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 did not invest; they were super cautious. Today, as we have come into this lightning-fast depression that was brought on by COVID-19, people are hanging onto their cash. They are not investing in trailers, trucks, or any upgrade of equipment.

When people do not know the future, they protect what they have. This is simple human nature. The problem will be, 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.

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 $1,375 per employee) and 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 per month). However, the Emergency Wage Subsidy (75% wage subsidy) is a much trickier program 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, you often have people fully employed with reduced productivity. This revenue drop may (for some) be difficult 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 recently announced that the CEWS has been extended until August 29th. 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 people’s need to hoard cash. It is 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 was with legislation that has precedent in its application. The CEWS is new; it will be interpreted ‘differently’ from one region to another and between one auditor to another. Interpretation is only one difficulty. There is also the sheer volume of the number of applicants for assistance. There could be more than half a million CEBA loans itself. How does CRA audit that volume? The simple answer is, they cannot… 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. It is not that CRA is corrupt, it is that the volume is just too high… it is an impossible task. Being involved with the government as much as I have in my life, I would just like to affirm that most 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 differently for some regions, industries and even individuals. Unusual circumstances are contagious, and they breed unusual results.

Having a deep sense of independence from any government is, and will always be, healthy. Knowing that there is no government body that is perfect (or even close) is critical to society’s happiness. We must have faith that they are trying as best as they can and in turn, demonstrate patience. Freedom does come 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 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 the government.

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

About the Author:
Robert D. Scheper is a leading Accountant and Consultant to the Lease/Owner operator industry in Canada. His first book in the Making Your Miles Count series “taxes, taxes, taxes” was released in 2007. His firm exclusively serves Lease/Owner Operators across Canada. His second book “Choosing a Trucking company” is the most in-depth analysis of the operator industry available today. He has a Master degree (MBA) in financial management and has been serving the industry since he and his wife came off the road in 1993. His dedication, commitment and strong opinions can be read and heard in many articles and seminars.

You can find him and his books at www.makingyourmilescount.com or 1-877-987-9787. You can also e-mail him at robert@thrconsulting.ca.