Douglas & McIntyre

Interviews with author(s) of “One Hell of a Ride”

John Lawrence Reynolds

John Lawrence Reynolds

January 2009

The author of your guide to staying calm during these frantic economic times gives us the low-down on the meltdown.

What is Bubbles, Bankers & Bailouts about?

The book deals with the biggest financial crisis since the Great Depression of the 1930s; it discusses how we got to this point, what the implications are globally and to Canadians, and how to cope with its effects.

What makes this financial crisis so different from other economic downturns?

Normal recessions occur as stages in economic cycles: strong demand builds the economy until over-supply dampens it, or stock market prices swing too far in one direction before moving back. This crisis was driven by a wild-west mentality among financiers engaged in activities that were clearly unsustainable, and the global impact is massive. A small group of people grew very rich; the rest of us will pay to clean up the mess.

How has this recession affected you personally?

My wife and I are approaching the age when we have to convert our RRSP to a Registered Retirement Income Fund, or RIFF. We’ve protected ourselves against serious losses but they occurred nevertheless and will likely affect some aspects of our retirement plans.

Do you suggest some ideas to avoid these kinds of problems?

The investment industry must become tightly regulated to prevent a recurrence. This was a “kids in the candy store” event, driven entirely by greed, and nations are already discussing the imposition of tighter rules within their borders. Unfortunately, we are not likely to see a cohesive national effort to rein in excesses. For Canadians whose RRSPs have been devastated by the events, I provide guidelines to soften the blow of any future financial meltdowns. These include building a foundation of guaranteed investments linked to the RRSP owner’s age, and measures to balance growth with security in RRSPs and tax-free savings accounts.

Has the crisis changed other aspects of your life?

It renewed my conservative nature when it comes to managing money. Events like this expose the shadier side of finance; things we tend to overlook when everything is rosy. The extreme example is Bernie Madoff’s hedge fund that wiped out an estimated $50 billion. But there are others, including smaller investment frauds, outrageous investment fees, lousy investment advice, and excessive credit card interest rates. We should be mindful of the need to reduce unnecessary expenses and protect the money we’ve worked so hard to earn.

Haven’t we seen enough media coverage already?

Few news stories deal with the Big Picture in a jargon-free narrative, nor do the headlines clarify the impact these events have on average Canadians and how we should cope with the fallout.

So it’s a simple fact-based treatise?

I tried to make the book entertaining with injections of humour here and there. This is a serious subject, but it needn’t be depressing. In addition, I include stories of individuals and actions that illustrate the overriding theme with a comic side where appropriate. The economic collapse of Iceland, for example – who thought there could be anything funny about Iceland? – is a classic study of raw greed infecting an entire country, sweeping common sense aside. No, it’s not funny if you’re an Icelander dealing with massive national debt, but the entire episode has a comic opera tone when seen from this angle.

What will readers of Bubbles, Bankers & Bailouts take away when they’re finished?

They’ll receive a factual and interesting background to crisis-prone newspaper headlines, as well as practical advice on how to deal with the implications of the financial crisis. When they finish the book, I hope they have a clear understanding of the true extent of the situation and how to cope with it. Knowledge, after all, really is power.

If you could give just one piece of advice from the book, what would it be?

Stay calm. If you have a job, a roof over your head and the support of family and friends, build on this. Don’t attempt to rebuild your RRSP overnight, or even over a year or two. Ignore pessimists who speak only of disaster and focus on good news – including Canada’s rather enviable position vis a vis other countries and the certainty that this, too, will pass. Find ways to lower your material expectations and get more out of life with less money. It’s an old lesson that still works. By the way – many people will make a lot of money out of this situation. How? That’s in the book as well.

D&M Marketing, Jan 15, 2009