in Canada,... but we are not immune either.

the US debt is definitely scary. Increasing the debt ceiling is just deferring the problem to the next generation.

It seems that hyperinflation was a popular topic for a while, leading to that last commodity bubble with resource-based investments being over valued. And as soon as the public forgot about it, got some hints that the economy was coming out of the trough, people threw their money into equities again (I did too, lots of under-valued stuff... it was like money was on sale at the bank). But the enormous US debt never went away...

I really don't know how this is going to play out... but there's quite a few potential game changers that can be optimistic.

With Bakken oil and more effective hydraulic fracturing techniques, the US now has a new-found resource that is suggested to make them self sufficient on oil in a few decades. So barring any more spending on new wars and curbing its own spending, there's a chance of managing that debt. If the US reach a point where oil exports exceed imports, that will change the outlook.

With taxes. I've worked in the US and in Canada. Working in the US was great... very little income tax compared to Canada. So, government & money is just like a person with money. If you want less debt, make more money and spend less. If the government want less debt, make more money (increase taxes), and spend less. Yes, increasing taxes is political suicide, but it is still an option (and a necessary one at that). Printing more money just causes inflation and defers the problem... all economists know that and so do the guys in charge. They are just choosing the popular route versus the necessary painful route.

If the US goes into hyperinflation, Canada is equally screwed. Our number one trading partner will then not be able to afford our exports with devaluation of the USD against CAD. Something that cost a US business 1 USD to buy (where CAD is at par) may double or triple with a USD devaluation. Canadian economy will hurt, we're an export & resource-based country.

[Reef Pilot]

Originally Posted by Reef_Geek

the US debt is definitely scary. Increasing the debt ceiling is just deferring the problem to the next generation.

It seems that hyperinflation was a popular topic for a while, leading to that last commodity bubble with resource-based investments being over valued. And as soon as the public forgot about it, got some hints that the economy was coming out of the trough, people threw their money into equities again (I did too, lots of under-valued stuff... it was like money was on sale at the bank). But the enormous US debt never went away...

I really don't know how this is going to play out... but there's quite a few potential game changers that can be optimistic.

With Bakken oil and more effective hydraulic fracturing techniques, the US now has a new-found resource that is suggested to make them self sufficient on oil in a few decades. So barring any more spending on new wars and curbing its own spending, there's a chance of managing that debt. If the US reach a point where oil exports exceed imports, that will change the outlook.

With taxes. I've worked in the US and in Canada. Working in the US was great... very little income tax compared to Canada. So, government & money is just like a person with money. If you want less debt, make more money and spend less. If the government want less debt, make more money (increase taxes), and spend less. Yes, increasing taxes is political suicide, but it is still an option (and a necessary one at that). Printing more money just causes inflation and defers the problem... all economists know that and so do the guys in charge. They are just choosing the popular route versus the necessary painful route.

If the US goes into hyperinflation, Canada is equally screwed. Our number one trading partner will then not be able to afford our exports with devaluation of the USD against CAD. Something that cost a US business 1 USD to buy (where CAD is at par) may double or triple with a USD devaluation. Canadian economy will hurt, we're an export & resource-based country.

Agree... The US does have some room to increase taxes. But it is all about timing and doing it now may not help things, and just prolong the agony. Cutting spending on the other hand will hurt short term, but it could lead to substantial future growth which then could help pay for some of those future debt obligations and entitlements (and they have just added a 3rd one) spending.

And yes, Canada needs to continue to increase their trade away from the US, especially with Asia. That's where the future seems to be.

[Reef_Geek]

so I think that we can segue back to the origin idea of this thread... which I think was... an objection to being a slave to a corporation...

A corporation is a subset system within the overall system (our economy, our society). We can be part of it actively (daily rat race), passively (not give it much thought), or reject it (go live in the mountains and prep for apocalypse). In parts of the world where there's higher standards of living, better quality of life, longer life expectancy... first world nations have our type of 'system' of society. These similar systems exist in different first world nations, not due to coincidence, not due to some artificial cause, not by accident... these systems continue successfully because they naturally worked out to prevail.


If I am lucky enough to live in such a system, I can choose to learn it, to understand it, and make the most of it for myself as best that I can, or I can choose to not understand it, get frustrated by it, object to it, and not have as good of a time... for the short time that I am alive in this world

Love it or hate it, money doesn't care, and money doesn't care that you don't understand how it works. So if I want the best quality of life that I can possibly have, it would make the most sense for me to understand how money works, and learn what are the forces that shape my best bet on my resources/wealth.

So I'm not working my butt off for the corporation for no reason. I am a shareholder as an employee too, thus, the corporation also works for me, the board of directors work for me.

[Reef Pilot]

Originally Posted by Reef_Geek

So I'm not working my butt off for the corporation for no reason. I am a shareholder as an employee too, thus, the corporation also works for me, the board of directors work for me.

Yup, sounds like your head is screwed on solid.... Probably don't have to tell you this, but when it comes to personal finance, debt is the enemy. I was never so happy (well, almost) as the day I paid off my last mortgage.

While I never deprived myself or my family, I was always frugal (and still am), and it has paid off for me. I was able to retire early, and am thoroughly enjoying life. And I have no problem keeping busy (reefing ensures that), as my friends are always asking me what I do with my time.

[Reef_Geek]

Originally Posted by Reef Pilot

Yup, sounds like your head is screwed on solid.... Probably don't have to tell you this, but when it comes to personal finance, debt is the enemy. I was never so happy (well, almost) as the day I paid off my last mortgage.

Thanks.

I think it's about using leverage (debt) with good business sense. Leverage is a very powerful tool. There's bad debt and good debt.

For example, I can't afford to buy my home out right, so I have a mortgage. I buy a property valued appropriately and at the right time/price. I'm not stretching to buy more than what I need, so my mortgage is affordable, and I have enough savings/investments that can handle a rate hike at refinancing. It is forced savings compared to rent.

Another example, I need a car, I could buy it out right... or, I could take advantage of low interest rates. At 2.5% APR... (sometimes zero for other brands), well, I could make more return on investment than 2.5% by keeping my investments rather than cashing them out to pay off the car.

Taking out a line of credit against a property's equity to wisely re-invest... for example to add a bathroom or finish a basement... not to build a pool or buy a Jacuzzi... so long as it can be justified in increase in property value, or additional loan payments and interest is recoverable proportionately (cap rate) in rental income. (and no, in wall aquariums do not increase property value)

Of course, I stay away from bad debt... carrying a credit card balance is a horrendous waste of money. I don't think there's value in leasing vehicles unless it can be a tax write off item for a business... etc.

But yes, I am looking forward to a day long into the future when 40% of my monthly cash flow doesn't get sucked into mortgage payments! It's far far away, but it's a heaven I've heard of!

[Reef_Geek]

should probably mention, we have different investment horizons.

I am still in my wealth accrual phase trying to ensure a retirement, whereas you're already there and have no need for debt.

[Reef Pilot]

Originally Posted by Reef_Geek

Thanks.

I think it's about using leverage (debt) with good business sense. Leverage is a very powerful tool. There's bad debt and good debt.

For example, I can't afford to buy my home out right, so I have a mortgage. I buy a property valued appropriately and at the right time/price. I'm not stretching to buy more than what I need, so my mortgage is affordable, and I have enough savings/investments that can handle a rate hike at refinancing. It is forced savings compared to rent.

Another example, I need a car, I could buy it out right... or, I could take advantage of low interest rates. At 2.5% APR... (sometimes zero for other brands), well, I could make more return on investment than 2.5% by keeping my investments rather than cashing them out to pay off the car.

Taking out a line of credit against a property's equity to wisely re-invest... for example to add a bathroom or finish a basement... not to build a pool or buy a Jacuzzi... so long as it can be justified in increase in property value, or additional loan payments and interest is recoverable proportionately (cap rate) in rental income. (and no, in wall aquariums do not increase property value)

Of course, I stay away from bad debt... carrying a credit card balance is a horrendous waste of money. I don't think there's value in leasing vehicles unless it can be a tax write off item for a business... etc.

But yes, I am looking forward to a day long into the future when 40% of my monthly cash flow doesn't get sucked into mortgage payments! It's far far away, but it's a heaven I've heard of!

Yes, for sure using debt (as with a secured line of credit) for investment can be good, and I have done that, too. But just don't get yourself in a position where if the markets fall, you are forced to sell low. Or your house/condo goes underwater (as what happened in the US to so many). Remember the ultimate objective, buy low, sell high, not the other way around.

Real estate is generally a good asset (does go up and down), but you have to live somewhere, and rent is for sure wasted. I have bought and sold many homes over the years. Some for less than what I bought them for (80's was a tough time), too. But I did learn that with real estate, you don't get ahead with your sells, but with your buys. It is much easier to get a good buy (with good market research) than a good sell (not up to you, but the buyers). And of course it is all about location, location, location.

But I do draw the line with borrowing money for a car. I can say that I never did that. Although, to be fair, interest rates were much higher many years ago. Problem with a car, as with boats, LED lights, etc, is they depreciate rapidly, and when you are ready to buy another one, you are no further ahead. Instead, I initially bought junkers, and amazingly, I actually sold some for what I bought them for and more. Later, when I finally had some money, I did buy new, but more because of vanity, and not smart personal finance.

Low interest rates are not a good thing, IMO. Sort of like taking drugs and hope that you don't get addicted.

Being in finance, I'm sure you know that cash is king. When the markets or real estate fall (and they always do), have cash available to take advantage of the low price opportunities. That's one way that I have got ahead.

And don't run with the herd...

[reefermadness]

My previous employer (one of the largest private corporations in Canada) decided to restructure my position and gave me a 30% pay decrease. Is that working for my interest? Lets not get it twisted Corporations work for their won interest and that is to make money. If a side effect is improving your quality of life that is great but believe me when I say that if they could pay you less to make more profit generally they would. We can see this happening in the global economy with outsourcing. Lets not forget the corporations who are responsible for polluting our shared resources (water,air,dirt) and even putting peoples lives at risk. You dont have to look to far to see corporations responsible for the death of inocent people. The bandledash garment factory was just one instance where 1,800 died. http://www.cbc.ca/news/business/bang...blaw-1.2223499 I would say the corporation did not work in favor of those people.

Anyway we are still lucky to live in Canada (for now) and thankfully I didnt stay with my old employer and and actually found a better job. Not everyone is so lucky though as good jobs seem harder to find.

So yes if your lucky corporations can improve your life.....invest in a good one and watch your money grow. But its not so plan and simple as we can leave that statement and say that is that......there is a flip side to that coin.