Heshani Makalande – ISP

19 06 2011

Revised Journal

1. Wal-Mart’s negative impact on the world’s economy

Marked Journals

1. Encouraging students to do better in school

2. Wal-Mart’s negative impacts on the world’s economy

3. The High Cost of University Education

4. Canada’s Top Concerns

Four comments to be marked

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Ten comments

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Consumer Debts, Mortgage Prices and Housing Prices Summary

3 06 2011

Key Concerns/Issues

– Possible burst of the housing bubble, as housing prices continue to rise (as a result of surging multimillion dollar property sales and increasing foreign investors that bids up the price) and number of sales go down (as the interest rate and household debt rises).

– Consumer debt is rising lately

– The economy is growing but the growing slows down due to decreased consumer spending

– Many Canadian aren’t aware of the current economic downturn that can affect their financial situation and debt is continuing

Resulting Challenges to Canadians

– If the housing bubble is burst, there will be a rise in housing foreclosures as middle class Canadians fail to pay their mortgages, debts or simply lost their source of income (More middle class Canadians will lose their homes)

– This rise in foreclosures will increase the supply line in housing, significantly dropping the housing prices and shutting away more jobs in the housing market.

– They also have to deal with their mortgages especially when they’re taking out home equity.

– Another major hurdle Canadians may have to deal with is the housing bubble bursting, dropping housing prices and value, leaving Canadians with more debt than they own in home value

Supporting Statistics and Evidence

– Average price of home sold in April across the country was $372,544, which is 8% rise from last year.

– Slow April sales figures shows that there is an activity dip of 4.4% from March, which is 14.7% down from last year.

– When the housing bubble burst inToronto andVancouver in the past, in the worst case had 35% of average housing value wiped out

– Household debt rose to $1.3 trillion in 2008

– 42% of people said that their personal debts were rising in the last three years

32% of respondents have no saving

– People under $35,000 a year, 49% people reported that their debt levels rose in the last three years. In comparison, 42% of those making $35,000 to $75,000 a year reported their debt levels rose, while 38%of those making over $75,000 annually reported an increase.

– Personal loans from banks was $48.5 billion, up 8.1 per cent from a year earlier, bank credit-card receivables were up 8.9 per cent at $51.5 billion.

– Consumers normally are 60% of the GDP, but high debt levels and the rising cost of living has brought that number down substantially.

– 3-4% of all mortgage holders representing about 200,000 home owners say they have no room for additional monthly increases in their payments

– Graph 

Possible Solutions

– Price ceiling for housing  to prevent skyrocketing housing prices

– Allow the market to burst the housing bubble and fall down quickly before demand rises again

– A series of mortgage rules set out by the government (such as increasing the interest rate on mortgage and decreasing the insurable amortization period) to prevent an unrealistic rise in housing demand and eventually burst of the housing bubble.

– In general mortgage laws and regulations should be changed to promote lowering debt for consumers, which would in turn promote consumer spending.

– Stricter laws on consumer borrowing, to prevent those already deep in debt from sinking further

Sources:

http://finance.yahoo.com/tech-ticker/article/152178/Best-Way-to-Fix-Housing-Market-Let-Prices-Fall-(Fast)?tickers=^gspc,^dji

http://www.theglobeandmail.com/report-on-business/banks-trim-mortgage-rates/article2037912/

http://www.moneyville.ca/article/997903–canadians-to-get-rate-hike-reprieve

http://okotoksmortgages.com/shawn-blog/a-warning-for-canadian-consumers-household-debt-could-spark-‘made-in-canada’-recession/#axzz1OB4zTm4H

http://www.iveybusinessjournal.com/departments/viewpoint/executives-should-monitor-household-debt

http://www.montrealgazette.com/business/Canadians+load+mortgages/4843035/story.html

http://www.theglobeandmail.com/report-on-business/economy/growth/consumer-fatigue-an-ominous-sign-for-economy/article2039584/

http://www.vancouversun.com/business/Report+cautions+that+over+indebted+consumers+drive+economy/4869489/story.html






Some homeowners at mortgage tipping point

24 05 2011

Article:

http://www.moneyville.ca/article/989683–some-homeowners-at-mortgage-tipping-point

Discussion Questions:

1) Should the government help the 200,000 homeowners who would be unable to cope if housing rates do go up?  Why?

2) How can the banks intervene to keep these mortgage rates steady as they are and not have defaults?





Income Tax- Pros and Cons.

25 04 2011

(Aparently I didn’t get to posting this, I could have sworn I had, my mistake

Regards,

Unicorns Everywhere)

PROS:

Fairness: Canadian income taxes are a progressive tax based on marginal income and tax brackets. Simply put, your income is put into levels and then you are charged accordingly. Because of this those who make more income then others are taxed more and conversely those who make less are charged less. Because the heaviest burden is put on the backs of those who can afford it the most, the system works to achieve a level playing field for all.

We all remember those times in monopoly where your jerk of a friend lands on the Income Tax square and decides to count up all his assets and take off 10% instead of paying the $200. Yeah, that’s income tax.

Quick to impliment: From a government standpoint, because the reaction of the public is so quick, the government can quickly lower or raise taxes in order to achieve certain results. For example, in a government deficit, the government can raise taxes in order to quickly gain money in order to pay these loans off.

“Mr. President, we’re in a deficit” “Shut. Down. Everything.”

Stability: Income taxes are imposed on everyone who earns income, but unlike other kinds of taxes, they are relatively stable. For example, in an depression, the unempl0yment rate may rise to 10% and even then, the government will still gain money off of the other 90%. Because of this, the system does not take as much of a hit as other taxes.

Benefits to society: Sure, you may be paying through your nose with these taxes, but at least our parks are pretty.

CONS:

It’s taxes: Taxes are solely based on government benefit. From an economic standpoint, we know that because we are taxed, we lose money to spend which in turn affects the demand curve of all products. Because consumers don’t have money to spend, the economy generally falls with higher taxes.

Loopholers: When you have taxes, you have people who don’t want to pay taxes. People exploit the system by using loopholes, cutting money or just not paying them. Because of this, Revenue Canada has to hire over 90,000 people trained in auditing who simply revise the taxation system to make sure that it is air-tight and impossible to scam. These thousands of people could easily be put into better use and are an example of implicit costs (HEY MRS. CUTTLE, I’M LEARNING.)

Inconsistent Taxation: One gripe many people tend to have with income taxes is that it’s inconsistent. Warren Buffett, one of the world’s richest investors is only submitted to 17% tax, where his secretary has to pay 30%. The unfairness of the system tends to outrage people and because of the huge amount of people being taxed, there is very few resources able to be allocated to dealing with case-by-case basises.





Decrease in rice prices

14 03 2011

According to this article, bumper crops of rice have been reported in Thailand, Vietnam, and India known as major growing countries. Also, good crops have been indicated in major consuming countries such as Philippines and Indonesia. This will increase the supply due to the large number of producers and the high production. As more countries produce more rice domestically, countries such as Philippines and Indonesia will reduce their imports. In addition, three benchmark prices for rice in Thailand, Vietnam and the United States have dropped by 8 percent in the past few months. Since there is a drop in the price of rice, as shown in the diagram below, it will result in an increase in the quantity demanded for rice.









New Flights

6 03 2011

Canada’s largest airline (Air Canada) will start flying out of Toronto Island airport from May 1st which will create competition for Porter Airlines. Air Canada has planned to start service with up to 15 daily non-stop return flights between Downtown Toronto to Montreal. They are also planning to put their tickets on sale. Since there are more producers (airlines) flying out of Toronto Island it increases the supply. The increase in the number of producers will bring down the prices of flights, and therefore, the consumer demand for flights will increase. This will make changes in the equilibrium and result in a new equilibrium market.

Link





Supply and Demand Assignment

6 03 2011

http://www.thestar.com/business/companies/aircanada/article/949105–air-canada-to-fly-out-of-toronto-island

This is my article