Recession is upon us; the Grand Poobahs of the financial and economic circles have made the official declaration so now it is official.Of course the consumer knew this six months or a year ago, but no one I know has ever accused economists of being smart.However, we are now seeing a further decline into deflation which is a step away from depression.
Canada’s Central Prime offered by The Bank of Canada is now at its lowest rate ever.Even with this “suggestion” that Canada’s charter banks need to fall in line with the central bank lending practices, the banks have by and large ignored the urgings.Of course they didn’t ignore the billions of dollars of windfall bailout offered so they could shore up their balance sheets in the midst of the Subprime and Banking Crisis from the US and world markets.They appear to have taken that money and not turned it around to the domestic markets in order to free up lending.This generalized failure to act in the best interests of Canada and Canadians should hardly be a surprise to anyone.
Even in the face of this storm, the banks who are by and large the sponsors of credit cards in Canada, refusing to act in a responsible manner.This is leading to questions being asked by parliamentarians about the banks negative actions.The actions of the banks defies all logic unless greed is logical.However, they seem to have forgotten their history and the lost billions during the 1990-92 recession when they acted similarly and forced millions into bankruptcy.The other and perhaps more often overlooked point is that the banks have in the recent past been hesitant to loan “small amounts”, instead urging consumers to put these loans on credit cards.
The effect of this has become a double whammy.First, the consumer has been denied low cost loans by our charter banks and second, the loans they are “sponsoring” are through high cost credit cards.Now they want consumers to pay up in a very deep recession, with a shrinking economy, increasing job losses, deflationary pricing pressures and all of this is underneath a global economic crisis.
Perhaps the time has come for Canadians to switch from banks to credit unions for their personal finance needs.Obviously, our charter banks are not doing the job of looking out for Canadians and their money.Credit Unions are locally owned by the depositors and therefore, beneficial to the local economies.
Something good can come out of bad times: your money can help your local economy.In that context it is a win-win situation.It helps you, your friends and neighbours and local business.