The Temporary Great Depression

History has a habit of repeating itself… not necessarily in exact form but certainly in similar sequences. During the great depression when liquidity was tight people held onto their cash. They didn’t invest, they were super cautious. So it now is with the lightning depression brought on by COVID-19. People are hanging onto cash. They are not investing in trailers, trucks or any upgrade of equipment.

When people don’t know the future they protect what they have, it’s simple human nature. The problem is how long will they hold on? The answer cannot be found in charts and graphs. It will be found in the collective hearts, minds and faith in our country’s financial future. Those sequences are generally difficult to chart and graph for the future.

Last month I wrote about the four government programs available for the Canadian Trucking Industry. All incorporated operators should qualify for the Temporary Wage Subsidy (to a maximum of $1375 per employee), many will qualify for CEBA (Canadian Emergency Business Account, or $40,000 loan with up to 25% forgivable). Some, who have been laid off completely will benefit from the CERB (Canadian Emergency Relief Benefit, $2000 month). However, the Emergency Wage Subsidy (75% wage subsidy) is much more tricky to qualify for and navigate.

The Emergency Wage Subsidy requires proof that the company has suffered a 30% drop in revenue (first qualification). However, if a company applies for the 75% subsidy the rule is that the employees must be retained at work. So, fully employed by reduced productivity. This revenue drop may (for some) be trouble to “prove” month over month. We have a few clients who have proceeded with applying for the CEWS. We have made sure that each client understands we cannot guarantee its post audit acceptance.

It was just now announced that the CEWS may be extended into the summer (the operative word being “MAY”). It could be that by the time you read this article the intention has turned to reality. Moving the goalposts may be a response to economic projections, however changes in assistance will also change people’s expectations of the future as well. Too much assistance will prolong peoples need to horde cash. It’s a wicked double edged sword that has no perfect answer. It is a dance with imperfection. No matter what is done, it can be promoted as wrong or unjust.

I have worked with CRA for well over 30 years now (I was four when I started…). The difficulty is that CRA has often moved the goalposts in the middle of a game, and that’s with legislation that has precedent in its application. The CEWS is new, it will be interpreted “differently” from one region to another, between one auditor and another. Interpretation is only one difficulty, there is also the sheer volume of applicants for assistance. There could be in excess of half a million CEBA loans itself. How does CRA audit that volume? The simple answer is, they can’t… they will end up doing their best in a severe situation. Many who need it may be scrutinized while others who profit will go undetected. Its not that CRA is corrupt, its that the volume is just too high… its an impossible task. Being involved with government as much as I have in my life I’d just like to affirm that the majority of government employees are fine people, who are just doing their job. They go home to their family at the end of the day and hope their work has made society better. We must not turn bitter. We must accept that things will turn out different for some regions, industries and even individuals. Unusual circumstances are contagious, they breed unusual results.

Having a deep sense of independence from any government is, and will always be, healthy. Knowing there is no government body that is perfect (or even close) is critical to society’s happiness. We must have faith they are trying as best they can and in turn demonstrate patience. Freedom does comes with a responsibility to make our positions known but we must express it as a Canadian, with respect.

The best attitude to have during these times is a dependence on yourself rather than a dependence on Government. Coming out of COVID-19 successfully will be determined by our collective individual actions rather than the aggregate of government interventions and responses. The future of our country is (and should be) in the hands of its citizens, not its government.

Holding onto your cash is a good idea… though it may have recessionary effects on the national economy, its our best response at this time. In any free market economy, individuals will (and should always) operate in the best interests of themselves first… not the country or stock market.