Tuesday, July 9, 2013

Priorities, Past and Present

When it comes to preparing for our future, the human race which bases preparation off historical events and statistics is at a serious disadvantage especially in the modern day where historical statistics rarely if ever represent the situation of the day.

Two examples of this came across my desk today that I'd like to look at.

Safety rules lag as oil transport by train rises

This article provides a great example of how we project the results of past investment into the future where this investment does not exist.

Air Brakes are supposed to be "fail-safe". So what caused the Lac-Megantic disaster?
This is very different from the way it used to be. Not that long ago, before cutbacks and efficiencies, there were brakemen who would manually lock each car down and then tell the engineer he could shut down his engine. (see comment at bottom of post).

In this case, the railway was shipping 73 tanker cars full of oil, parked it by the side of the road with the engine running and didn't even put on the parking brakes. This isn't a couple of wagons full of wheat, it is explosive stuff that is taking over the railroads.

This wasn't brake failure; The air brakes did exactly what air brakes do when you turn off the air supply and leave. This was human failure in neglecting to set the hand brakes. It was a systemic failure in designing a system without backups. It was a management failure, with cutbacks so severe that trains are run by one person, they leave running engines unattended and don't have the brakemen to do what is obviously a critical job, setting the handbrakes.
When we look at rail safety in the past and try to compare it to now we're not comparing the same set of circumstances; today's world is 100% focused on the bottomline, and the bottomline trumps all. If we continue down this path of budget cuts to balance a budget that's made possible through a private bond buying process, every year cutting more and more to 'meet our obligations' then this might be the state of our infrastructure sooner rather than later.

As a society we have a hard time projecting our path into the future, especially when it comes to things like cuts. When we cut services or costs for this year's budget we are not thinking about the level of service in 5 years or 10 years. Every year it's more cuts, but what happens when there is nothing left to cut? What happens when the cost of the disasters caused by these cuts dwarf the costs of the services to begin with? What happens when we've cut every last penny we can, eliminated every public service possible and find ourselves still with mounting debt?

It's not like things are getting better, every year it gets just a little bit worse (this year due to the sheer number of disasters that's probably going to be a lot worse) and every year just a little more is cut to make up for it. It's not just about public services though where we as a society are unable to prepare for an inevitable future or perhaps simply don't want to...

When it comes to finances, not all boomers are in the same boat
The biggest differences between early (mid-60s) and late (mid-50s) boomers has been the migration from the defined benefit pension plan (DB) to the defined contribution (DC) plan that has left many of those not yet retired on their own when it comes to investing.

The 'it's all yours, buddy' plans that many late boomers are relying on present them with a unique challenge when compared with the secure income plans their older siblings are living off of.

For this reason, late boomers may want to look into annuities in order to provide them with a guaranteed source of income throughout their years in retirement,
the report states.


What's worse, more late boomers admit that they're already financially challenged even though many are still working. The biggest reason seems to be that 34 per cent of them are currently supporting an adult child compared to 21 per cent of early boomers.

Most boomers report helping out
by providing free room and board, but also contributing to major purchases like cars or computers, helping pay for rent and groceries and of course, paying off credit card bills.
We've talked here before about how the boomer's will end up taking on their debts whether they want to or not simply because they will be forced into providing for their children or relinquishing them into poverty due to stealing their wealth. To maintain the "middle-class life" that the boomer's children have grown up expecting the boomers themselves are finding they're having to foot the bill and provide for it. This is being portrayed as some sort of financial issue for the boomer's looking to retire but the real financial issue really resides with those who they are having to support: their children.

Kelly McParland: Canadian wages suffer from moribund middle
Vancouver real estate: The $1-million white picket fence
“Buying a Vancouver house is not even close to affordable for us,” said Mr. Kebede, 28, a graduate student who rents a two-bedroom suite with his brother for a total of $1,300 a month. Mr. Kebede, Ms. McDonald and Mr. Thomas are each renting modest places on the East side, where accommodation is more affordable than on the West side.
Of course Canada is just going to keep on pretending this is all according to our "economic action plan":

Ottawa’s move to tighten Canada’s mortgage rules a year ago helped cool down the country’s real estate market by forcing some first-time home buyers to delay their purchases, economists say.
To delay them until.. when? Never? But there's no housing bubble here folks.

So today we have all sorts of articles talking about the retirement problems the boomers are facing or will shortly face but how many articles asking whether retirement is even going to be possible for the younger generations? Our attitude as a society is that those retiring today are entitled to their retirement portfolios and those retiring in the future are only entitled to whatever is left over from that. And if nothing is left over then.. what? Anyone know? I think the time should be asking is now while we have the resources to reorganize the remaining resources in an equitable way for everyone rather than asking when it's already too late, but that is what we tend to do though, isn't it?

Starting to see the problem and relations? We project into the future using the data of today. There isn't a second thought about whether further expanding infrastructure which is already suffering from service cuts and age is a good idea or if it's even up to the challenge. We don't account for the coming budget cuts of the future which will be added onto the ones this year, and the ones last year, and so on. We're not preparing at all for the affordability cliff that's going to slap us in the face shortly as the true scope of baby boomer support for the younger generations comes into view. We still think we're living in a world where will simply "return to growth" and as a society we are intent to pursue this goal even if we blow through every available resource in the process. Our priorities are set even if we destroy ourselves in the process. The trends are all in motion and apparent and the only thing standing in the way of the change needed for the future generations is an obsession with the past and our squandered fortunes.

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Richard Fantin is a self-taught software developer who has mostly throughout his career focused on financial applications and high frequency trading. He currently works for CenturyLink

Nazayh Zanidean is a Project Coordinator for a mid-sized construction contractor in Calgary, Alberta. He enjoys writing as a hobby on topics that include foreign policy, international human rights, security and systemic media bias.

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