Book Reviews ‘U – Z’

Author: Adam Harmes

A significant shift in financial power from individuals to institutional investors has resulted in a massive bloodbath of corporate downsizing and cuts to social programs.

The intense pressure on money managers for higher returns is due to the impatience and greediness of average investors. When results fall short of expectations, money is quickly removed.

"They are evaluated and paid based on their ability to retain old clients and attract new ones, and this means that they must produce strong performance numbers on a quarterly basis. So while the retirement savings that make up mutual funds and pension funds may have long-term investment horizons, the men and women who manage these funds often do not."

Chapter 2: Long-Term Money, Short-Term Behaviour/Short-Term Horizons And Herd Behaviour In Mutual Funds And Pension Funds

The people involved in financial markets build investor confidence by pressuring government administrators to cut the deficit and reduce spending. Corporations are following a similar path by creating a more flexible workforce through downsizing. Firms create jobs by selling products or services that benefit the economy and society. Others with unique views have reached an entirely different conclusion.

"Companies aren't put together to create jobs. The number one priority is creating shareholder wealth."
Bob Bertram, senior vice-president of the Ontario Teachers' Pension Plan.

The funds industry has grown so rapidly that government regulators have been left behind. Developed countries could create holding period taxes on capital inflows. This exit tax will help curb speculation and prevent large panicked withdrawals. Legislation could also be introduced that would limit the use of stock options. This would force managers to think up real business solutions instead of continually reducing the workforce. Inefficient capital markets have created a serious imbalance of power between Main Street and Wall Street. This is financially and politically unsustainable over the long-term.

Adam Harmes has a Ph.D in political science from York University and is now a fellow at the University of Toronto's Munk Center for International Studies.

Author: Elinor Harris Solomon

Electronic money must be converted into something with intrinsic value or worth. If not, it wouldn't be worth much as a long term standard of value. Good money must have a relative worth and be easy to handle. It must also be able to be subdivided to buy fractions of things of lesser value.

Conventional bank deposits are expressed as liabilities at banks and are scrutinized by an established system of examinations by regulators and bank examiners. With a government backing of deposits guaranteed, money has a common value within the established clearing system. It can deliver value when moved from buyer to seller. E-money, e-cash or cyber money has no physical home. Computer generated and manipulated, it lies outside regulatory surveillance. E-money can be moved and transferred around the world and encourages tax evasion. It has made the world very short-term oriented. Well-paid quants and rocket scientists are well paid. They are secretive and rarely publish articles or give lectures. Their goal is to maximize short term trading profits using sophisticated software. They are also said to feel guilty about their wealth. This marks a significant shift over other high paid professionals such as a doctor whom make real and lasting contributions to society and can feel good about it at day's end. E money can't physically be seen but has dramatic effects on the monetary systems of most nations. Speculative attacks on England, Sweden, Mexico and a host of other countries caused local governments a real sense of powerlessness and loss of control over monetary policy. It also resulted in volatile exchange rates and capital markets. Find out why this new type of invisible money isn't exactly the greatest idea. Take a spin into the past where money was backed by the gold standard and into the present shadowy world of unregulated cyber cash.

Authors:  Michael Babad and Catherine Mulroney

There are two major problems with our monetary policy. The first is the fact that the governor of the central bank of Canada is an unelected official with too much power and independence. In a real sense, he is unaccountable to the people. The second big problem is the ability of foreign interests to affect out dollar, which forces the central bank to adjust interest rates. The fear of inflation was the reason for not expanding the money supply. Banks slashed loans in order to pay off government debt. By choking off credit just when it was needed most, the depression was longer and much more severe. The Bank of Canada was nationalized in 1935 by Mackenzie King’s government. The focus on just battling inflation by several governors drove up interest rate and caused unemployment to soar to dizzying heights. The governor’s decisions have brought about the downfall of the Liberals in the 1970s and the Tories in the 1990s. The mandate of the central bank must change. Not only be to battle inflation, but to have a goal of a low unemployment rate too. Canada’s autonomy has been questioned because our debt to foreign investors stands at 40%. The government must cut its dependence on foreign interests. The board for the Bank of Canada has to become more active and alert, like that of the U.S Fed. It should also be filled with professionals. There is past evidence that indicates it does not understand the governors mandates and goals, and is thus, lay and unable to participate in policy. Also the debt carrying costs must be taken into consideration when determining interest rates. The zero inflation focus of the governors of the past has resulted in high unemployment and political instability. Michael Babad and Cathrine Mulroney are journalists and have produced articles for major Canadian newspapers and have also written a few books as well.

Author: Ann Finlayson

Surplus raids, contribution holidays and an absence of inflation protection of a plan's assets are the main problems that plague private company pensions.

A pension is a deferred wage that employees should be entitled to because they have earned it. Many Canadian corporations aren't informing workers about the values or functionality of their private plans. The Pension Commission of Ontario has the responsibility for the protection and regulation of private pension plans.

In the early 1980s, strong investment returns caused plan assets to exceed liabilities by a wide margin. As the piles of large excess returns started to bulge, employers got creative.

"And if they weren't actually applying to the Commission for approval to withdraw money, many employers were using the surplus assets to reduce their own contributions to the plan. Such "contribution holidays" required no approval from anyone."

Chapter 5: The Battle For The Dominion Stores Pension Plan

The reality over the past couple of decades has been a clear transfer of wealth from pensioners to employers and shareholders. Surpluses should be used for adjusting pension benefits for retirees and improving them for current employees. Whenever inflation rises a few percentage points, its the retired employees living on fixed incomes that suffer.

"What they see is that in the last decade billions of dollars in surplus assets have accumulated in defined - benefit pension plans at a time when the real value of their own pension investment was sinking like a stone in calm waters. Worse, they see that these surpluses have accumulated at a time when more than half of all older Canadians were obliged to apply for welfare in the form of federal or provincial supplements to survive."

Author:  J.J Brown

Term insurance is a bad type to sell from a company’s perspective because the policyholder can drop out of the contract at any time without much financial loss and the company gets little savings to play with.

His solution is to buy a policy of term insurance from a company that is used to selling it to clients. He gives names of companies that do. Along the way, every insurance policy imaginable is examined and evaluated. The results are shocking. Most policies benefit the company and not the policyholder. Buy term and invest the difference. This should allow you to be self insured at a certain point, thereby stopping the payments of life insurance premiums. This book is easy to understand with lots of definitions and practical advice on what to do. J.J Brown teaches you how to deal with an industry more focused on profits and shareholders than on giving a great deal to the policyholder. Anyone that is thinking about getting a life insurance policy or has one already should read this book.

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