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N Bloated government debt may trigger 2014 recession Dollars & Sense Peter Watson Guest Contributor 25 | Thursday, December 19, 2013 | OAKVILLE BEAVER | www.insideHALTON.com BRING HOME A DEAL ext year there is the risk of a global recession and the likely cause will be bloated government debts both in the U.S. and Europe. These were the thoughts expressed by Eugene Fama last week, just a few days before he accepted his Nobel Prize for Economics. Fama spoke about the highly indebted governments on both sides of the Atlantic. He said, "there may come a point where the nancial markets say none of their debt is credible anymore and they can't nance themselves." Government and corporate bonds are sold based on risk. Government bonds are seen to have less risk than corporate bonds; therefore, they are sold at a lower rate of interest. Bondholders are willing to receive a lower interest rate if the risk is lower than with other bonds and other types of investments. If the perceived risk of government bonds increased then governments would be forced to increase the interest rate they pay on their bonds. For countries, this would be more expensive. It would lead to more concern about their nancial worthiness and the house of cards known as over-extending debts would come crashing down. That would most de nitely cause a global recession. One recent piece of good news is the improving employment numbers in the U.S. Jobs are key because a consumer with a job will spend. Fragile economies rely heavily on consumer spending. Fama discounts the recent jobless numbers of 7 per cent in the U.S. He maintains the only reason that gure is not higher is many unemployed workers have given up the search for a job; therefore, they are no longer included in employment job statistics. So, the culprit for future economic stability is debt. Government debt is something we can blame on governments -- is it not? My opinion is individuals play a signi cant role in governments mismanaging their economies. Voters often blame governments when we should share a large part of the blame. We encourage our governments to do as we do and overspend with borrowed money. Household debt is at all-time highs in Canada. That mentality has shifted to our government. We want the government to be all things to all people. We want more money spent on health and education. We want more government spending to get the unemployed back to work. The message is "we want." Governments ultimately answer to the voters by attempting to give us as much of what we want as possible. Suddenly, the simple truths of past generations have vanished. Gone are the days of saving and then spending. At some point, we will reach the overspending limit. Governments can print money. They are even more skilled than individuals at spending funds they do not have. The solution is for countries to start to be more scally responsible. There will be push back from voters. Some governments may lose an election on the issue of controlling debt by reining in spending. It is better to have a little pain now in the form of a reality check instead of allowing increasing debt to push us into a world recession that would be a tremendous hardship for us all. -- Submitted by Peter Watson, MBA, CFP , R.F .P ., CIM, FCSI., Certi ed Financial Planner MODEL FB2E2DEX $ $ 88 1.99 @ 2013 CIVIC DX % APR $ LEASE BI-WEEKLY FOR 60 MONTHS. FINANCE BI-WEEKLY FOR 84 MONTHS. $16,970 SELLING PRICE INCLUDES FREIGHT, PDI, LEVIES AND OMVIC FEE. EXCLUDES LICENSE AND HST. 0 MODEL RM3H3EES WITH SE ACCESSORY PACKAGE DOWN PAYMENT/OAC $ DEPOSIT 0SECURITY $ HOL ID O AY B CIVIN ALL 2 ONUS C CR-V AND 013 MOD 2014 ELS * 500 PLUS GE T 149 2.99 @ $ 2014 CR-V LX % APR LEASE BI-WEEKLY FOR 60 MONTHS. 5 MORE BI-WEEKLY FOR SE ACCESSORY PACKAGE INCLUDES ROOF RACK RAILS, RUNNING BOARDS, CARGO TRAY, ALL-SEASON FLOOR MATS, AND MORE. THE BEST-SELLING CAR IN CANADA FOR 15 YEARS RUNNING. $ HOL I ON DAY BON ALL US FIT M 2 ODE 013 LS * 500 PLUS GE T $ 771.99 @ $ 2013 FIT DX % APR 1,430 DOWN PAYMENT/OAC LEASE BI-WEEKLY FOR 60 MONTHS WITH $0 SECURITY DEPOSIT. 2013 CANADIAN BLACK BOOK BEST RETAINED VALUE AWARD: SUB-COMPACT CAR§ MODEL GE8G2DEX BI-WEEKLY LEASE ONLY AVAILABLE FOR 48 MONTH TERMS OR GREATER. OR GET GREAT DEALS ON OTHER 2013 MODELS $ % OR GET UP TO APR 0.99 LEASE FOR 24 MONTHSµ OR FINANCE UP TO 48 MONTHS^ ON SELECT 2013 HONDA MODELS. CASH INCENTIVES ON OTHER SELECT REMAINING 2013 HONDA MODELS. 5000 From December 1st to January 5th some of our local hotels are offering up to 25% off room rates for friends and family of Oakville residents visiting for the holidays. HondaOntario.com Ontario Honda Dealers Limited time lease and finance offers available through Honda Financial Services Inc. (HFS), to qualified retail customers on approved credit. Selling prices and payments include freight and PDI (ranges from $1,495 to $1,640 depending on 2013 model and $1,695 on advertised 2014 models), EHF tires ($29), EHF filters ($1), A/C levy ($100 except Civic DX and Fit DX models), and OMVIC fee ($5). Taxes, license, insurance and registration are extra. Representative bi-weekly lease example: 2013 Civic DX Sedan // 2014 CR-V LX 2WD on a 60 month term with 130 bi-weekly payments at 1.99% // 2.99% lease APR. Bi-weekly payment is $88 // $148.74 with $0 // $0 down or equivalent trade-in, $66 // $0 individual dealer contribution deducted from the negotiated selling price before taxes, $0 security deposit, and first bi-weekly payment due at lease inception. Total lease obligation is $11,439.71 // $19,336.43. 120,000 kilometre allowance; charge of $0.12/km for excess kilometres. PPSA lien registration fee of $45.93 and lien registering agent's fee of $5.65, due at time of delivery are not included. Limited time SE Accessory Package installed for $4.88 more bi-weekly (plus taxes) on a 2014 CR-V LX 2WD includes all advertised items plus "SE" badge. Representative bi-weekly finance example: 2013 Civic DX Sedan on an 84 month term with 182 bi-weekly payments at 1.99% APR [including $1,600 Finance incentive and $476.65 individual dealer contribution deducted from the negotiated selling price before taxes]. Incentives apply only to Finance contracts through HFS, and can be combined with subvented rates of interest offered by Honda as part of a low rate interest program. Finance amount is $14,939. Cost of borrowing is $1,077.28 for a total finance obligation of $16,016.28 with $0 down or equivalent trade-in. *$500 Holiday Bonus offer applies only to retail customer purchase or lease agreements for new 2013 Civic, 2013 Fit and 2014 CR-V models concluded between December 3rd, 2013 and January 2nd, 2014 at participating Ontario Honda Dealers. Deducted from the negotiated price after taxes and can be combined with advertised lease and finance rates. µLimited time 0.99% APR lease offers on remaining new 2013 Fit DX // 2013 Civic DX Sedan // 2013 CR-Z // 2013 Accord EX Coupe 6MT // 2013 Accord LX Sedan 6MT // 2013 CR-V LX 2WD for a maximum of 24 // 24 // 24 // 42 // 24 // 36 months. Representative lease example: 2013 Civic DX Sedan on a 24 month term at 0.99% lease APR, the monthly payment is $287.20 with $0 down or equivalent trade-in, $0 security deposit and first monthly payment due at lease inception. Total lease obligation is $6,892.80. 48,000-kilometre allowance; charge of $0.12/km for excess kilometres. PPSA lien registration fee of $18.81 and lien registering agent's fee of $5.65, due at time of delivery are not included. ^Receive 0.99% APR purchase financing on remaining new 2013 Fit DX // 2013 Civic DX Sedan // 2013 CR-Z // 2013 Accord EX Coupe 6MT // 2013 Accord LX Sedan 6MT // 2013 CR-V LX 2WD models for a maximum of 36 // 48 // 24 // 60 // 24 // 48 months. Representative finance example: 2013 Civic DX Sedan on a 24 month term at 0.99% APR and finance amount of $16,991.65 the monthly payment is $715.31. Cost of borrowing is $175.79 for a total finance obligation of $17,167.44 with $0 down or equivalent trade-in. $1,500 // $1,500 // $3,000 // $1,500 // $2,000 // $3,500 // $2,000 // $2,500 // $4,000 // $5,000 // $5,000 customer cash incentive is valid on remaining new 2013 Fit (except DX) // 2013 Civic Coupe and Sedan (except DX Sedan) // 2013 Accord Coupe (except EX Coupe 6MT) // 2013 Accord Sedan (except LX Sedan 6MT, EX-L V6 Sedan and Touring V6 Sedan) // 2013 Accord EX-L V6 Sedan and Touring V6 Sedan // 2013 Crosstour EX 2WD and EX-L 2WD // 2013 Crosstour EX-L 4WD and EX-L 4WD NAVI // 2013 CR-V (except LX 2WD) // 2013 Odyssey // 2013 Pilot // 2013 Ridgeline models when registered and delivered between December 3rd, 2013 and January 2nd, 2014. Cash incentive is available for all Honda retail customers except customers who lease or finance through HFS at a subvented rate of interest offered by Honda as part of a low rate interest program. All advertised lease and finance rates are special rates. Cash incentive will be deducted from the negotiated price before taxes. For all offers: taxes payable on full amount of purchase price. Offers only valid for Ontario residents at Ontario Honda Dealers. Dealer may sell/lease for less. Dealer order/trade may be necessary. Vehicles and accessories are for illustration purposes only. Offers, prices and features subject to change without notice. See your Ontario Honda Dealer or visit HondaOntario.com for full details. Based on Association of International Automobile Manufacturers of Canada (AIAMC) data reflecting sales between 1997 and December 2012. §2013 Canadian Black Book Best Retained Value Award winner ­ Sub-Compact Car category. Based on value retained from original MSRP for 2009 model year vehicles as published by CBB, as of 1 January 2013. See CanadianBlackBook.com for complete details. To receive this special offer, make reservations directly with a participating hotel and mention "Oakville friends and family" for the best rate available. Visit www.visitoakville.com/holidayspecial for promotion details. Oakville Friends & Fami A gif t for.. . ly *The first three letters of the resident's postal code will be used used for for verifica ver verification ification purpo purposes.