Money grubbers

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Don’t sock your money under the mattress, say the experts. You need to invest. Put it in a retirement plan, or long-term savings. Buy stocks and bonds. Buy shares in a company or open your own business.

For decades, ordinary working stiffs have been encouraged and goaded and coerced into being money-wise. In recent years, we’ve been told not to rely on social security and old-

fashioned pension plans.

More and more of the latter are now tied entirely to the market. No more guaranteed pension amounts when you retire. If the economy tanks, so does your nest egg.

So, if playing the market is the mantra — nay, the gospel — of modern financial security, why are corporations now refusing to take their own medicine?

On Wednesday, Bank of Canada governor Mark Carney took the extraordinary step of scolding Canadian companies that are sitting on “dead money” rather than putting it to work.

The latest statistics show non-financial corporations in Canada are stockpiling $526 billion in cash. That’s half a trillion dollars — almost double what the Canadian government spends in a year.

“The level of caution could be viewed as excessive,” Carney told reporters following a speech to the Canadian Auto Workers.

Corporate managers, he said, should “put money to work and if they can’t think of what to do with it, they should give it back to their shareholders.”

Meanwhile, on the same day, The Globe and Mail carried Carney’s remarks, the paper also ran a story that reported personal debt in this country has hit a new record high.

Citing a survey by credit bureau TransUnion, the Globe reported that the average Canadian’s non-mortgage debt reached $26,221 in the second quarter of 2012, up $192 from the previous quarter.

“The $26,221 amount is the highest per person debt level since the credit bureau started tracking the data in 2004.”

Oh, and did we mention the housing bubble is expected to spring a leak soon?

It’s not likely to be a major blowout, assured one economist with CIBC. But then again, who knows?

So, the corporations sock away money in the banks, the banks dole it out for mortgages, and then the housing market sags. Guess who ends up holding the bag?

It’s the same story over and over again. Companies may rise and fall, come and go, but ordinary folk can’t absorb this kind of economic roller-coaster. They can’t reinvest or rely on subsidies or walk away with golden handshakes.

Carney, at least, seems to be looking out for the economy as a whole. He sees the bigger

picture.

Let’s hope he backs it up with firm action if the need arises.

Organizations: Bank of Canada, Canadian Auto Workers, Globe and Mail CIBC

Geographic location: Canada

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Recent comments

  • Neil
    August 24, 2012 - 20:51

    To think $26,221 is a high amount is unrealistic. Anyone with a car, a credit card and a student loan owes that much and more in non-mortgage debt. I think if anyone owes that amount, they are doing pretty good.

  • yo mama
    August 24, 2012 - 16:55

    If I had listened to my old man and stuffed it in a mattress, I'd have more in that mattress than I do sitting in investments.