Before U.S. President Nixon abandoned the gold standard in 1971, anyone with U.S. dollars could exchange them for gold at a fixed price.  Now that the U.S. government (as well as other governments including Canada) can issue new money at will, we call it “fiat money.”  Stephanie Kelton, former chief economist on the U.S. Senate Budget Committee, claims that this ability to create money at will has profound implications that she explains in her book The Deficit Myth: Modern Monetary Theory and the Birth of the People’s Economy .  Modern Monetary Theory is certainly a different way to think about government finances, but whether it really has profound implications is less clear. Under the gold standard, government finances resembled a family’s finances.  To run a deficit, the government had to borrow.  However, today the government can just create new money.  Governments typically choose to issue bonds (treasuries) to cover deficit spending, but such bonds ar...

BMO was sued in a class action lawsuit for charging undisclosed fees on foreign exchange conversions in customers’ registered accounts between 2001 and 2011.  Customers of BMO Nesbitt Burns, BMO InvestorLine, and BMO Trust Company will get their share of the settlement before Oct. 8. A decade ago I calculated that I had spent $7374 in currency exchange costs while trading U.S. stocks since I had opened trading accounts at BMO InvestorLine .  When I heard about the class action settlement with BMO, I figured I’d only get back a tiny fraction of this money.  However, my wife and I are pleased to be getting a total of $2051 plus $955 in interest. It would be nice if BMO’s response to this lawsuit was to charge sensible foreign exchange fees, but they are much more likely to simply be more careful about meeting some legal standard of disclosure.  Unwitting customers will continue to rack up unreasonably high foreign exchange costs.

The word “millionaire” is frequently used to mean a person who doesn’t have any financial concerns and whose wealth is much greater than what the rest of us have.  However, imagine a couple whose house is now worth $750,000, they have a $300,000 mortgage, they owe $50,000 on their cars, and one has a public service pension now worth $600,000.  On paper, this couple has a million dollars, but they are hardly rich, and they definitely still have financial worries.  It’s time to start using “decamillionaire” to mean a very wealthy person.  Maybe $5 million is enough, but we don’t have a common word for that level of wealth. Here are my posts for the past two weeks: Debunking a Bogus Stock Market Prediction Wilful Blindness Here are some short takes and some weekend reading: Andrew Hallam explains how European banks sell some horrific “investments” to unsuspecting consumers.  He also exposes the huge downside of index-linked investments that promise no down years ....

Reporter Sam Cooper tells a remarkable story of the British Columbia provincial government profiting from Canada’s epidemic of fentanyl deaths in his book Wilful Blindness: How a Network of Narcos, Tycoons and CCP Agents Infiltrated the West .  Cooper’s evidence is strongest for B.C.’s cooperation in laundering money for the drug trade in return for a cut of the profits.  However, he demonstrates connections to trans-national organized crime, Canada’s housing bubble, and China’s communist party. The book begins by carefully explaining that the evidence presented is not intended as an indictment of the people of Canada or China but rather criminal organizations within these countries and parts of government. Cooper paints a picture of massive amounts of drug cash being laundered through B.C. casinos, and authorities happy with the huge “gambling profits” thwarting RCMP efforts to stop illegal activity.  There was a “rapidly growing narco-economy that B.C.’s government was ...

It would be much easier to plan for the future if we knew what stock prices were going to do.  Bank of America has a chart with seemingly solid evidence that stocks will lose a total of about 8% over the next 10 years.  I’m going to show why this evidence is nonsense.  But don’t worry; I’ll do it without making you try to remember any of your high school math. The Bank of America chart looks intimidating to non-specialists, but I’ll summarize the relevant parts in easy-to-understand language.  The basic idea is that for each month since 1987, they looked at how expensive stocks were that month and compared that to stock market returns over the 10 years following that month.  They found that the more expensive stocks were, the lower the next decade of returns tended to be.  The hope is that we can just use the chart to look up today’s stock prices to see what stock returns we’ll get over the next 10 years. In the chart below, each dot represents one month fr...

Eight months ago, a group of friends including my wife and I took a chance and booked a PEI vacation.  Fortunately, we were able to go, and we’re just back from a great time.  I’m starting to wonder if we were lucky enough to hit a window that’s now closing as the COVID-19 Delta variant continues its exponential spread through Canada.  We just don’t have enough Canadians vaccinated yet to stop the growth without restricting our movements as they were earlier in the pandemic.  It’s been interesting to watch governments at all levels struggle with attempts to encourage people to get vaccinated and to apply lockdown rules only to those who have chosen not to be vaccinated.  All this is a work in progress and teething pains will continue. Here are some short takes and some weekend reading: Economist Writing Every Day says U.S. Gen Xers are now 30% wealthier than Boomers were at the same age, and that Millennials are on a similar path.  It would be interesting ...