On Economics and Random Thoughts

I've spent too much time shoveling snow, I have thrown my back out something awful, walking around the kitchen is becoming painful and here is the best part, another 10cm is predicted to fall overnight. I hate winter.

So I was looking up pricing on the Specialized Transition I was dreaming about, not going to happen, I am sure to Lesley's relief, the model I liked was just way to expensive. Ironically just one step down, but considerably uglier styling is the Transition Pro and it is half the price. Honestly guys, couldn't you make the Pro in the same colour scheme as the S-Works version? (I'd pay a modest premium for that colour scheme, but lets face it, us working, in my case very, stiffs, cannot ever possibly afford an S-works bike, they are just too expensive for what is ultimately a recreation, a passion to be sure, but still just a recreation.)

Anyway I've had the chance lately to think about a great many things, like the recession, and it occurs to me, I have a line of credit, a mortgage and a big RRSP that is loosing value, probably faster than I am paying off my mortgage. So it got me thinking, the reason I am being such a tight wad with money lately is simple really, I want to pay off that damned line of credit while making regular payments to the mortgage so that I can feel justified in spending thousands of dollars on a new bike. Well here's a really silly idea, so silly it actually makes a lot of sense. The Government of Canada should allow people in positions like my own to make a one time withdrawal (just during market slowdowns like this one) from their RRSP tax free on two conditions:

1. The money, limited probably to a maximum of about $20 thousand is paid back to the RRSP within 15 years.
2. All money withdrawn is used to pay down higher interest debts, i.e. debts with an interest rate that exceeds the bank prime rate. Credit card debt, line of credits, over draft protection, etc.

Actually first time home buyers are allowed to do exactly what I am proposing (of course a first time home buyer does not need to pay down debts), but I am suggesting allow anyone to make an RRSP withdrawal, just during periods of market slowness and only allow maybe one withdrawal every 5 or 15 (or whatever else) years.

When you think about it, paying down that high interest debt probably makes more sense for many people than having an RRSP in the first place. After all, with what the markets are doing these days, I am pretty much sure that if I dared look at my statement I'd just want to cry.

Actually I was in the elevator in First Canadian Place a couple weeks ago, and a couple guys get on and start chatting and I was tempted to tell them I was in the exact same place:

"Have you looked at your RRSP mine is being clobbered."

"I won't even look, I'm too afraid!"

So tell me, I get some of my RRSP now, pay off some bad debts, i.e. debts that are costing me money without being tax deductible (see the Smith Manoeuvre if you have the guts for that kind of thing) or debts for items that are deprecating, unlike a mortgage which is on a property which, we hope goes up in value over time. I then pay off my loan to myself faster, because I don't have as many bad debts and maybe I go spend a little hard earned thus priming the pump.

The only looser in this little scam? Well I suppose whoever loaned me at a high rate before hand, the bank or credit card, but even they don't get hit too bad, they just get the higher interest debt paid off sooner so they in turn will go around and loan more money because suddenly they have a larger capital ratio. Holy smokes, I think I just dreamed up an almost free way to really give the Canadian economy a healthy kick start. Why the hell am I, a computer engineer after all, thinking of this? And how does one suggest this sort of thing to the Ministry of Finance, I think it is a good idea, I might be wrong, but hey it ought to be considered by someone who knows more about this than me. Shouldn't it? If anyone knows someone high up in Ottawa, feel free to pass my idea along, mention my name if you'd like, but mainly lets at least give the smart people as many good ideas to shoot down as possible one of those ideas will be a good one that just might get things working again.

And to my readers, in case you are wondering, yes I did come up with a way to end the world's dependency on oil, its green and safe and creates lots of jobs. Actually I am not sure if it would work, something else for the smart people to shoot down but you can read a really old description of it here. I've actually been giving that idea a lot of thought lately, I am not so sure it would completely supplant oil, but it would get us started and having driven through Southern Arizona and New Mexico I can assure you, installing a huge grid of solar generators there would not even be noticed, it is "magnificent desolation" but still desolated.