Deep Dive
Shownotes Transcript
Hello and welcome to the TLDR podcast, a show about the culture, gossip and business of money. And this week, sure hope you didn't like the world order. My name is Devin Friedman. I am here with my co-host, Sarah Rieger is one of them, the business and markets correspondent for the TLDR newsletter. Sarah, update us. I thought you brought all the updates when I accidentally added you to my signal group chat, right? Didn't you read everything in there?
Well-played Secretary of Defense Sarah Rieger. Thank you. Joining us this week is a special guest who is a very special friend of the show, TLDR newsletter editor and author of the book Valley So Low, Jared Sullivan. How are you? Good. Please buy my book. My sales have dipped in recent weeks. I really need y'all to come through for me. Is it true that you only agree to come on the show when your sales dip? No. Delighted to be here. I love that when y'all...
Let me come on and not just toil away on the newsletter. Okay, so we have a pretty interesting show for you today. We are going to be covering a lot of the stuff that I think is on everyone's mind right now, specifically Canada's place in a changing world. It's not what it used to be. What's it going to be in the future? And we're going to give you a practical guide to getting out of debt. And if you don't happen to be in debt, how to get ahead on your financial plan.
And we're going to start a little differently today. We are not going to ask Jared, who's going to be our first panelist here. We're not going to ask him who's making or losing money, but we are going to share an interview that Jared did. Jared, why are we going to do that? Yes. So I don't know if you heard Prime Minister Mark Carney's comments last week. The old relationship we had with the United States based on deepening integration of our economies and tight security and military cooperation is over.
That dramatic pause. Those are breakup words. Pretty strong. You can almost feel the tension in his voice or the animus. Anyways, Carney was responding, you know, in part to Trump's threat to impose huge tariffs on Canadian imports to the U.S., which I'm sure most listeners know about now.
These levies represent, in many people's mind, at least a big turnaround in alliances and maybe even the world order. Yeah. So I believe you found an expert on the old world order versus the new world order. What's it going to mean? Tell us a little bit about the guy that you talked to. I found a heck of an expert. His name is Graham Thompson. He is a senior analyst at the Eurasia Group, which is one of those big, fancy global consulting firms. That was going to be my other job. It was either Wealthsimple or the Eurasia Group.
These guys have cool jobs. So Graham's specialty is Canadian politics and kind of all stuff Canada. He is something of a hawk by Canadian standards, at least. He's also, I guess, what you'd call like a neoliberal, which means he believes in stuff like free markets and free trade and democracy. He's also, in my view, a very, very smart guy. Here's our conversation.
Graham, welcome to the show. Yeah, nice to meet you guys. Okay, so take me back to this post-World War II moment. What did the U.S. do and how can it benefit from this old order? So post-World War II, the United States turned from a very protectionist country into a more free trade country. And it encouraged other countries to join a more free trade global system.
It used its military might to uphold that system. Even today, the vast majority of global trade flows via the ocean, and therefore it needs a certain amount of protection. And the U.S. Navy provided that.
And that was especially great for Canada as a medium-sized country, which doesn't have the world's largest military, which trades a lot with the United States. We had essentially the world's most powerful economy and military as our big brother. Okay, so now what is changing, right? The U.S. is still a very, very powerful country. But why is Donald Trump talking about tariffs? And why are we talking about defense in the news a lot?
So two things happened. One, internationally, which matters a lot, is especially after China joined the World Trade Organization, Chinese growth exploded. They made up the gap between themselves and the United States very quickly. In that context, the United States has increasingly said, hey, wait a second, we're seeing the major threat
is China. So we need to reallocate resources to the Pacific and to Asia. That's the geopolitical aspect of what's happening. And the domestic aspect is perhaps more important.
And that's because manufacturing jobs have left the United States, not only the United States, also Canada and parts of Western Europe, and gone to lower wage jurisdictions overseas. Okay. Where does this leave Canada? It leaves Canada in a really tough spot.
On the strategic side, Canada made the reasonable assumption that after the Cold War, that there was no prospect of military conflict with anybody, basically, right? So defense spending went down to really low levels. Canada basically put all of its eggs in the basket of economic and trade integration with the United States. And the problem with that is that quite suddenly, Canada
That no longer looks like such a safe bet. And Canada is really exposed now to the whims of President Trump. Yeah. So basically, Canada, we had a best buddy. You know, we hit we hit the beaches of Normandy together. Right. And World War Two, we were best friends with the U.S. and wrongly assume it would we would stay best buddies forever. Right.
I mean, is that the long and short of it? That's a perfect way of putting it. Okay, so now tariffs could be a part of life for Canadians for a while. How can Canada try to insulate itself from future trade disruptions? I mean, I think what is clear is that we as Canadians can no longer assume that
that the United States market is open to us or that U.S. policy will not actively seek to harm our economy for their benefit. And if that's the case, then at minimum, we want to have fewer eggs in the American basket. So we open up our friend group is what you're saying. Our best buddy may or may not come back, but in the meantime, we better hit the gym and make some friends. Yeah, yeah.
Okay, talk me through, like, do, like, a step-by-step, like, what that could actually look like. Canada could do a couple of things. One is it could become more self-reliant from a defense and foreign policy point of view, which means...
increasing its capacity. You want to have your own domestic, military, and foreign policy capacity to influence events in the world so that you get good outcomes for Canadians. And on the other side, on the economic side of the ledger, ideally Canada would be less dependent on
And it would be more domestically competitive because if the United States is our competitor, you've got company A looking at making an investment either in Canada or the United States. You need to make that attractive to come to Canada. And that might mean regulatory changes. It might mean tax changes. It might mean different forms of incentives. And unfortunately, Canada has fallen quite far behind in
in a whole bunch of economic measures that make it less attractive as an investment or manufacturing destination. Well, in this great moment of change where our BFF is maybe not quite our BFF, maybe need to make new friends, what would it be to unlock Canada's superpower? How could forming closer ties with other non-U.S. nations benefit Canada generally? So we need to diversify our
trade foreign policy relationships to maximize and amplify Canada's ability to pursue and defend its national interests. Basically, you could put it into two buckets, right? We've got our old friends who
who we kind of have let things go with a little bit, and that's the United Kingdom, Australia, and New Zealand. Obviously, we have a long history with those countries in the Commonwealth. All four countries have an interest in a world where
where might does not make right, where we stand up for democratic values, where we have relatively free trade. We should be doing more trade, have freer movement of people. We should improve foreign policy coordination because our interests so often align. That's part one. But that shouldn't be
you know, taken to mean that we can't go out and forge other partnerships. So the Japanese and the South Koreans want more connections with Canada. They want to collaborate on foreign policy. They want to collaborate militarily. You know, we've got a pretty bad relationship with India right now, but India is a really important country coming up on the global stage. We're moving into a period of history where the United States and the West are
They're not the only game in town. Okay, so what is our greatest weakness in your view, and what is our greatest strength right now? The strength, I think, is Canadians.
Right. Canadians are highly educated. They come from all parts of the world. It is rich in resources. It has a great system of government. We've got accountability. We've got a non-corrupt civil service and we've got all the natural resources in the world. All the things that you would want on paper, but you can have a really great hand and play it badly.
I think Canadian policy in recent years has been a bit complacent and we haven't spent as much time on making sure that we are competitive in regulation, we're competitive on tax, we're getting value for money in government spending. We're getting rid of barriers that impede investment and trade and productivity. So I think Canada's got a great hand. It's got one of the best hands in the world to play, but we need policies that will help to play it well.
Do you want to be my friend or my enemy? Why do you ask? Okay, so we have been talking about the big Canadian geopolitical maelstrom that we're in the midst of, but we're still the same show. And I think we're going to go back to our classic question, Sarah Rieger.
Who is making or losing money that's interesting to you right now? Well, Canadians are losing money. According to one survey, more than a third of Canadians are in more debt this year than last year, and two-thirds are relying on their credit or their savings to pay their bills. And it's something I've been thinking about a lot lately. Like, if the cost of living is increasing so much and you've already got debt on your hands, like, how do you actually stay above water? Okay. This is an age-old problem and one that is at least...
psychologically, if not financially, really difficult to solve. And the sort of basic psychological building blocks of getting out of debt are actually the same psychological building blocks that every person needs to get ahead. You know, speaking from experience, your lifestyle tends to expand with your income so that it can feel like you're treading water no matter how much money you make.
the barriers to feeling in control are the same, whether you make a little bit of money or whether you make a lot of money. So if you are thinking like, oh, this segment's not for me because I don't have a lot of credit card debt, I would say maybe it is for you. Totally. With that, drumroll, Sarah. Let's get into it.
What do you do? Like, I think a lot of people know the general advice, like, don't spend outside your means. But it's not really clear to me how that advice helps when life stuff happens, like, you know, an emergency hits and all of a sudden you're scrambling. So I called an expert to help us figure out what to do. Isaiah Chan is the VP of Programs and Services with the Credit Counseling Society. They're this nonprofit organization that helps people once they get into trouble with debt.
Isaiah said the first thing you should do is be really honest with yourself and actually like accurately total up everything you've been spending. So no lowballing it, no over-exaggerating.
If you're scared of the word budget, like just call it something else, but just write it all down. So basically the first thing to do is like save your receipts, dig into your credit card statements, look at your rent payments, everything that goes out in a month, write it all down and add it up. I find that the worst financial shape I'm in, the less I open my account. Like when I know that my credit card is really bad, I avoid it. Oh, definitely.
It is kind of unpleasant when you look at like your idea of what you should be spending versus like the reality of your actual habits, hey? Okay, so say that I rip off the Band-Aid, take off the blinders, whatever your metaphor. I take a hard look at my expenditures every month. I realize how terrifying they are given my financial state. What do I actually do then? It kind of depends on once you've taken that look.
where you're at. And Isaiah said there are basically three really broad scenarios that most people fall into. So the first scenario is one where you've figured out your budget and you actually have good cash flow. You're making more than you're spending. We can call these people swimmers because like you're above water, you can change direction. And then treading water is you barely have enough cash flow to pay bills. So you're just like kind of at a break-even point. And then you have people who are drowning.
Okay, so let's take the first scenario. Say you're a swimmer. Where do I go from there?
Yeah, so that one's to have your best case scenario, right? Because you're at least making money, so you can really take a look and restructure your budget and shift some of that cash flow around to start paying stuff down. Does that just mean, like, don't buy frivolous crap anymore? Basically, or maybe you make some harder choices. So that's the scenario everyone thinks they're in. I think this is kind of the problem, is that everyone thinks, like, oh, I'll just, like, eliminate my Starbucks.
And then I'm going to be fine. When in fact, if you look deeper, you might be, say, number two, which is treading water. What do you do at the point where like you're making enough money to live off of, but not enough to come close to paying off your debt?
Yeah, so that's a tougher one, right? When you're kind of feeling like you could go underwater at any moment. So in that scenario, you have to move past just little spending changes. Maybe you get your loans restructured, like refinancing your home or your car, or you could even enter into like a debt management program through a group like the Credit Counseling Society, the group Isaiah works with.
So if you go to one of those services, besides advice, like what do they help you actually do? They can actually help you restructure your debt. So basically, say you have a high interest credit card in one place and a car loan somewhere else and a line of credit somewhere else. They will consolidate that all into one place.
and negotiate with your lenders to bring your interest rate down really low, possibly as low as zero, which, you know, could be a ton of money every month. It will end up as a hit on your credit, but that's sometimes better than the hit of, hey, I'm not paying any of my bills and, you know, collection agencies are looking for me. All right. So say I have, you know, I have a line of credit that has $5,000 and
And I have a car loan that's $15,000. And I have credit card debt that's $8,000. And they have varying interest rates. The idea is if you go to someone, they can help you put all those debts into one loan at a lower rate. Yeah, and you might not even need to take a step that big. Like, I don't think a lot of people realize this, but you can literally just call up your bank and be like...
hey, could you lower my interest rate? Could you help me out a little bit? Calling your creditors seems so scary, but it's like they want you to pay them. They want your money. Okay, let's get into the scariest scenario. Let's address the drowning man as much as we may not want to. Yeah, I think that's the toughest scenario, right? Like when you're, I don't know, using your credit card to pay your bills or maybe you've maxed out your credit. And at this point, you have to consider some more serious options.
What are the things you can do to really stop the bleeding?
That's like the big lifestyle change stuff, right? So selling your home, your vehicle, stuff that I think no one really wants to have to do. Basically changing the way you live in a really drastic way. It reminds me of when we did our episode with Matty Matheson, the chef and actor, to his wife. He said, look, I got us into this. Give me a year. Because I believe that being in this situation causes stress, causes fear, causes...
Like, it ain't cool for us. So like, let's make this cool. So like, can we move into this really small apartment? And so then I was just like, I had to write out a path. And so I wrote out like a Bristol board thing and hung it up in my bedroom. You know, he wrote down the debts that he had on his wall and he crossed them off.
Is that one of the tricks to being able to stomach a big lifestyle change? It sounds like that's a good psychological trick. Totally. And I think that kind of goes back to the first tip Isaiah had, which is just having a really clear picture of the situation you're in, right? Like if you actually go write all this down, figure out the problem, kind of figure out which of these three buckets you fall into. You know, are you swimming, treading water, drowning? I think then you can kind of actually figure out what repayment and what getting out of this actually will look like. Right.
Right, right, right. You know, obviously some of this is math, but some of this is psychology. I think money is just really hard to talk about. Like Isaiah shared that he comes from an immigrant Chinese family. And the last thing you would ever do is admit that you're in debt. I think it's similar when I think of my friends and family. People have been hard financial times, but no one talks about it. No one actually goes into the specifics of it. So I think it makes it really hard to understand when you're in that situation how you actually get out.
Things are very different in my house. I'm constantly telling my wife how dire things are. I'll just be throwing numbers around as we're going to sleep at night. You're doing the opposite of counting sheep. You're just like counting all the financial horrors you are concerned about. I'm counting. That's one part of it that's right. Can I say one thing in favor of blowing up your life to get ahead financially? I was not in, fortunately, not in a lot of debt. But during the pandemic, I got laid off and I did not have tons of money and I
Me and my wife and my then six-month-old, we lived in my parents, I guess they have like a barn behind their house. That's kind of like an apartment. And it was not glamorous and not fun, but it allowed us to really catch up financially. So it was not the best year of my life, but man, I'm really thankful that I did it.
Did it get better only after, like, you got a new job and you're like, okay, I see a path out? Or did it get better even just reducing your expenses? It got better once I saved up enough money to buy a house, once I moved out. Like, that's when it got better. For me, I've been in some really hard financial spots in my life. And when I was kind of, like, struggling to make it through them, I just thought about what future Sarah would want. Like, I wanted me in a few years to look back and be like, wow, thanks, past Sarah, for, like,
doing the terrible thing. So I think that can kind of be nice is like, even though this is unpleasant, like do a nice thing for your future self. That is it for this week. Sarah Rieger, let's tell them what we learned. We learned that the U.S. has kind of blown up the world order that it created and we'll have to see what that means for Canada. And we learned that if you're spending more than you're making, there are people who can help. I'll use this as a chance to plug Isaiah's organization, nomoredetts.org.
That is it for this week. Thank you, everyone, for listening. This show is sponsored by Wealthsimple. It is made by me, Devin Friedman, Matt Karras, Sarah Rieger, with Matilde Erfolino, Leah Fetter, Sam Lee, and Jared Sullivan. Help from Eva Cruz, Juanita Leon, and Allison Hopkins. Fact-checking by Brennan Doherty. Theme music by Andy Huckvale. And engineering by Emma Munger. This week, we are giving a special thanks to Graham Thompson and Isaiah Chan.
The TLDR podcast is offered by Wealthsimple Media Incorporated and is for informational purposes only. The content in the TLDR podcast is not investment advice, a recommendation to buy or sell assets or securities, and does not represent the views of Wealthsimple Financial Corporation or any of its other subsidiaries or affiliates. Wealthsimple Media Incorporated does not endorse any third-party views referencing this content. More information at wealthsimple.com slash TLDR.