Justin & Finance Minister Morneau have so far offered $82b to save families from the Covid-19 virus in order to keep the economy going.  $27b of that will be used wisely through various government benefit programs.  The remaining $55b is 100% fancy bookkeeping solely to make Ottawa look good.  This is a tax deferral that will be reversed once 2019 taxes are collected.    The amount could be $1b or $55b, no one knows, but all that matters is that Ottawa looks good and is supposedly saving the country.

Realistically, Ottawa cannot afford to offer much relief without penalty, either be a lower credit rating or higher borrowing rate, because contrary to what they say, it too is broke.  Yes, they can still borrow, and the Bank of Canada can print fiat money, but it is today’s outstanding debt and the interest charges that is squeezing the government’s finances.  Borrowing more money today only increases future problems which Ottawa will have no clue how to resolve. 

Once today’s economic slowdown reverses, everyone’s taxes will go up substantially. There is no doubt about it.  This is because Justin does not understand what budgeting is. One cannot blame the guy!  After all, he has a huge trust fund that allowed him to never worry about money, and now a gold-plated pension that will lift him into the top 5% of income earners in the world.  

We get a daily update from Justin, which I turn off because he is part of the problem.  He loves to say he has “our back”.  To date, he has done nothing other than create more problems. Thankfully we have Dr. Henry, Dr. Tam and all the other medical professionals giving us daily updates.  They make sense. Justin just babbles.  We are in good hands with our medical system and all those who are aiding in delivering the care.  We thank them all for taking on such risk to carry out the excellent work they are doing.

If unemployment is going to increase to record numbers, it is likely the Canadian Emergency Response Benefit (CERB) and income supplements will not be enough of a cushion to prevent a deeper recession for the simple reason it will only cover living costs.  There will be no money leftover to spend in the community.  Furthermore, these programs do not offer any relief for many people such as part-time workers or seniors.     

A policy that would cost the government less and still cushion a downturn immediately would be to instate temporary tax changes such as increase the personal exemption, eliminate the GST, PST, and various other consumer taxes, eliminate taxes on dividends, capital gains and interest altogether. This will be a bonus for seniors.  Sadly, the chances of these simple acts, even for a year or two, will not happen because the bunch in Ottawa only want to be seen giving out benefits upfront, whereas nobody will notice the three tax changes until 2020 tax time.  

Cash in the hands of the consumer is the only way for the economy to recover.    Ottawa has shown that when pushed they can get things done.  The payments to flow now were done within a month.  There is no excuse why they cannot begin to plan to boost the economy today for when the virus is yesterday’s news.

Another easy path to recovery is to get rid of the destructive Bill C-69 immediately.  There are plenty of infrastructure projects (energy, mining, highways, dams, and bridges) needing to be (re) built that would generate so many high paying jobs across the country.  It is crazy to need up to 10 years, which Bill C-69 pretty much requires, to get these projects all the permits needed before they can break ground.   Justin will never go for this because it would make him look bad even though it would cushion the economic effects from the Covid-19 virus.        

More importantly, we need fresh blood in Ottawa.  Our political leaders today, except for a couple of them, are clueless.  Have you noticed that wages are being cut across the country (including directors and CEO’s), meanwhile Ottawa has not mentioned that their wages should be cut?  The politicians just gave themselves their annual salary increase that became “law” years ago.  Only a handful of MPs’ declared they would donate their salary increase to help with the fight against todays problems.

For the next year CASH will be the number one asset.   We are fortunate the virus is striking during spring and summer when our costs are lower and one’s immune system tends to be healthier.  This is a chance to build up your savings, which we strongly recommend you do. Continue to hold your blue-chip shares that pay a steady dividend. Other than that, sit on the sidelines and accumulate cash. If the virus does not change course by winter, the world will come to a complete shut down.  I do not think this will occur, but we do expect the global economy to slow down dramatically either way by summer.  In other words, the world has a few months to find a remedy.