Economic analysis

Need investment advice? Ask Harper

The Prime Minister isn't shy about telling Canadians what to do with their money

If you’re in the market for a financial advisor, why not try Stephen Harper?

The Prime Minister offered up a bit of investment advice in an interview with group of local community newspapers in Vancouver last week.

Canada’s high level of household debts, Harper said in 45-minute interview, which was posted to SoundCloud, are largely because so many Canadian have taken advantage of historically low interest rates to buy homes and cars. Given that mortgage rates have in recent times fallen as low as 2.99 per cent and car loans are often interest-free, he says, Canadians are making what “I, as an economist, would argue is a rational decision to borrow more.”

How rational? Well Harper himself admits he and wife Laureen also took advantage of low interest rates to borrow money, although he didn’t elaborate on how much or for what purpose. (According to disclosure documents filed with the Parliamentary Conflict of Interest and Ethics Commissioner, the couple has a joint loan from the Bank of Nova Scotia.) But he warned that Canadians should start taking stock of their debts to make sure they can pay them off when interest rates inevitably rise, sometime in the next “two to three years.”

That’s what Harper says he’s doing anyway:

I know that my wife and I have never been big borrowers, but we have borrowed some money in the last few years because of the low rates. But we also know if the rates went up considerably we could still afford to carry that debt. But Canadians should ask themselves that question.

Harper has never been shy about doling out investment advice, telling CBC’s The National in June 2012 it was a good time to buy and hold:

As Prime Minister I am not allowed to invest speculatively and so I don’t. But to the extent I advise people, as we do with the government, think about what you need to do in the long-term to grow your portfolio. Be in markets and places where the business is good, where the long-term prospects are solid, and focus on that. Things will go up and down in short term, they always do. It’s been more spectacular over the last five years than in 80 years, but nevertheless those things come and go, there will always be solid businesses and solid markets will always experience growth over time. Have a mid- to long-term game plan and stick with it…Don’t cut and run. And that’s what our financial institutions do. That’s why we have the most solid financial institutions in the world. They don’t think that way. They don’t cut and run and they don’t get involved in a lot of short term speculation.

An interview he did with Peter Mansbridge during the 2008 financial crisis ruffled some feathers when he suggested the stock market meltdown had opened up “great buying opportunities.”

He’s not the only federal politician to hand out investment advice recently. Finance Minister Jim Flaherty has also been warning Canadians that the days of cheap debt are probably coming to an end. His comments earlier this month that  Canada was under “pressure” to raise interest rates provoked accusations he was encroaching on the Bank of Canada’s exclusive control over monetary policy.

Much of Harper and Flaherty’s advice should be seen through the light of politics: Put a positive spin on a financial crisis in the midst of an election; try to preemptively deflate a potential speculative bubble; encourage Canadians to put the brakes on household debt lest it cause problems for the economy between now and the 2015 federal election.

But beyond politics, Harper’s investment advice seems to have been prescient. The TSX has indeed rebounded since the lows of late 2008 and early 2009, meaning many investors who jumped into the market at the time have seen their portfolios appreciate. Interest rates will most likely have to go up eventually, though when exactly that might happen is the source of much debate. His financial advice may be on the money — but whether the country’s Prime Minister has any business telling Canadians what to do with their cash is another matter.


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