I recently interviewed Jon Stead, a CPA who specializes in cryptocurrency margin trading. Figured this would be a good place to post the interview, as well as some highlights for anyone who prefers reading to listening. He offers a simplified explanation of margin trading, as well as some strategies for being successful at margin trading.
Full disclosure, I work for BitcoinTaxes and the link below links to our podcast page.
BitcoinTaxes Podcast Link
Highlights:
Margin trading can be a complex concept to those unfamiliar with it. [03:17]
Jon: Margin trading is the process whereby you take a speculative position using a loan. So if you want to make a bet that Bitcoin is going to go up in value, for instance, instead of clearing out your savings account to buy Bitcoin, you would take out a loan and use the loan to buy the Bitcoin. That's the difference between ordinary trading and margin trading - you are doing it with somebody else's money.
Most of the time if you want to trade on margin, you need to have an account with a broker. In the case of a cryptocurrency margin, you need only have an account with a particular exchange that supports trading on margin. There's going to be requirements for collateral. Just like in any loan, there's going to be an interest expense.
When trading on margin, there are long positions and short positions. [04:52]
Jon: In plain English, if you want to take out a long position on margin: let's say you think Bitcoin will go up - you borrow $1,000 from a bank and buy one Bitcoin that is trading at $1000. Then wait three months. At the end of three months, you have one Bitcoin and you owe $1,000 plus interest at the end of three months. Let's say Bitcoin is now trading at $2,000 - you sell the Bitcoin and now you have $2,000 in cash and you owe $1,000 plus interest. You payback your thousand dollars, you pay the interest, and you keep the change.
Short positions are much more fun and much more dangerous. So let's imagine that you want to short Bitcoin and Bitcoin is trading at 1000 bucks today. You borrow one Bitcoin. So now you're holding one Bitcoin and you owe one Bitcoin. You sell the one Bitcoin for 1000 bucks and then hold the cash and then wait three months. At the end of three months you are holding $1,000 cash and you owe one Bitcoin, plus interest denominated in bitcoin. So let's say that Bitcoin is now trading for 500 bucks. You take your thousand dollars cash and buy, let's say 1.1 bitcoin for 550 - you pay back the one Bitcoin that you owe, pay back the 0.1 Bitcoin in interest and keep 440 US dollars. That's a short position - you've borrowed what you think will go down, sold it for USD and wait, buy it back cheaper, pay back your interest and keep the change.
Understanding your margin trades becomes a lot easier if you can understand the resulting ledgers. [11:09]
Jon: The one that I that I find the easiest is the Kraken ledger. So I'll use this as the example. All of the other exchanges that do margin trading are roughly similar.
When you export a Kraken Ledger, it's going have every transaction that you did. Now the trades are going to come up in two pieces and the category is going to be called "trade". Let's say you bought 1 ETH for 1000 bucks - it'll say "trade", "ETH", "1". The next line down will say "trade", "USD", "-1000".
Now on the margin side, there are two categories that will show up. One of them is called "rollover", and the other one is simply called "margin".
Let's take roll over first. If you are trading on margin and you don't cash out your position, you're essentially letting it ride. So if you go long on Bitcoin and you win, and now you've got 0.2 Bitcoin in your exchange and you want to let it ride and bet again, you're going to be charged a rollover fee. The rollover fee is usually going to be denominated in crypto and there's just going to be a giant ledger full of them.
The other thing that you'll see is just simply called "margin". The margin category is going to have a quantity value - the quantity value will either be positive or negative and it'll have a denominator. So if you look in your Kraken ledger and it says "margin", "2", "BTC", that means that you took out a margin position, you won your bet, and your winnings from that bet is 2 BTC. Obviously the reverse is true here. If it says "margin", "-2", "BTC", you lost your futures position.
If you want to be successful at margin trading crypto, Jon says four factors come into play [21:50]
Jon: If you're going to trade on margin, and your approach is just to throw money at it and hopefully something sticks, you're going to lose your money. But there's another approach. And the other approach is to take it like a poker player. Now a poker player needs four things in play, and all of them need to work to win.
The first thing you need is a strategy. And the strategy has to actually be good. If your strategy isn't going to work, it doesn't matter. You're going to lose money.
The second thing you need in order to win on margin, when you're approaching it like a poker player, is discipline. Anybody can write down a strategy and believe it, but when things start getting difficult, a lot of people second guess themselves. You have to have your strategy and it has to be the one you work all the way through your trade. When your trade doesn't work, use the feedback and reorient your strategy. Don't go reorienting your strategy mid-trade. That's like trying to reorient your golf swing in the middle of the swing - it’s not the right time for that.
The third aspect that you need is patience. If you don't have any patience, you should not be trading on margin. And that's because if you don't have patience, you're going to go doubling down on your bet while it's still alive. Not a good idea, right? You need to have a long-term strategy approach, approach it with discipline, and also let the strategy work in real time and be patient about it.
The last thing that you need is liquidity, which is to say you need cash to backup your gain. The example from poker would be if you're a good poker player, you have your proper strategy, you're a disciplined, cool headed poker player and you have patience, - but you also need the chips to ride out a bad poker player’s lucky streak. Any bad poker player can hit a pot once or twice - it's going to happen. If you are a good poker player and you don't have the chips to ride that out, it doesn't matter that you're right in the long-term...you're not going to be able to ride it out in the short-term.
Jon utilizes his expertise with our previous guest, Alex Kugelman. If you want to reach out to Jon, the best way to do so is to get in touch with Alex. [38:14]
Jon: I work for Alex Kugelman. In the case that you want to talk to me, you’ve got to call or email Alex at [email protected]. He's also on Bitcoin.Tax if I'm not mistaken. Reach out to Alex, set it up through Alex, and he'll put it together. The benefit of that is then the attorney-client privilege extends to me, through Alex.
If you would like to request a topic for an interview, or have any questions related to this podcast, you are welcome to reach out to me at [email protected].

BitcoinTaxes Podcast Link
Margin trading with cryptocurrencies is common practice for many in the world of crypto. Joining us today is Jon Stead. Jon is a CPA who specializes in cryptocurrency margin trading - he’s here to give us an in-depth overview of margin trading, discuss the tax implications, and share his strategies for being a successful margin trader.
Highlights:
Margin trading can be a complex concept to those unfamiliar with it. [03:17]
Jon: Margin trading is the process whereby you take a speculative position using a loan. So if you want to make a bet that Bitcoin is going to go up in value, for instance, instead of clearing out your savings account to buy Bitcoin, you would take out a loan and use the loan to buy the Bitcoin. That's the difference between ordinary trading and margin trading - you are doing it with somebody else's money.
Most of the time if you want to trade on margin, you need to have an account with a broker. In the case of a cryptocurrency margin, you need only have an account with a particular exchange that supports trading on margin. There's going to be requirements for collateral. Just like in any loan, there's going to be an interest expense.
When trading on margin, there are long positions and short positions. [04:52]
Jon: In plain English, if you want to take out a long position on margin: let's say you think Bitcoin will go up - you borrow $1,000 from a bank and buy one Bitcoin that is trading at $1000. Then wait three months. At the end of three months, you have one Bitcoin and you owe $1,000 plus interest at the end of three months. Let's say Bitcoin is now trading at $2,000 - you sell the Bitcoin and now you have $2,000 in cash and you owe $1,000 plus interest. You payback your thousand dollars, you pay the interest, and you keep the change.
Short positions are much more fun and much more dangerous. So let's imagine that you want to short Bitcoin and Bitcoin is trading at 1000 bucks today. You borrow one Bitcoin. So now you're holding one Bitcoin and you owe one Bitcoin. You sell the one Bitcoin for 1000 bucks and then hold the cash and then wait three months. At the end of three months you are holding $1,000 cash and you owe one Bitcoin, plus interest denominated in bitcoin. So let's say that Bitcoin is now trading for 500 bucks. You take your thousand dollars cash and buy, let's say 1.1 bitcoin for 550 - you pay back the one Bitcoin that you owe, pay back the 0.1 Bitcoin in interest and keep 440 US dollars. That's a short position - you've borrowed what you think will go down, sold it for USD and wait, buy it back cheaper, pay back your interest and keep the change.
Understanding your margin trades becomes a lot easier if you can understand the resulting ledgers. [11:09]
Jon: The one that I that I find the easiest is the Kraken ledger. So I'll use this as the example. All of the other exchanges that do margin trading are roughly similar.
When you export a Kraken Ledger, it's going have every transaction that you did. Now the trades are going to come up in two pieces and the category is going to be called "trade". Let's say you bought 1 ETH for 1000 bucks - it'll say "trade", "ETH", "1". The next line down will say "trade", "USD", "-1000".
Now on the margin side, there are two categories that will show up. One of them is called "rollover", and the other one is simply called "margin".
Let's take roll over first. If you are trading on margin and you don't cash out your position, you're essentially letting it ride. So if you go long on Bitcoin and you win, and now you've got 0.2 Bitcoin in your exchange and you want to let it ride and bet again, you're going to be charged a rollover fee. The rollover fee is usually going to be denominated in crypto and there's just going to be a giant ledger full of them.
The other thing that you'll see is just simply called "margin". The margin category is going to have a quantity value - the quantity value will either be positive or negative and it'll have a denominator. So if you look in your Kraken ledger and it says "margin", "2", "BTC", that means that you took out a margin position, you won your bet, and your winnings from that bet is 2 BTC. Obviously the reverse is true here. If it says "margin", "-2", "BTC", you lost your futures position.
If you want to be successful at margin trading crypto, Jon says four factors come into play [21:50]
Jon: If you're going to trade on margin, and your approach is just to throw money at it and hopefully something sticks, you're going to lose your money. But there's another approach. And the other approach is to take it like a poker player. Now a poker player needs four things in play, and all of them need to work to win.
The first thing you need is a strategy. And the strategy has to actually be good. If your strategy isn't going to work, it doesn't matter. You're going to lose money.
The second thing you need in order to win on margin, when you're approaching it like a poker player, is discipline. Anybody can write down a strategy and believe it, but when things start getting difficult, a lot of people second guess themselves. You have to have your strategy and it has to be the one you work all the way through your trade. When your trade doesn't work, use the feedback and reorient your strategy. Don't go reorienting your strategy mid-trade. That's like trying to reorient your golf swing in the middle of the swing - it’s not the right time for that.
The third aspect that you need is patience. If you don't have any patience, you should not be trading on margin. And that's because if you don't have patience, you're going to go doubling down on your bet while it's still alive. Not a good idea, right? You need to have a long-term strategy approach, approach it with discipline, and also let the strategy work in real time and be patient about it.
The last thing that you need is liquidity, which is to say you need cash to backup your gain. The example from poker would be if you're a good poker player, you have your proper strategy, you're a disciplined, cool headed poker player and you have patience, - but you also need the chips to ride out a bad poker player’s lucky streak. Any bad poker player can hit a pot once or twice - it's going to happen. If you are a good poker player and you don't have the chips to ride that out, it doesn't matter that you're right in the long-term...you're not going to be able to ride it out in the short-term.
Jon utilizes his expertise with our previous guest, Alex Kugelman. If you want to reach out to Jon, the best way to do so is to get in touch with Alex. [38:14]
Jon: I work for Alex Kugelman. In the case that you want to talk to me, you’ve got to call or email Alex at [email protected]. He's also on Bitcoin.Tax if I'm not mistaken. Reach out to Alex, set it up through Alex, and he'll put it together. The benefit of that is then the attorney-client privilege extends to me, through Alex.
If you would like to request a topic for an interview, or have any questions related to this podcast, be sure to reach out to us at [email protected].

(Updated August 9th, 2020)
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Background

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You may have heard about off-shore tax havens of questionable legality where wealthy people invest their money in legal "grey zones" and don't pay any tax, as featured for example, in Netflix's drama, The Laundromat.
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The reality is that the Government of Canada offers 100% tax-free investing throughout your life, with unlimited withdrawals of your contributions and profits, and no limits on how much you can make tax-free. There is also nothing to report to the Canada Revenue Agency. Although Britain has a comparable program, Canada is the only country in the world that offers tax-free investing with this level of power and flexibility.
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Thank you fellow Redditors for the wonderful Gold Award and Today I Learned Award!
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(Unrelated but Important Note: I put a link at the bottom for my margin account explainer. Many people are interested in margin trading but don't understand the math behind margin accounts and cannot find an explanation. If you want to do margin, but don't know how, click on the link.)
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As a Gen-Xer, I wrote this post with Millennials in mind, many of whom are getting interested in investing in ETFs, individual stocks, and also my personal favourite, options. Your generation is uniquely positioned to take advantage of this extremely powerful program at a relatively young age. But whether you're in your 20's or your 90's, read on!
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Are TFSAs important? In 2020 Canadians have almost 1 trillion dollars saved up in their TFSAs, so if that doesn't prove that pennies add up to dollars, I don't know what does. The TFSA truly is the Great Canadian Tax Shelter.
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I will periodically be checking this and adding issues as they arise, to this post. I really appreciate that people are finding this useful. As this post is now fairly complete from a basic mechanics point of view, and some questions are already answered in this post, please be advised that at this stage I cannot respond to questions that are already covered here. If I do not respond to your post, check this post as I may have added the answer to the FAQs at the bottom.
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How to Invest in Stocks

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A lot of people get really excited - for good reason - when they discover that the TFSA allows you to invest in stocks, tax free. I get questions about which stocks to buy.
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I have made some comments about that throughout this post, however; I can't comprehensively answer that question. Having said that, though, if you're interested in picking your own stocks and want to learn how, I recommmend starting with the following videos:
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The first is by Peter Lynch, a famous American investor in the 80's who wrote some well-respected books for the general public, like "One Up on Wall Street." The advice he gives is always valid, always works, and that never changes, even with 2020's technology, companies and AI:
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https://www.youtube.com/watch?v=cRMpgaBv-U4&t=2256s
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The second is a recording of a university lecture given by investment legend Warren Buffett, who expounds on the same principles:
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https://www.youtube.com/watch?v=2MHIcabnjrA
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Please note that I have no connection to whomever posted the videos.
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Introduction

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TFSAs were introduced in 2009 by Stephen Harper's government, to encourage Canadians to save.
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The effect of the TFSA is that ordinary Canadians don't pay any income or capital gains tax on their securities investments.
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Initial uptake was slow as the contribution rules take some getting used to, but over time the program became a smash hit with Canadians. There are about 20 million Canadians with TFSAs, so the uptake is about 70%- 80% (as you have to be the age of majority in your province/territory to open a TFSA).
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Eligibility to Open a TFSA

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You must be a Canadian resident with a valid Social Insurance Number to open a TFSA. You must be at the voting age in the province in which you reside in order to open a TFSA, however contribution room begins to accumulate from the year in which you turned 18. You do not have to file a tax return to open a TFSA. You do not need to be a Canadian citizen to open and contribute to a TFSA. No minimum balance is required to open a TFSA.
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Where you Can Open a TFSA

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There are hundreds of financial institutions in Canada that offer the TFSA. There is only one kind of TFSA; however, different institutions offer a different range of financial products. Here are some examples:
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• The Canadian big 5 bank branches and most other financial institutions offer a TFSA that allows you to buy mutual funds, hold cash, GICs, term deposits, and possibly ETFs. This is a good choice if you want guaranteed returns or diversified investing.
• There are a number of on-line banks such as Tangerine, Simplii Financial, Oaken Financial, and many more that offer the TFSA.
• The discount DIY brokerage arms of the big 5 banks give you more choices, including stocks, warrants, bonds and options. There are also standalone brokers like IBKR Canada, Questrade, Qtrade, and Virtual Brokers, among others, that offer this.
• Some brokerages and financial advisors also offer TFSAs that give you these investment choices, in different formats such as:
  • Traditional brokerage, where a stockbroker invests your money (BMO Nesbitt Burns, RBC Dominion Securities and others)
  • Financial advisor who will invest your money according to a plan you put together with the advisor (TSI Network and many others)
  • "Robo" advisors such as Wealthsimple, RBC InvestEase, BMO SmartFolio, or Wealthbar
  • BMO's AdviceDirect, which is a semi-directed hybrid between standalone DIY investing and fully-advised investing, where you operate on a DIY basis but have access to a registered investment advisor (a live person) who can give you suggetions and advice.

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Insurance

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Your TFSA may be covered by either CIFP or CDIC insuranceor both. Ask your bank or broker for details.
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What You Can Trade and Invest In

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You can trade the following:
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• GICS, mutual funds, term deposits
• individual common and preferred stocks listed on an "approved exchange" which is the TSX, TSX-V, NASDAQ, NYSE, and about 20 other exchanges worldwide, but not the US OTC pink sheets. Many examples, such as Suncor, Linamar, Apple, any of the big banks, and many thousands of others, when you want to buy into an individual company
• stock-like securities like REITS, ETFs and ETNs, including 2x and 3x leveraged
• gold and silver certificates
• warrants
• cash of many countries (CAD/USD/EUGBP/AUD/NZD/JPY/CHF and many others)
• government bills and bonds of most countries, subsovereigns like Canadian provincial bills and bonds, and most corporations
• options that trade on the Montreal Exchange or various options exchanges in the USA and the rest of the word (see FAQ for details)
• gold, silver bullion certificates
• shares in certain private companies -- but consult your tax advisor on this

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What You Cannot Trade

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You cannot trade:
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• commodity futures contracts
• option spread positions (see FAQ for details)
• anything that requires a margin account, meaning, a special kind of account that allows you to borrow money directly from the broker against the assets you have in your account and the assets you intend to buy.
• crypto (although there exist crypto ETNs that you can buy)

Again, if it requires a margin account, it's out. You cannot buy on margin in a TFSA. Nothing stopping you from borrowing money from other sources as long as you stay within your contribution limits, but you can't trade on margin in a TFSA. You can of course trade long puts and calls which give you leverage.
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Rules for Contribution Room

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Starting at 18 you get a certain amount of contribution room.
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According to the CRA:
You will accumulate TFSA contribution room for each year even if you do not file an Income Tax and Benefit Return or open a TFSA.
The annual TFSA dollar limit for the years 2009 to 2012 was $5,000.
The annual TFSA dollar limit for the years 2013 and 2014 was $5,500.
The annual TFSA dollar limit for the year 2015 was $10,000.
The annual TFSA dollar limit for the years 2016 to 2018 was $5,500.
The annual TFSA dollar limit for the year 2019 is $6,000.
The TFSA annual room limit will be indexed to inflation and rounded to the nearest $500.
Investment income earned by, and changes in the value of TFSA investments will not affect your TFSA contribution room for the current or future years.
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https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/tax-free-savings-account/contributions.html
If you don't use the room, it accumulates indefinitely.
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Trades you make in a TFSA are truly tax free. But you cannot claim the dividend tax credit and you cannot claim losses in a TFSA against capital gains whether inside or outside of the TFSA. So do make money and don't lose money in a TFSA. You are stuck with the 15% withholding tax on U.S. dividend distributions unlike the RRSP, due to U.S. tax rules, but you do not pay any capital gains on sale of U.S. shares.
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You can withdraw *both* contributions *and* capital gains, no matter how much, at any time, without penalty. The amount of the withdrawal (contributions+gains) converts into contribution room in the *next* calendar year. So if you put the withdrawn funds back in the same calendar year you take them out, that burns up your total accumulated contribution room to the extent of the amount that you re-contribute in the same calendar year.
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Examples

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E.g. Say you turned 18 in 2016 in Alberta where the age of majority is 18. It is now sometime in 2020. You have never contributed to a TFSA. You now have $5,500+$5,500+$5,500+$6,000+$6,000 = $28,500 of room in 2020. In 2020 you manage to put $20,000 in to your TFSA and you buy Canadian Megacorp common shares. You now have $8,500 of room remaining in 2020.
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Sometime in 2021 - it doesn't matter when in 2021 - your shares go to $100K due to the success of the Canadian Megacorp. You also have $6,000 worth of room for 2021 as set by the government. You therefore have $8,500 carried over from 2020+$6,000 = $14,500 of room in 2021.
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In 2021 you sell the shares and pull out the $100K. This amount is tax-free and does not even have to be reported. You can do whatever you want with it.
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But: if you put it back in 2021 you will over-contribute by $100,000 - $14,500 = $85,500 and incur a penalty.
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But if you wait until 2022 you will have $14,500 unused contribution room carried forward from 2021, another $6,000 for 2022, and $100,000 carried forward from the withdrawal 2021, so in 2022 you will have $14,500+$6,000+$100,000 = $120,500 of contribution room.
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This means that if you choose, you can put the $100,000 back in in 2022 tax-free and still have $20,500 left over. If you do not put the money back in 2021, then in 2022 you will have $120,500+$6,000 = $126,500 of contribution room.
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There is no age limit on how old you can be to contribute, no limit on how much money you can make in the TFSA, and if you do not use the room it keeps carrying forward forever.
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Just remember the following formula:
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This year's contribution room = (A) unused contribution room carried forward from last year + (B) contribution room provided by the government for this year + (C) total withdrawals from last year.
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EXAMPLE 1:
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Say in 2020 you never contributed to a TFSA but you were 18 in 2009.
You have $69,500 of unused room (see above) in 2020 which accumulated from 2009-2020.
In 2020 you contribute $50,000, leaving $19,500 contribution room unused for 2020. You buy $50,000 worth of stock. The next day, also in 2020, the stock doubles and it's worth $100,000. Also in 2020 you sell the stock and withdraw $100,000, tax-free.
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You continue to trade stocks within your TFSA, and hopefully grow your TFSA in 2020, but you make no further contributions or withdrawals in 2020.
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The question is, How much room will you have in 2021?
Answer: In the year 2021, the following applies:
(A) Unused contribution room carried forward from last year, 2020: $19,500
(B) Contribution room provided by government for this year, 2021: $6,000
(C) Total withdrawals from last year, 2020: $100,000
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Total contribution room for 2021 = $19,500+6,000+100,000 = $125,500.
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EXAMPLE 2:
Say between 2020 and 2021 you decided to buy a tax-free car (well you're still stuck with the GST/PST/HST/QST but you get the picture) so you went to the dealer and spent $25,000 of the $100,000 you withdrew in 2020. You now have a car and $75,000 still burning a hole in your pocket. Say in early 2021 you re-contribute the $75,000 you still have left over, to your TFSA. However, in mid-2021 you suddenly need $75,000 because of an emergency so you pull the $75,000 back out. But then a few weeks later, it turns out that for whatever reason you don't need it after all so you decide to put the $75,000 back into the TFSA, also in 2021. You continue to trade inside your TFSA but make no further withdrawals or contributions.
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How much room will you have in 2022?
Answer: In the year 2022, the following applies:
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(A) Unused contribution room carried forward from last year, 2021: $125,500 - $75,000 - $75,000 = -$24,500.
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Already you have a problem. You have over-contributed in 2021. You will be assessed a penalty on the over-contribution! (penalty = 1% a month).
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But if you waited until 2022 to re-contribute the $75,000 you pulled out for the emergency.....
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In the year 2022, the following would apply:
(A) Unused contribution room carried forward from last year, 2021: $125,500 -$75,000 =$50,500.
(B) Contribution room provided by government for this year, 2022: $6,000
(C) Total withdrawals from last year, 2020: $75,000
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Total contribution room for 2022 = $50,500 + $6,000 + $75,000 = $131,500.
...And...re-contributing that $75,000 that was left over from your 2021 emergency that didn't materialize, you still have $131,500-$75,000 = $56,500 of contribution room left in 2022.
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For a more comprehensive discussion, please see the CRA info link below.

FAQs That Have Arisen in the Discussion and Other Potential Questions:

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1. Equity and ETF/ETN Options in a TFSA: can I get leverage? Yes. You can buy puts and calls in your TFSA and you only need to have the cash to pay the premium and broker commissions. Example: if XYZ is trading at $70, and you want to buy the $90 call with 6 months to expiration, and the call is trading at $2.50, you only need to have $250 in your account, per option contract, and if you are dealing with BMO IL for example you need $9.95 + $1.25/contract which is what they charge in commission. Of course, any profits on closing your position are tax-free. You only need the full value of the strike in your account if you want to exercise your option instead of selling it. Please note: this is not meant to be an options tutorial; see the Montreal Exchange's Equity Options Reference Manual if you have questions on how options work.
2. Equity and ETF/ETN Options in a TFSA: what is ok and not ok? Long puts and calls are allowed. Covered calls are allowed, but cash-secured puts are not allowed. All other option trades are also not allowed. Basically the rule is, if the trade is not a covered call and it either requires being short an option or short the stock, you can't do it in a TFSA.
3. Live in a province where the voting age is 19 so I can't open a TFSA until I'm 19, when does my contribution room begin? Your contribution room begins to accumulate at 18, so if you live in province where the age of majority is 19, you'll get the room carried forward from the year you turned 18.
4. If I turn 18 on December 31, do I get the contribution room just for that day or for the whole year? The whole year.
5. Do commissions paid on share transactions count as withdrawals? Unfortunately, no. If you contribute $2,000 cash and you buy $1,975 worth of stock and pay $25 in commission, the $25 does not count as a withdrawal. It is the same as if you lost money in the TFSA.
6. How much room do I have? If your broker records are complete, you can do a spreadsheet. The other thing you can do is call the CRA and they will tell you.
7. TFSATFSA direct transfer from one institution to another: this has no impact on your contributions or withdrawals as it counts as neither.
8. More than 1 TFSA: you can have as many as you want but your total contribution room does not increase or decrease depending on how many accounts you have.
9. Withdrawals that convert into contribution room in the next year. Do they carry forward indefinitely if not used in the next year? Answer :yes.
10. Do I have to declare my profits, withdrawals and contributions? No. Your bank or broker interfaces directly with the CRA on this. There are no declarations to make.
11. Risky investments - smart? In a TFSA you want always to make money, because you pay no tax, and you want never to lose money, because you cannot claim the loss against your income from your job. If in year X you have $5,000 of contribution room and put it into a TFSA and buy Canadian Speculative Corp. and due to the failure of the Canadian Speculative Corp. it goes to zero, two things happen. One, you burn up that contribution room and you have to wait until next year for the government to give you more room. Two, you can't claim the $5,000 loss against your employment income or investment income or capital gains like you could in a non-registered account. So remember Buffett's rule #1: Do not lose money. Rule #2 being don't forget the first rule. TFSA's are absolutely tailor-made for Graham-Buffett value investing or for diversified ETF or mutual fund investing, but you don't want to buy a lot of small specs because you don't get the tax loss.
12. Moving to/from Canada/residency. You must be a resident of Canada and 18 years old with a valid SIN to open a TFSA. Consult your tax advisor on whether your circumstances make you a resident for tax purposes. Since 2009, your TFSA contribution room accumulates every year, if at any time in the calendar year you are 18 years of age or older and a resident of Canada. Note: If you move to another country, you can STILL trade your TFSA online from your other country and keep making money within the account tax-free. You can withdraw money and Canada will not tax you. But you have to get tax advice in your country as to what they do. There restrictions on contributions for non-residents. See "non residents of Canada:" https://www.canada.ca/content/dam/cra-arc/formspubs/pub/rc4466/rc4466-19e.pdf
13. The U.S. withholding tax. Dividends paid by U.S.-domiciled companies are subject to a 15% U.S. withholding tax. Your broker does this automatically at the time of the dividend payment. So if your stock pays a $100 USD dividend, you only get $85 USD in your broker account and in your statement the broker will have a note saying 15% U.S. withholding tax. I do not know under what circumstances if any it is possible to get the withheld amount. Normally it is not, but consult a tax professional.
14. The U.S. withholding tax does not apply to capital gains. So if you buy $5,000 USD worth of Apple and sell it for $7,000 USD, you get the full $2,000 USD gain automatically.
15. Tax-Free Leverage. Leverage in the TFSA is effectively equal to your tax rate * the capital gains inclusion rate because you're not paying tax. So if you're paying 25% on average in income tax, and the capital gains contribution rate is 50%, the TFSA is like having 12.5%, no margin call leverage costing you 0% and that also doesn't magnify your losses.
16. Margin accounts. These accounts allow you to borrow money from your broker to buy stocks. TFSAs are not margin accounts. Nothing stopping you from borrowing from other sources (such as borrowing cash against your stocks in an actual margin account, or borrowing cash against your house in a HELOC or borrowing cash against your promise to pay it back as in a personal LOC) to fund a TFSA if that is your decision, bearing in mind the risks, but a TFSA is not a margin account. Consider options if you want leverage that you can use in a TFSA, without borrowing money.
17. Dividend Tax Credit on Canadian Companies. Remember, dividends paid into the TFSA are not eligible to be claimed for the credit, on the rationale that you already got a tax break.
18. FX risk. The CRA allows you to contribute and withdraw foreign currency from the TFSA but the contribution/withdrawal accounting is done in CAD. So if you contribute $10,000 USD into your TFSA and withdraw $15,000 USD, and the CAD is trading at 70 cents USD when you contribute and $80 cents USD when you withdraw, the CRA will treat it as if you contributed $14,285.71 CAD and withdrew $18,75.00 CAD.
19. OTC (over-the-counter stocks). You can only buy stocks if they are listed on an approved exchange ("approved exchange" = TSX, TSX-V, NYSE, NASDAQ and about 25 or so others). The U.S. pink sheets "over-the-counter" market is an example of a place where you can buy stocks, that is not an approved exchange, therefore you can't buy these penny stocks. I have however read that the CRA make an exception for a stock traded over the counter if it has a dual listing on an approved exchange. You should check that with a tax lawyer or accountant though.
20. The RRSP. This is another great tax shelter. Tax shelters in Canada are either deferrals or in a few cases - such as the TFSA - outright tax breaks, The RRSP is an example of a deferral. The RRSP allows you to deduct your contributions from your income, which the TFSA does not allow. This deduction is a huge advantage if you earn a lot of money. The RRSP has tax consequences for withdrawing money whereas the TFSA does not. Withdrawals from the RRSP are taxable whereas they are obviously not in a TFSA. You probably want to start out with a TFSA and maintain and grow that all your life. It is a good idea to start contributing to an RRSP when you start working because you get the tax deduction, and then you can use the amount of the deduction to contribute to your TFSA. There are certain rules that claw back your annual contribution room into an RRSP if you contribute to a pension. See your tax advisor.
21. Pensions. If I contribute to a pension does that claw back my TFSA contribution room or otherwise affect my TFSA in any way? Answer: No.
22. The $10K contribution limit for 2015. This was PM Harper's pledge. In 2015 the Conservative government changed the rules to make the annual government allowance $10,000 per year forever. Note: withdrawals still converted into contribution room in the following year - that did not change. When the Liberals came into power they switched the program back for 2016 to the original Harper rules and have kept the original Harper rules since then. That is why there is the $10,000 anomaly of 2015. The original Harper rules (which, again, are in effect now) called for $500 increments to the annual government allowance as and when required to keep up with inflation, based on the BofC's Consumer Price Index (CPI). Under the new Harper rules, it would have been $10,000 flat forever. Which you prefer depends on your politics but the TFSA program is massively popular with Canadians. Assuming 1.6% annual CPI inflation then the annual contribution room will hit $10,000 in 2052 under the present rules. Note: the Bank of Canada does an excellent and informative job of explaining inflation and the CPI at their website.
23. Losses in a TFSA - you cannot claim a loss in a TFSA against income. So in a TFSA you always want to make money and never want to lose money. A few ppl here have asked if you are losing money on your position in a TFSA can you transfer it in-kind to a cash account and claim the loss. I would expect no as I cannot see how in view of the fact that TFSA losses can't be claimed, that the adjusted cost base would somehow be the cost paid in the TFSA. But I'm not a tax lawyeaccountant. You should consult a tax professional.
24. Transfers in-kind to the TFSA and the the superficial loss rule. You can transfer securities (shares etc.) "in-kind," meaning, directly, from an unregistered account to the TFSA. If you do that, the CRA considers that you "disposed" of, meaning, equivalent to having sold, the shares in the unregistered account and then re-purchased them at the same price in the TFSA. The CRA considers that you did this even though the broker transfers the shares directly in the the TFSA. The superficial loss rule, which means that you cannot claim a loss for a security re-purchased within 30 days of sale, applies. So if you buy something for $20 in your unregistered account, and it's trading for $25 when you transfer it in-kind into the TFSA, then you have a deemed disposition with a capital gain of $5. But it doesn't work the other way around due to the superficial loss rule. If you buy it for $20 in the unregistered account, and it's trading at $15 when you transfer it in-kind into the TFSA, the superficial loss rule prevents you from claiming the loss because it is treated as having been sold in the unregistered account and immediately bought back in the TFSA.
25. Day trading/swing trading. It is possible for the CRA to try to tax your TFSA on the basis of "advantage." The one reported decision I'm aware of (emphasis on I'm aware of) is from B.C. where a woman was doing "swap transactions" in her TFSA which were not explicitly disallowed but the court rules that they were an "advantage" in certain years and liable to taxation. Swaps were subsequently banned. I'm not sure what a swap is exactly but it's not that someone who is simply making contributions according to the above rules would run afoul of. The CRA from what I understand doesn't care how much money you make in the TFSA, they care how you made it. So if you're logged on to your broker 40 hours a week and trading all day every day they might take the position that you found a way to work a job 40 hours a week and not pay any tax on the money you make, which they would argue is an "advantage," although there are arguments against that. This is not legal advice, just information.
26. The U.S. Roth IRA. This is a U.S. retirement savings tax shelter that is superficially similar to the TFSA but it has a number of limitations, including lack of cumulative contribution room, no ability for withdrawals to convert into contribution room in the following year, complex rules on who is eligible to contribute, limits on how much you can invest based on your income, income cutoffs on whether you can even use the Roth IRA at all, age limits that govern when and to what extent you can use it, and strict restrictions on reasons to withdraw funds prior to retirement (withdrawals prior to retirement can only be used to pay for private medical insurance, unpaid medical bills, adoption/childbirth expenses, certain educational expenses). The TFSA is totally unlike the Roth IRA in that it has none of these restrictions, therefore, the Roth IRA is not in any reasonable sense a valid comparison. The TFSA was modeled after the U.K. Investment Savings Account, which is the only comparable program to the TFSA.
27. The UK Investment Savings Account. This is what the TFSA was based off of. Main difference is that the UK uses a 20,000 pound annual contribution allowance, use-it-or-lose-it. There are several different flavours of ISA, and some do have a limited recontribution feature but not to the extent of the TFSA.
28. Is it smart to overcontribute to buy a really hot stock and just pay the 1% a month overcontribution penalty? If the CRA believes you made the overcontribution deliberately the penalty is 100% of the gains on the overcontribution, meaning, you can keep the overcontribution, or the loss, but the CRA takes the profit.
29. Speculative stocks-- are they ok? There is no such thing as a "speculative stock." That term is not used by the CRA. Either the stock trades on an approved exchange or it doesn't. So if a really blue chip stock, the most stable company in the world, trades on an exchange that is not approved, you can't buy it in a TFSA. If a really speculative gold mining stock in Busang, Indonesia that has gone through the roof due to reports of enormous amounts of gold, but their geologist somehow just mysteriously fell out of a helicopter into the jungle and maybe there's no gold there at all, but it trades on an approved exchange, it is fine to buy it in a TFSA. Of course the risk of whether it turns out to be a good investment or not, is on you.

Remember, you're working for your money anyway, so if you can get free money from the government -- you should take it! Follow the rules because Canadians have ended up with a tax bill for not understanding the TFSA rules.
Appreciate the feedback everyone. Glad this basic post has been useful for many. The CRA does a good job of explaining TFSAs in detail at https://www.canada.ca/content/dam/cra-arc/formspubs/pub/rc4466/rc4466-19e.pdf
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Unrelated but of Interest: The Margin Account

Note: if you are interested in how margin accounts work, I refer you to my post on margin accounts, where I use a straightforward explanation of the math behind margin accounts to try and give readers the confidence that they understand this powerful leveraging tool.
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How Margin Loans Work - a Primer

Since my other post became excessively large and the title increasingly misleading, I've decided to post a separate guide.

Index

1. Economy & Empire
2. Resources
3. Military
4. Design
5. Miscellaneous

1. Economy & Empire

• Never tax early on, keep it at 0% until either the planet maxes out or you have no choice and need the funds. Population increases exponentially and you'll benefit from the increased early population growth through migration until the endgame. For reference, a top-quality max population planet can be taxed up to 100% for absurd income.
• Your private economy will pay a percentage of their total income as "tax" to the state, then aim to fulfill all utility demands, filling out the remaining cashflow with maintenance costs.
  • In detail: First the taxes are deducted from private finances. Then, civs purchase ships and auto-build mining stations through your construction ships if there is utility demand. Thus tax reduces the amount of civ ships available in some cases yet frees up these funds for state matters like research and military. This also means the old argument "let your civs pay the bill" is partially true but only in case of surplus private spending or profit. Check the F6 screen to find out, but also look at spaceports to check if transports are gathering around doing nothing - a clear indication of a surplus. Increasing either civ maintenance costs or taxes will directly lower the amount of civ ships available (not existing mining stations). If there's no surplus to take this hit a deficit will form; hampering migration, tourism and resource transport (also mining if the stations fill up).
  • In conclusion: Only in case of surplus private spending or profit you'll want to militarize mining stations and civ ships. The opposite is also true - you can over-tax the private economy given enough happiness bonuses (else colonies will rebel anyway). Also, low-maintenance civ ships and stations means more civ ships - bigger isn't necessarily better.
• While you should play as whichever race and government you enjoy most, wealth determines the size of your military and can be used to speed up research. Thus, economical bonuses are incredibly valuable (growth, happiness and colony income are excellent).
  • The "change cycle" is very effective due to the exponential nature of population growth (earlier is better), allowing the Gizureans and Securans to expand very rapidly combined with their high base reproduction; to a lesser degree the Dhayut as well.
  • Slowly reproducing races take more time to flourish, making the early to mid game more difficult but don't draw as much envy from other empires. Thus they have more freedom to choose their wars while the larger empires duke it out.
• Resorts are a deceptively good source of income. Proximity is more important than quality. Passengers tend to be ferried to resorts in small amounts, so passenger transports only require large holds for migration purposes.
• A few great empire-wide boosts: Firstly, Wonders. The Trade Guild (income) is incredibly powerful, especially if combined with the Holographic Universe (happiness). Growth is also useful though less near the endgame. The "Way of the Ancients" government type (from a ruin) is a boost in stats not unlike an empire-wide wonder while removing the Democracy's downsides. The "Way of Darkness" is a similarly powerful militant government type, including negative diplomatic fallout with non-militant empires, but may still be worth using as a relatively peaceful player.
• Wonders' development bonuses don't stack, though their unique bonuses do. Thus, one wonder at each colony is ideal for income with possible exception of the Holographic Network and Trader's Bazaar, which combine well if the Bazaar alone isn't enough to get tax up to 100% on your best colony (max population-wise) while maintaining 15-20 happiness. All in one place is more defensible though the development bonus can pay for protection.
• Buy a few empire contacts from pirates if you start in pre-warp. You'll likely get periodic monetary gifts to refund the costs and can trade your map for bonus income, ensuring you don't need to resort to taxation. You might be able to set up a few trade agreements early.
• Mutual defense pacts cause major alliances to be formed; galaxy-wide war is not uncommon if you join them. It can be fun but also dangerous by lessening your empire's ability to pick its battles. Neutrality (only trade agreements) is generally easier.
• When threatened with war at an inopportune moment consider trading trade sanctions aimed at a friendly empire. You can then end the sanctions immediately. Note that this is an exploit which can be used for trading even if you're not threatened.
  • Another way to gain millions worth of "trade value" is to build mining stations in enemy territory. Beware that this will cause a temporary relationship penalty.

2. Resources

• Gas stations are often picked for automated refueling missions and thus benefit from a handful of docking ports, though manual spaceport selection for fleet refueling lowers this necessity.
• Rare luxury resources can be shared for a significant diplomacy boost, making the entire galaxy more friendly towards you using a single colony or mining station.
• Caslon/Hydrogen are the two fuel types and you'll likely want to use both to avoid shortages. Caslon engines provide more power and energy capacity per size and are thus ideal for military vessels, while Hydrogen is very fuel-efficient and thus ideal for civ/base use. The top-tier engine uses Hydrogen, at which point it may be useful to swap Caslon to civs and Hydrogen to military use.
• Spaceports are best used as construction yards as freighters will prioritize them to offload or centralize resources. Thus, you don't need many unless there's a freighter deficit. Colonies can be serviced with medical, recreational and defensive facilities through the Defensive Base instead.
• Different freighter sizes are useful simply because having designs for them causes your civs to buy more (they don't adapt to having less options), but otherwise don't seem to behave any differently. You can use one design and copy it. This understanding also provides the option of reducing the amount of freighters when desired by marking a freighter design as obsolete.

3. Military

• Your finances determine the max size of your military, while resources determine how quickly ships are built and whether or not they have fuel available. Tech, size and your design skills (particularly range setup and weapon choice) mostly determine individual ship power.
• Extreme difficulty demands that you pick fights selectively until the lategame. Diplomacy is the best defense.
• Sometimes it's a great idea to spend all your funds on an all-out blitz invasion of a friendly neighboring empire, notably when they only have a single or few colonies. Use troop transports and primarily armored ground forces, no weapons, and create an amount of fleets equal to the amount of colonies with troop numbers proportional to their targets - roughly 3x troop power is advised, even 4x if there's a swarm of ships around the colony (they'll likely have troops, which will land almost immediately). Just before invading, position your troop transports directly above the center of the target colony (moving towards a port or vessel is ideal for this), pausing as necessary. When ready, simultaneously invade - they won't be able to retaliate, and everything they owned is now yours.
  • It's best to retrofit bases but retire any ships to assimilate their technology.
• Pirates are best paid off immediately for a cheap protection arrangement. As your relationship improves over time they'll be less inclined to break it. Thus for a small and manageable price pirates don't need to be much of a bother. Alternatively, destroying them for good by wiping their bases (including any Criminal Networks) and construction ship can be the better option, but only if you achieve a quick victory. Fail, and you've now got a persistent enemy who can only be bought off at a ludicrous price which keeps going up as they periodically break your arrangement.
• Passive territory defense can globally be done in three ways: Defense fleets using posture to defend key areas, automated non-fleet ships (not escorts/frigates as they'll waste time following civs) and militarizing everything (inefficient). If you're using ships there are a few important considerations to actually make them effective: Response times (range-appropriate hyperdrives), delaying the enemy (armoshields, Gravity Well, shield bypassing damage) and keeping your empire's territory "tight".
• An Admiral with +attack power will massively increase damage dealt at max range for falloff weapons as damage loss/distance does not increase proportionally, making long-range torps overpowered. Having a good Admiral can in general make your main fleet immensely powerful. Note that +maneuver and +speed apply to fighters to increase their DPS significantly while helping your carriers dictate range.
  • If the F11 screen is correct, which I doubt, Admiral bonuses stack.
• Explorer ships without weapons are ignored by out-of-range enemies and can thus be used for long-range scanning. Park one in a gas cloud with excess energy collectors (~2x) for sustained operation.

4. Design

• Regarding range dictation, "Standoff" will make the AI attempt to stay at the widest equipped weapon range, causing the ship to err in both directions - sometimes too far, sometimes too close. "Evade" is ideal for carriers as this keeps the margin of error closer to safety. "Point Blank" is ideal for any weapon with sharp damage falloff like blasters, gravs, rails and some torps, though mixed weapons on a single ship benefit from "All Weapons". Different ranges against weakestronger opponents are mostly useful in small engagements as the enemy is likely to target closer ships, meaning there's no such thing as a "weaker opponent" in large battles.
  • Tractor beams are amazing: Pulling enemies works well in any situation to close distance including large fleet engagements - your fleet will suck in individual ships and blast them to bits, maintaining range advantage both in offense (hitting a nearby target) and defense (getting shot at from far away). Pushing works well unless outnumbered.
• For military ships, bigger is better. Firepower housed in a tanky hull stays operational longer as opposed to small ships getting picked off early. They'll have high boarding defense due to hab modules and greater ability to flee before taking fatal damage.
  • Smaller ships are not faster: A ship double the size with double the thrusters will achieve equal speed.
  • Resupply ships are essentially supercapitals, going up to 4500 size at max construction, minus 20% on "resupply parts" (cargo bays/docks/gas extractors) = 3600 usable size (1.6 carriers or 2.4 capitals). Note that: The resupply parts will cost around 10% of the maintenance and slow down the ship somewhat, they can only be built on colonies as opposed to construction yards, while deployed they won't defend themselves actively and they refuse to refuel from their own cargo bays. Despite all that they're incredibly powerful.
• A good fleet command ship to keep the Admiral and fleet countermeasures/targeting safe is one without hyperdrive. Minimal speed and a single fuel cell ensures it never leaves the homeworld system. If this seems cheesy, use a cowardly tank instead.
• Though weapons are only as good as the tactics and Admiral they're used with, it's safe to say gravs, rails and blasters (not phasers) show their weakness in Extreme mode. Gravs have a low time-to-kill even if mounted on supercapitals while rails and blasters have poor accuracy in large quantities.
  • However, a single grav will damage a ship's hull to make it flee prematurely - great on defensive ships/stations.
  • Area weapons are very powerful in fleet engagements yet mediocre (not weak) in small engagements. They're bottlenecked by energy capacity and thus combine well with high energy/s modules to get the most out of your reactors. They also combine poorly with tractor beams as you'll want the enemy to swarm together.
  • If you find a superweapon, use it - especially the Devastator. A few supercapitals with Devastators will make even Extreme difficulty easy.
• There are three possible strategies to ship defense: Capacity (shields/armor), sustain (recharge/repair) and speed/range. It's a good idea to specialize in one or two of these strategies, not all three.
  • Very fast ships set to Evade or long range Standoff don't require much shields/armor, benefit strongly from sustain and rarely get their shields bypassed or boarded.
  • Calculate "armor recharge" when using a repair bot. The base rate at max tech is 13.33/s (40/3) or 20/s (40/2) with an Ikkuro bot, though more in practice due to reactive armor damage reduction (20% against a point blank torp, more against most weapons). In other words, the sustain equivalent of at least 11 top-tech shields or 16 with an Ikkuro bot, without the energy cost.
• The energy requirement of a ship in combat is simply "sprint + weapons + shield recharge" when compared to "excess energy output" as shown on the design screen.
  • Slightly draining the reactor is permissible as engagements tend to be brief and early damage will take enemies out of the fight sooner (~60 secs is a good aim), unless using area shield recharge (these will not be used if the reactor is drained).
  • Point defenses are used situationally, meaning they're allowed to drain the reactor more rapidly.
  • Fleeing causes a ship to switch to cruise speed, freeing up the reactor significantly. Still, make sure it has enough energy to warp, else it gets stranded.
• Low delay hyper jumping is better than you might think, particularly on dense maps and with sustain tanking. This allows military ships to flee before taking crippling damage, giving them time to regenerate shields or repair. They'll then get back into the fight or at least avoid destruction. Civs will often take short trips, particularly if you intentionally limit their fuel capacity. However, max speed hyper drives are significantly faster across long distances (1-2+ sectors). The top-tier Torrent Drive is outright better than earlier options, except the Kaldos for hit-and-run tactics (33% longer delay - 3 to 4 seconds).
• Partially built stations are already functional, meaning component order can be optimized for earlier operation (that includes mining, med/rec facilities, armor etc). Also, you can use a bare-bones design to "plop" down a base quickly and retrofit it afterwards to save construction ship time - particularly useful when pre-building a defensive base on a new colony.
• A few non-obvious things: Spaceports don't require cargo bays. Damage control and repair bots don't stack. A single component plant (weapon, energy, hitech) each is sufficient unless you want to churn out 30+ large ships at once - good planning makes adding more largely obsolete. More than one construction yard per construction ship is wasted as additional yards will not improve speed (including yards used on stations - these just add more queues). Exploration ships ought to be kept lightweight so you can field more. Mining/Gas stations can extract resources without fuel or energy. The "mining cap" is reached at 4 Mining Engines or 3 Gas Extractors.

5. Miscellaneous

• Intelligence Agents (spies) can be used to boost research progress tremendously, give access to otherwise expensive or inaccessible race-specific tech and steal particularly large galaxy maps (the latter can be sold to other empires). Particularly the Haakonish "Compressed Fuel Storage" is an amazing steal as this renders two subsequent research options obsolete.
• Watch your research cap. Too many or too few labs is wasteful, though too few is definitely worse. Always take advantage of location research bonuses as these are applied after the cap. Put your best scientists on these locations to further increase the bonus (only the highest total bonus of any one station+resident scientist applies). A unique "home base" spaceport can house your labs, adding more as you near the cap, using only 3 research stations total for the bonuses throughout the game. A scientist with the "Ultra Genius" trait should be held onto for a +20% bonus to all fields.

Lastly, two off-topic tips:
A great way to test any game mechanic or ship build is to start a game at tech 7, or just backup one of your endgame saves for later use.
Star amount largely governs the drain on your PC's hardware. If you're experiencing stutter, consider playing on a less populated map. You can lower the map size to keep inter-system distances similar, though vast distances add a certain "deep space" charm to gameplay.

Most of us have overlooked a fundamental problem that is currently causing an insurmountable obstacle to building a fairer and more sustainable world. We are very familiar with the thing in question, but its problematic nature has been hidden from us by a powerful illusion. We think the problem is capitalism, but capitalism is just the logical outcome of aggregate human decisions about how to manage money. The fundamental problem is money itself, or more specifically general purpose money and the international free market which allows you to sell a chunk of rainforest and use the money to buy a soft drink factory. (You can use the same sort of money to sell anything and buy anything, anywhere in the world, and until recently there was no alternative at all. Bitcoin is now an alternative, but is not quite what we are looking for.) The illusion is that because market prices are free, and nobody is forced into a transaction, those prices must be fair – that the exchange is equitable. The truth is that the way the general money globalised free market system works means that even though the prices are freely determined, there is still an unequal flow of natural resources from poor parts of the world to rich parts. This means the poor parts will always remain poor, and resources will continue to accumulate in the large, unsustainable cities in rich countries. In other words, unless we re-invent money, we cannot overturn capitalism, and that means we can't build a sustainable civilisation.
Why does this matter? What use is it realising that general purpose money is at the root of our problems when we know that the rich and powerful people who run this world will do everything in their power to prevent the existing world system being reformed? They aren't just going to agree to get rid of general purpose money and economic globalisation. It's like asking them to stop pursuing growth: they can't even imagine how to do it, and don't want to. So how does this offer us a way forwards?
Answer: because the two things in question – our monetary system and globalisation – look like being among the first casualties of collapse. Globalisation is already going into reverse (see brexit, Trump's protectionism) and our fiat money system is heading towards a debt/inflation implosion.
It looks highly likely that the scenario going forwards will be of increasing monetary and economic chaos. Fiat money systems have collapsed many times before, but never a global system of fiat currencies floating against each other. But regardless of how may fiat currencies collapse, or how high the price of gold goes in dollars, it is not clear what the system would be replaced with. Can we just go back to the gold standard? It is possible, but people will be desperately looking for other solutions, and the people in power might also be getting desperate.
So what could replace it? What is needed is a new sort of complementary money system which both
(a) addresses the immediate economic problems of people suffering from symptoms of economic and general collapse and
(b) provides a long-term framework around which a new sort of economy can emerge – an economy which is adapted to deglobalisation and degrowth.
I have been searching for answers to this question for some time, and have now found what I was looking for. It is explained in this recently published academic book, and this paper by the same professor of economic anthropology (Alf Hornborg). The answer is the creation of a new sort of money, but it is critically important exactly how this is done. Local currencies like the Bristol Pound do not challenge globalisation. What we need is a new sort of national currency. This currency would be issued as a UBI, but only usable to buy products and services originating within an adjustable radius. This would enable a new economy to emerge. It actually resists globalisation and promotes the growth of a new sort of economy where sustainability is built on local resources and local economic activity. It would also reverse the trend of population moving from poor rural areas and towns, to cities. It would revitalise the “left behind” parts of the western world, and put the brakes on the relentless flow of natural resources and “embodied cheap labour” from the poor parts of the world to the rich parts. It would set the whole system moving towards a more sustainable and fairer state.
This may sound unrealistic, but please give it a chance. I believe it offers a way forwards that can
(a) unite disparate factions trying to provoke systemic change, including eco-marxists, greens, posthumanists and anti-globalist supporters of “populist nationalism”. The only people who really stand to lose are the supporters of global big business and the 1%.
(b) offers a realistic alternative to a money system heading towards collapse, and to which currently no other realistic alternative is being proposed.
In other words, this offers a realistic way forwards not just right now but through much of the early stages of collapse. It is likely to become both politically and economically viable within the forseeable future. It does, though, require some elements of the left to abandon its globalist ideals. It will have to embrace a new sort of nationalism. And it will require various groups who are doing very well out of the current economic system to realise that it is doomed.
Here is an FAQ (from the paper).

What is a complementary currency? It is a form of money that can be used alongside regular money.
What is the fundamental goal of this proposal? The two most fundamental goals motivating this proposal are to insulate local human subsistence and livelihood from the vicissitudes of national and international economic cycles and financial speculation, and to provide tangible and attractive incentives for people to live and consume more sustainably. It also seeks to provide authorities with a means to employ social security expenditures to channel consumption in sustainable directions and encourage economic diversity and community resilience at the local level.
Why should the state administrate the reform? The nation is currently the most encompassing political entity capable of administrating an economic reform of this nature. Ideally it is also subservient to the democratic decisions of its population. The current proposal is envisaged as an option for European nations, but would seem equally advantageous for countries anywhere. If successfully implemented within a particular nation or set of nations, the system can be expected to be emulated by others. Whereas earlier experiments with alternative currencies have generally been local, bottom-up initiatives, a state-supported program offers advantages for long-term success. Rather than an informal, marginal movement connected to particular identities and transient social networks, persisting only as long as the enthusiasm of its founders, the complementary currency advocated here is formalized, efficacious, and lastingly fundamental to everyone's economy.
How is local use defined and monitored? The complementary currency (CC) can only be used to purchase goods and services that are produced within a given geographical radius of the point of purchase. This radius can be defined in terms of kilometers of transport, and it can vary between different nations and regions depending on circumstances. A fairly simple way of distinguishing local from non-local commodities would be to label them according to transport distance, much as is currently done regarding, for instance, organic production methods or "fair trade." Such transport certification would of course imply different labelling in different locales.
How is the complementary currency distributed? A practical way of organizing distribution would be to provide each citizen with a plastic card which is electronically charged each month with the sum of CC allotted to him or her.
Who are included in the category of citizens? A monthly CC is provided to all inhabitants of a nation who have received official residence permits.
What does basic income mean? Basic income is distributed without any requirements or duties to be fulfilled by the recipients. The sum of CC paid to an individual each month can be determined in relation to the currency's purchasing power and to the individual's age. The guiding principle should be that the sum provided to each adult should be sufficient to enable basic existence, and that the sum provided for each child should correspond to the additional household expenses it represents.
Why would people want to use their CC rather than regular money? As the sum of CC provided each month would correspond to purchases representing a claim on his or her regular budget, the basic income would liberate a part of each person's regular income and thus amount to substantial purchasing power, albeit restricted only to local purchases. The basic income in CC would reduce a person's dependence on wage labor and the risks currently associated with unemployment. It would encourage social cooperation and a vitalization of community.
Why would businesses want to accept payment in CC? Business entrepreneurs can be expected to respond rapidly to the radically expanded demand for local products and services, which would provide opportunities for a diverse range of local niche markets. Whether they receive all or only a part of their income in the form of CC, they can choose to use some of it to purchase tax-free local labor or other inputs, and to request to have some of it converted by the authorities to regular currency (see next point).
How is conversion of CC into regular currency organized? Entrepreneurs would be granted the right to convert some of their CC into regular currency at exchange rates set by the authorities.The exchange rate between the two currencies can be calibrated so as to compensate the authorities for loss of tax revenue and to balance the in- and outflows of CC to the state. The rate would thus amount to a tool for determining the extent to which the CC is recirculated in the local economy, or returned to the state. This is important in order to avoid inflation in the CC sector.
Would there be interest on sums of CC owned or loaned? There would be no interest accruing on a sum of CC, whether a surplus accumulating in an account or a loan extended.
How would saving and loaning of CC be organized? The formal granting of credit in CC would be managed by state authorities and follow the principle of full reserve banking, so that quantities of CC loaned would never exceed the quantities saved by the population as a whole.
Would the circulation of CC be subjected to taxation? No.
Why would authorities want to encourage tax-free local economies? Given the beneficial social and ecological consequences of this reform, it is assumed that nation states will represent the general interests of their electorates and thus promote it. Particularly in a situation with rising fiscal deficits, unemployment, health care, and social security expenditures, the proposed reform would alleviate financial pressure on governments. It would also reduce the rising costs of transport infrastructure, environmental protection, carbon offsetting, and climate change adaptation. In short, the rising costs and diminishing returns on current strategies for economic growth can be expected to encourage politicians to consider proposals such as this, as a means of avoiding escalating debt or even bankruptcy.
How would the state's expenditures in CC be financed? As suggested above, much of these expenditures would be balanced by the reduced costs for social security, health care, transport infrastructure, environmental protection, carbon offsetting, and climate change adaptation. As these savings may take time to materialize, however, states can choose to make a proportion of their social security payments (pensions, unemployment insurance, family allowance, etc.) in the form of CC. As between a third and half of some nations' annual budgets are committed to social security, this represents a significant option for financing the reform, requiring no corresponding tax levies.
What are the differences between this CC and the many experiments with local currencies? This proposal should not be confused with the notion, or with the practical operation, of local currencies, as it does not imply different currencies in different locales but one national,complementary currency for local use. Nor is it locally initiated and promoted in opposition to theregular currency, but centrally endorsed and administrated as an accepted complement to it. Most importantly, the alternative currency can only be used to purchase products and services originating from within a given geographical range, a restriction which is not implemented in experiments with Local Exchange Trading Systems (LETS). Finally, the CC is provided as a basic income to all residents of a nation, rather than only earned in proportion to the extent to which a person has made him- or herself useful in the local economy.
What would the ecological benefits be? The reform would radically reduce the demand for long-distance transport, the production of greenhouse gas emissions, consumption of energy and materials, and losses of foodstuffs through overproduction, storage, and transport. It would increase recycling of nutrients and packaging materials, which means decreasing leakage of nutrients and less garbage. It would reduce agricultural intensification, increase biodiversity, and decrease ecological degradation and vulnerability.
What would the societal benefits be? The reform would increase local cooperation, decrease social marginalization and addiction problems, provide more physical exercise, improve psycho-social and physical health, and increase food security and general community resilience. It would decrease the number of traffic accidents, provide fresher and healthier food with less preservatives, and improved contact between producers and consumers.
What would the long-term consequences be for the economy? The reform would no doubt generate radical transformations of the economy, as is precisely the intention. There would be a significant shift of dominance from transnational corporations founded on financial speculation and trade in industrially produced foodstuffs, fuels, and other internationally transported goods to locally diverse producers and services geared to sustainable livelihoods. This would be a democratic consequence of consumer power, rather than of legislation. Through a relatively simple transformation of the conditions for market rationality, governments can encourage new and more sustainable patterns of consumer behavior. In contrast to much of the drastic and often traumatic economic change of the past two centuries, these changes would be democratic and sustainable and would improve local and national resilience.
Why should society want to encourage people to refrain from formal employment? It is increasingly recognized that full or high employment cannot be a goal in itself, particularly if it implies escalating environmental degradation and energy and material throughput. Well-founded calls are thus currently made for degrowth, i.e. a reduction in the rate of production of goods and services that are conventionally quantified by economists as constitutive of GDP. Whether formal unemployment is the result of financial decline, technological development, or intentional policy for sustainability, no modern nation can be expected to leave its citizens economically unsupported. To subsist on basic income is undoubtedly more edifying than receiving unemployment insurance; the CC system encourages useful community cooperation and creative activities rather than destructive behavior that may damage a person's health.
Why should people receive an income without working? As observed above, modern nations will provide for their citizens whether they are formally employed or not. The incentive to find employment should ideally not be propelled only by economic imperatives, but more by the desire to maintain a given identity and to contribute creatively to society. Personal liberty would be enhanced by a reform which makes it possible for people to choose to spend (some of) their time on creative activities that are not remunerated on the formal market, and to accept the tradeoff implied by a somewhat lower economic standard. People can also be expected to devote a greater proportion of their time to community cooperation, earning additional CC, which means that they will contribute more to society – and experience less marginalization – than the currently unemployed.
Would savings in CC be inheritable? No.
How would transport distances of products and services be controlled? It is reasonable to expect the authorities to establish a special agency for monitoring and controlling transport distances. It seems unlikely that entrepreneurs would attempt to cheat the system by presenting distantly produced goods as locally produced, as we can expect income in regular currency generally to be preferable to income in CC. Such attempts would also entail transport costs which should make the cargo less competitive in relation to genuinely local produce, suggesting that the logic of local market mechanisms would by and large obviate the problem.
How would differences in local conditions (such as climate, soils, and urbanism) be dealt with?It is unavoidable that there would be significant variation between different locales in terms of the conditions for producing different kinds of goods. This means that relative local prices in CC for agiven product can be expected to vary from place to place. This may in turn mean that consumption patterns will vary somewhat between locales, which is predictable and not necessarily a problem. Generally speaking, a localization of resource flows can be expected to result in a more diverse pattern of calibration to local resource endowments, as in premodern contexts. The proposed system allows for considerable flexibility in terms of the geographical definition of what is categorized as local, depending on such conditions. In a fertile agricultural region, the radius for local produce may be defined, for instance, as 20 km, whereas in a less fertile or urban area, it may be 50 km. People living in urban centers are faced with a particular challenge. The reform would encourage an increased production of foodstuffs within and in the vicinity of urban areas, which in the long run may also affect urban planning. People might also choose to move to the countryside, where the range of subsistence goods that can be purchased with CC will tend to be greater. In the long run, the reform can be expected to encourage a better fit between the distribution of resources (such as agricultural land) and demography. This is fully in line with the intention of reducing long-distance transports of necessities.
What would the consequences be if people converted resources from one currency sphere into products or services sold in another? It seems unfeasible to monitor and regulate the use of distant imports (such as machinery and fuels) in producing produce for local markets, but as production for local markets is remunerated in CC, this should constitute a disincentive to invest regular money in such production processes. Production for local consumption can thus be expected to rely mostly – and increasingly – on local labor and other resource inputs.

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Occasionally people ask how these loans work. With that in mind: from the Canadian prairie on a beautiful day in July, to you:
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First, if you're from the U.S.: I'm doing this from a Canadian perspective which means I'm ignoring the Regulation T, special memorandum account, overnight maintenance requirement, and initial margin, because all of those are concepts that have no equivalent or application in Canada. But the basics are the same. You can ignore all of those concepts because they have no bearing on how margin actually works. Those concepts are simply restrictions in how you can use margin and as a practical matter they're not onorous restrictions.
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I'm also ignoring U.S. risk-based "portfolio margin" because that's a specialized, alternative margin system some brokers offer in the U.S., that we don't have in Canada. We have traditional, rules-based margin that hasn't changed in Canada in 100+ years.
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Note: If you are a Canadian resident buying U.S. stock in Canada you still fall under the Canadian rules for margin.
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Margin in Canada hasn't really changed since the 1900's, except you have to put up at least 30% nowadays instead of 10% as it was back before the crash of 1929. Basically that's the only thing that's changed.
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In Canada you can borrow up to 70% of a position at once for most stocks. This means that if you want to buy $10,000 worth of RBC or Apple, you only have to put up $3,000 and your broker lends you the rest.
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Margin was first developed in the Netherlands which basically invented the modern financial system we have today in the West, back in the 1600s. The Dutch East India corporation (ticker VOC) was at one point 20% of the world's total commerce. That would be like a company in 2020 grossing about 16 trillion US a year. By comparison Apple brings in about one half of one percent of that. The Amsterdam stock market developed just to trade VOC and other shares and related securities.
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Seein the success of their Continental rivals, the British copied the Dutch and for a long time, until after the Battle of Waterloo, the western world had two rival financial capitals, London, and Amsterdam. For various historical reasons, Amsterdam got pushed out of the picture and for about 100 years the City of London (which is what the financial district in London is called) was the financial capital of the west. They of course now share that crown with New York City.
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But it's really the Dutch who started it all, around the time of Vermeer.
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***
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The concept is that the bank (or broker) will lend against some of your stock, but not all of it. They want a "haircut." The haircut is the amount they won't lend against. In Canada the haircut is usually 30% but can be 50% and there are some stocks the banks won't lend against at all, like most of the stuff on the TSX-V or on the U.S. pink sheets. Every bank is different, so BMO InvestorLine might want 50% on one company and Interactive Brokers Canada might want 30% or vice versa for another. But most things are 30%, some are 50% and some are 100% (meaning no loan).
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The maximum available leverage is 1/haircut.
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If the haircut is 30% as is typical in Canada, the bank will let you buy up to 1/0.3 = 3 1/3 as much as your cash, meaning, you can borrow up to 2 1/3 dollars for every dollar you put up. That's the limit. But:
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So say you have $3,000 and you want to buy on margin. As the bank haircut (margin rate) is 30%, you can buy $3,000/0.3 = $10,000 worth of stock. Obviously you then have a loan of $7,000.
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You now have $10,000 worth of stock, but remember, the bank won't let you borrow against 30%*$10,000 = $3,000. So your collateral is only $7,000. So you now have a $7,000 loan collateralized by $7,000 worth of stock.
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In the above example, you put up 30% margin, the same as the haircut.
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It's easy to see that if your total position slides so much as a dollar, you will have less collateral than $7,000 and therefore get what's called a "margin call" where they will tell you that you have to put up more money in a few hours or sell stock (which automatically pays down the loan to the extent of the sale) so that you have enough collateral to cover your loan, otherwise they will automatically sell a stock of their choosing at an amount of their choosing.
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They are also allowed to sell whichever stock they choose automatically without calling you first, in the event of a margin call. That is explicitly set out in your margin agreement.
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There have been at least two challenges to that in the Ontario courts in the last 20 years or so, where the former client argued that the bank sold their shares out without first advising them, or, in one of the court cases, after promising to hold off so that the client could put up money, and then reneging on that and selling the client's stock anyway.
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The court in both cases sided with the bank. The margin is for real, not negotiable, it is there to protect the bank and the other client's capital, and the words "the bank can sell at any time and without prior notice" mean what they say they mean. If you get sold out at a loss, don't expect the courts to give you redress.
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So obviously you need some "buffer" because of volatility, but how much do you borrow?
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Now you have to understand some more math.
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target margin = 1-(1-x)*(1-haircut)
x is the price drawdown
target margin is how much margin you have to put up.
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Say Apple is marginable at 30% (the haircut) by your bank. You decide you want to borrow on margin. But you decide, "I will allow Apple to slide 40% from what I buy it at before I get a margin call." So how much margin should you put up?
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target margin = 1-(1-0.4)*(1-0.3) = 1-0.6*0.7 = 1-0.42 = 0.58.
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So you have to put up 58% margin.
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That means if you have $3,000 to invest, you would buy $3,000/0.58 = $5,172 worth of Apple. If Apple is trading at $350 that means it can slide to $210 before you get a margin call. At which point you will have lost 0.4/0.58 = 68.9% of your money. (Remember, leverage is simply 1/margin.)
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You can convince yourself by working through it as a check.
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In the example, as you had $3,000 and you margined that at 58%, you bought $3,000/0.58 = $,5172 worth of stock. Obviously your equity at the time of purchase was be $3,000 because you owned $5,172 worth of stock and owed the bank $2,172. Because of the haircut, 0.3*$5,172 = $1,551 could not be used as collateral.
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Then the stock slid 40%, from $350 to $210, so your total stock position was then (1-0.4)*$5,172 = $3,103. Of course, you still owed the bank $2,172. But remember, not all of the $3,103 was available be used as collateral, only 70% (meaning, 1-haircut) of that.
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So at $210 your collateral was (1-0.3)*$3,103 = $2,172, exactly the same as the loan amount. $210 was, therefore, the lowest price at which you still have sufficient collateral. Anything less and you would have received a margin call or the bank would simply have automatically sold stock, depending on how they saw the risk.
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Key takeaway here is that the haircut is 30%, meaning that 30% of your stock cannot be used as collateral, which mathematically also means that your account equity/total amount of stock = (total amount of stock-loan)/(total amount of stock) has to stay at or above 30%. You're putting up 58%, meaning you're borrowing 1/0.58 - 1 = 72 cents from the bank for every dollar of your own money that you put up.
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The formula above is simply a rearrangement using basic algebra, of the basic margin equation which is:
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price at margin call = initial price of stock*(1-target margin)/(1-haircut)
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Whatever you do, make sure you are maxing out your TFSA or possibly RRSP or possibly both before you use margin, or only contribute a small amount of capital to a margin account and make sure your TFSA or RRSP is your main stock investment vehicle. Do not put up your TFSA as collateral on a margin account. You could end up getting a margin call, then the broker transfers the TFSA over to the margin account, but then the stock market slides again and now your TFSA is wiped out along with your margin account. Questrade offers this and I think it's an absolutely terrible idea. Frankly I think the CRA should disallow it. Notice how none of the banks offer this.
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Also have a plan for a margin call. You will get a margin call at some point. One good plan is simply to sell enough stock to pay off the margin loan and then re-enter margin when conditions warrant. It makes absolutely no sense to have cash lying around to meet a margin call. Why not just invest the cash and not use margin. The old adage is, "Never meet a margin call" and I think that's good advice. If the bank gives you to choice of either putting in more money in or selling, then sell.
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To me there are only 3 reasons you would use a margin account:
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• You have a large account in a diversified stock portfolio and you want to borrow against say 5% of that to go and buy a car, renovate your house, pursue an investment other than securities;
• You are consistently good at beating the stock market by a significant amount, and you have maxed out or at least significantly contributed to a TFSA or RRSP or have other wealth-generating property, you have a well-thought out plan that you commit to, that governs your trading decisions, how much you will borrow, and what you will do in the event of a margin call;
• You are executing certain trades that require a margin account; for example, options spreads, short selling stocks or commodity futures trades.

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To me the following are bad reasons to trade on margin:
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• It looks like a way to make even more money in stocks, even though you don't know how to make money in stocks;
• You are a diversified "Canadian Couch Potato" -style investor getting more or less average returns and you realize that you can buy stock get a 5% dividend yield and pay 4% pre-tax on margin money, so you decide to be a margined "couch potato."

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Margined investing = active investing = checking your positions at least daily and following a trading plan.
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Finally, the average investor working with average capital should always, always, make the TFSA their #1 priority. The TFSA is truly a gem. When I was in my 20's back in the 90's, the only tax shelters for the average Canadian were the sale of their primary residence and the RRSP, the latter which is a deferral and a deduction but not an outright break the way the TFSA is.
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The TFSA offers leverage effectively equal to the capital gains inclusion rate * your average taxation rate, and yet without a margin call and at zero percent and it doesn't even magnify your losses. No margin account can match that.
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Some investors don't believe in margin at all. Like Warren Buffett, who said in a 2018 CNBC interview, "It's crazy to borrow against securities." (Note he said borrowing against stocks, not borrowing to buy stocks.) But he is right in saying that the bad thing about margin is that it gives you limited additional potential upside but at the cost of great potential downside.
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Understand the risks. Read your margin agreement. Consider even meeting with a securities lawyer who can explain the agreement to you.
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Consider this statement from an article posted on a popular stock investing website (Fair dealing exception), posted March 15th, 2020:
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" https://www.fool.com/investing/2020/03/15/5-ugly-lessons-from-a-nasty-margin-call.aspx
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From its close on Feb. 19 to its close on March 12, the S&P 500 fell more than 26%, a huge decline in less than a month. Like many investors who had been using options in a margin account, I faced a margin call during that precipitous decline and was forced to liquidate positions to satisfy that call.
Note that despite facing that margin call, I never actually borrowed money from my broker. I just had margin available and usable from a purchasing power perspective in the event some of my options got exercised against me. It didn't matter to my broker, though, who only saw the margin math, rather than the cash and investment-grade bonds that were also in that account and hadn't seen their values evaporate.
Unfortunately, my experience during that margin call revealed some very ugly realities about how Wall Street really works, particularly when it comes to retail investors. "
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He goes on set out "lessons learned." None of those lessons learned is "read your margin agreement before you trade." So he didn't really learn his lesson.
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Anyway, it's up to each person to do what is right for them, bearing in mind the risks. But know the risks. Trading with margin doesn't mean you'll be wiped out, but if you trade anything you need to know what you're doing and that is even more important if you've agreed to borrow money.
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The post here was to explain how to do the calculations for this popular and important financial tool as there is a lot of misinformation out there on the subject, make some suggestions on how you can use it as a part of your overall portfolio, and give my opinions on how one might do that.
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Whichever road or roads you take, good investing.
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For more details on the TFSA and its contribution rules, see https://www.reddit.com/CanadianInvestocomments/hcy9r9/how_the_tfsa_works/
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This is guide to US options trading from the UK, because I've seen countless requests of people browsing in /ukinvesting, /options, /wallstreetbets etc. about this.
First thing's first - no part of this post is to be taken as financial advice. It is a guide on how to start options trading from the UK. Options/CFD trading is a high-risk activity and most retail traders lose money.

1. CFDs vs. Options

So getting started, options and contracts for difference (CFDs) are both financial derivatives - they derive their values from an underlying security e.g. stock, indices, currency, commodities. Long story short, CFDs do not have an expiration and options do; and at the option expiration date, options give the opportunity to buy/sell the underlying (e.g. stock) at the agreed strike price. CFDs are highly directional (delta) trades where positions require ongoing financing fees by a broker, whereas options strategies allow the trader to trade time decay (theta) as well as market volatility (vega). Options provide greater flexibility in trading strategies (time/volatility trading as well as direction); however, due to this, the more complex strategies can be difficult to understand.
Spread betting allows a literal directional bet of an underlying by a certain date. It is most similar naked options - i.e. if your position moves against you enough, your broker may forcibly close your position unfavourably and/or margin call you for extra cash ("you can lose more than your initial deposit"). With options/CFDs, you can define risk by specifying a profitability range (spreads) instead to avoid this scenario. Due to spread betting being so close to gambling, it is treated as such in the UK in terms of taxation - gains are tax free. I will also add here that CFDs/options can also be used in this manner (gambling, with subsequent margin calls etc.), and that CFD brokers tend to understate the risks of these strategies, whilst almost all options brokers require elevated permissions to seek out this level of risk - this is because blowing through margin presents a risk to the broker and they would rather have commissions without the risks of the brokerage going bust. The lowest level of permissions still allows you to buy extremely highly leveraged OTM options without margin, as your max loss is limited to the amount you paid for those options.

2. Brokers

Given that options effectively open up two additional aspects of trading (time/volatility) and require additional regulatory oversight compared to CFDs/spreadbetting, there is basically no options market in the UK - the only brokers at this time are IG/Saxo, and they only do vanilla options on Forex/Indices/Commodities. Everyone else only does CFDs and/or stock (T212, Freetrade, IG, Plus500 etc.). To engage in true stock options trading, the only choice is to open an international/US brokerage account.
The two that are accessible to UK investors are Interactive Brokers (IB) and TastyWorks. Both are reputable brokers and have strong insurances for cash & securities held with them.

• IB is quite expensive (£20+ pcm minimum), but is the full bells and whistles international trading platform - you may access European options as well as worldwide markets on stocks/currency/anything you want really. Recommended for high value traders/investors.
  
• TastyWorks is the opposite - free accounts, low fees (zero inactivity, free stock trades, low option trading fees), though they charge $45 for cash withdrawals. TastyWorks primarily offer trading on US options (inc. futures) and stocks, so anything listed on the American stock exchanges are game, including international companies listed via ADRs (e.g. global UK companies, especially on FTSE100).
  

3. Opening an account

I will walk through some of the aspects of funding and operating a TastyWorks account from the UK, as this is my recommendation if you're here looking for a cheap way to get started.
Opening a free account on TastyWorks is easy as they are used to foreign traders (form filling within 20-60 mins - you will need a photo of proof of ID and address). It typically takes 1 day for cash accounts and 2-3 days for margin accounts to be ready for funding. My referral link if you feel this guide deserves the effort is: https://start.tastyworks.com/#/login?referralCode=GD9EGGNZYZ. (mods, happy to remove this is this guide is deemed low effort)
The account types are:

• Cash. Recommended to start because you can always open a margin account easily later. Able to buy long calls/puts and sell covered options. No short stock allowed.
  
• Basic (margin). Able to sell naked puts, and trade defined-risk strategies i.e. anything with a known maximum loss before entering the trade. E.g. credit/debit spreads. Note that naked puts carry significant risk - this is equivalent to CFD trading on margin, and you can have your position forcibly closed at unfavourable market rates if you overleverage. You minimum $2k to access this account.
  
• The Works (margin): everything above, and able to sell naked calls - also easily upgraded to trade futures. Note that naked calls carry HUGE risk - this is equivalent to CFD trading on margin, and you can have your position forcibly closed at unfavourable market rates if you overleverage. The difference in naked calls and naked puts: stock can only go to zero, limiting the (huge) loss on a naked put, whereas a naked call has theoretically unlimited loss since stocks can (theoretically) go to infinity. I won't go into futures - be warned that they carry additional risks to stock options. You need a minimum of $2k, self-declare extensive knowledge on financial products and self-declare min. income of $100k + $50k net liquidity to access this account.
  

4. Funding the Account

Since trading US options is done in USD, the account must be funded in USD. As international traders, deposits must be "By Wire", assuming you do not have a US bank account - full instructions for the "By Wire" method will show up when you are approved to fund your account. With TastyWorks, UK traders have 3 options at time of writing, going from highest to lowest fee:
1) Starling Bank: ~1% commission (+flat fee TBC?)
2) CurrencyFair: typical ~0.75% commission +$20 flat fee
3) TransferWise/Revolut + UK USD Account: ~0.5% commission +$20 flat fee
TastyWorks does not accept third party transfers (accounts not in your name), so services such as Revolut and TransferWise (inc. borderless) do not work directly
4.1 Starling Bank
With Starling Bank, you can do an international wire from a GBP account directly. Easy online bank setup and probably fastest way to get started, especially if you already bank with them. Note: Starling Bank is rejecting transfers to TastyWorks 'as it sits out of our international payment provider's risk appetite' (as of 11th May) - waiting for updates
Note that other routes include a $20 flat fee charged by intermediate banks before the transfer reaches TastyWorks. Haven't got confirmation that this route is charged or if Starling includes it within their higher fee.
4.2 CurrencyFair
TastyWorks have approved transfers via CurrencyFair with a guide at: https://support.tastyworks.com/support/solutions/articles/43000435321-can-i-use-currencyfair-to-fund-my-account-
Easy to get started, but a couple hoops to jump through to confirm your transaction to TastyWorks via email.
Note that the $20 flat fee is for an intermediary bank to take their cut between CF and TastyWorks, but that is not mentioned on the CurrencyFair website.
4.3 USD account + TransferWise/Revolut
The cheapest option is to set up a USD currency account and transfer through that.
The account of choice is the Barclays USD Foreign Currency account - you need a current account with them to be able to open the USD account. HSBC also have an offering, but not had this route confirmed.
Once the USD account is open, you can transfer into it using Revolut/TransferWise (cheap) and then international (wire) transfer from Barclays account to TastyWorks (free!). Note that the Barclays USD account is still a UK bank account, so you'll need to use a SWIFT transfer from Revolut/TransferWise to turn your GBP into USD.
Note that the $20 flat fee is for an intermediary bank to take their cut between Barclays and TastyWorks, but that is not mentioned on the Barclays website.
4.4 Withdrawals
To withdraw funds, do the opposite for a deposit, noting that $45 will be charged by TastyWorks per withdrawal.

5. Getting Started

I highly, highly recommend TastyWork's education centre and their TastyTrade videos, especially if you are new to this.
Otherwise, once funded, it's as simple as downloading the app on mobile, using the browser trading screen, or downloading their full desktop platform.
That's it for the guide - happy trading, and if there are any questions, feel free to get in touch and I'll edit the answers in here. I want this to be a resource because I've helped many people get started, and it would be good to have it all in one place!

It's incredibly surprising, given the weight which the left (for which is often a good proxy the average Reddit user) gives to empirical data and scientific authority (and the superiority they feel while doing so), that the majority of arguments I see floating around the front page seem absolutely ignorant to even basic concepts relating to taxation, labour and capital markets, and economics.
While with one hand condemning certain (anti-vax) arguments for refusing to answer to fact, the left simultaneously covers its ears with the other and repeats the same straw-man eat-the-rich talking points. Not only is this incredibly counter productive when it comes to furthering viable and effective change, since policies that are both unlikely to pass and unlikely to produce the desired results are pushed instead (e.g. the wealth tax), but it also signals (in 'build-the-wall' fashion) an unwillingness to engage in good faith debate. I conclude with some common takes I find particularly frustrating.
TL;DR: A Google search is worth a thousand Elizabeth Warren re-tweets.
A) Eat the rich, i.e. no one should be able to have x amount of money. I'll be honest, I don't really get this one. CEOs are commonly celebrated for their ambition and success, but god forbid you're too successful, that's unjust. Restauranteur opens a second location -- American dream. Chain opens thousandth location -- CEO's fortune is illegitimate. The natural consequence of people being able to own businesses is that the owners of extremely successful businesses will be extremely successful. I don't see how the mere existence of billionaires is a systemic failure. This leaks into point B.
B) Rich don't pay taxes, i.e. they're hoarding their wealth. Yes and no. Sure, higher tax brackets pay a lower effective rate than their marginal rate on income due primarily to capital gains mechanics. Moreover, there are good arguments to be made that the uber-rich should be paying more tax overall. However, the claim that these lower rates are the result of fraud or evasion is mostly false (or says more about problems with the tax code than with those filing), and the consequences of many proposed remedies should be extensively scrutinized. For instance, the capital gains tax is low for a reason (see point C), and the wealth tax has proven quite ineffective.
C) Capital markets bad, i.e. rich people buy stocks instead of contributing to the economy. In a flourishing economy, there is a need for investors with an appetite for risk. Companies need money (capital) for growth and are often too risky for a bank loan, either due to their earnings (or lack thereof) or existing debt. This is where investors step in to assume that risk (in return, they require compensation, usually a share (i.e. stock) in the business and it's future profits). Investor capital allows money-losing companies like Uber and Tesla to grow at speeds much faster than what their profits would allow in a bubble, thus allowing them to provide their services to society more effectively while create new jobs. Dare I say, the benefits of these investments trickle down to the rest of the economy. Once again, many objections appear with respect to point D.
D) The labour market is the slave trade, i.e. corporations are taking my bailout dollars and exploiting my workers. The false dichotomy of slave wage and living wage detracts from the very real questions about the value of unskilled labour in an increasingly globalized and service oriented society. Instead of wondering how to force greedy corporations to pay their workers more without outsourcing or automating away the very jobs these workers desperately need to survive, it makes sense to ask what investments are necessary to make the workforce better equipped for the requirements of today's job market.
Mostly, I'd like to have my view changed to the fact that the left is intentionally deploying the same fallacious strategies when it comes to shutting down debate on economics as the right when it comes to well criticized positions on abortion, police brutality, etc.

Most of us have overlooked a fundamental problem that is currently causing an insurmountable obstacle to building a fairer and more sustainable world. We are very familiar with the thing in question, but its problematic nature has been hidden from us by a powerful illusion. We think the problem is capitalism, but capitalism is just the logical outcome of aggregate human decisions about how to manage money. The fundamental problem is money itself, or more specifically general purpose money and the international free market which allows you to sell a chunk of rainforest and use the money to buy a soft drink factory. (You can use the same sort of money to sell anything and buy anything, anywhere in the world, and until recently there was no alternative at all. Bitcoin is now an alternative, but is not quite what we are looking for.) The illusion is that because market prices are free, and nobody is forced into a transaction, those prices must be fair – that the exchange is equitable. The truth is that the way the general money globalised free market system works means that even though the prices are freely determined, there is still an unequal flow of natural resources from poor parts of the world to rich parts. This means the poor parts will always remain poor, and resources will continue to accumulate in the large, unsustainable cities in rich countries. In other words, unless we re-invent money, we cannot overturn capitalism, and that means we can't build a sustainable civilisation.
Why does this matter? What use is it realising that general purpose money is at the root of our problems when we know that the rich and powerful people who run this world will do everything in their power to prevent the existing world system being reformed? They aren't just going to agree to get rid of general purpose money and economic globalisation. It's like asking them to stop pursuing growth: they can't even imagine how to do it, and don't want to. So how does this offer us a way forwards?
Answer: because the two things in question – our monetary system and globalisation – look like being among the first casualties of collapse. Globalisation is already going into reverse (see brexit, Trump's protectionism) and our fiat money system is heading towards a debt/inflation implosion.
It looks highly likely that the scenario going forwards will be of increasing monetary and economic chaos. Fiat money systems have collapsed many times before, but never a global system of fiat currencies floating against each other. But regardless of how may fiat currencies collapse, or how high the price of gold goes in dollars, it is not clear what the system would be replaced with. Can we just go back to the gold standard? It is possible, but people will be desperately looking for other solutions, and the people in power might also be getting desperate.
So what could replace it? What is needed is a new sort of complementary money system which both
(a) addresses the immediate economic problems of people suffering from symptoms of economic and general collapse and
(b) provides a long-term framework around which a new sort of economy can emerge – an economy which is adapted to deglobalisation and degrowth.
I have been searching for answers to this question for some time, and have now found what I was looking for. It is explained in this recently published academic book, and this paper by the same professor of economic anthropology (Alf Hornborg). The answer is the creation of a new sort of money, but it is critically important exactly how this is done. Local currencies like the Bristol Pound do not challenge globalisation. What we need is a new sort of national currency. This currency would be issued as a UBI, but only usable to buy products and services originating within an adjustable radius. This would enable a new economy to emerge. It actually resists globalisation and promotes the growth of a new sort of economy where sustainability is built on local resources and local economic activity. It would also reverse the trend of population moving from poor rural areas and towns, to cities. It would revitalise the “left behind” parts of the western world, and put the brakes on the relentless flow of natural resources and “embodied cheap labour” from the poor parts of the world to the rich parts. It would set the whole system moving towards a more sustainable and fairer state.
This may sound unrealistic, but please give it a chance. I believe it offers a way forwards that can
(a) unite disparate factions trying to provoke systemic change, including eco-marxists, greens, posthumanists and anti-globalist supporters of “populist nationalism”, as well as large numbers of confused and worried "ordinary" people. The only people who really stand to lose are the supporters of global big business and the 1%.
(b) offers a realistic alternative to a money system heading towards collapse, and to which currently no other realistic alternative is being proposed.
In other words, this offers a realistic way forwards not just right now but through much of the early stages of collapse. It is likely to become both politically and economically viable within the forseeable future. It does, though, require some elements of the left to abandon its globalist ideals. It will have to embrace a new sort of nationalism. And it will require various groups who are doing very well out of the current economic system to realise that it is doomed.
Here is an FAQ (from the paper).

What is a complementary currency? It is a form of money that can be used alongside regular money.
What is the fundamental goal of this proposal? The two most fundamental goals motivating this proposal are to insulate local human subsistence and livelihood from the vicissitudes of national and international economic cycles and financial speculation, and to provide tangible and attractive incentives for people to live and consume more sustainably. It also seeks to provide authorities with a means to employ social security expenditures to channel consumption in sustainable directions and encourage economic diversity and community resilience at the local level.
Why should the state administrate the reform? The nation is currently the most encompassing political entity capable of administrating an economic reform of this nature. Ideally it is also subservient to the democratic decisions of its population. The current proposal is envisaged as an option for European nations, but would seem equally advantageous for countries anywhere. If successfully implemented within a particular nation or set of nations, the system can be expected to be emulated by others. Whereas earlier experiments with alternative currencies have generally been local, bottom-up initiatives, a state-supported program offers advantages for long-term success. Rather than an informal, marginal movement connected to particular identities and transient social networks, persisting only as long as the enthusiasm of its founders, the complementary currency advocated here is formalized, efficacious, and lastingly fundamental to everyone's economy.
How is local use defined and monitored? The complementary currency (CC) can only be used to purchase goods and services that are produced within a given geographical radius of the point of purchase. This radius can be defined in terms of kilometers of transport, and it can vary between different nations and regions depending on circumstances. A fairly simple way of distinguishing local from non-local commodities would be to label them according to transport distance, much as is currently done regarding, for instance, organic production methods or "fair trade." Such transport certification would of course imply different labelling in different locales.
How is the complementary currency distributed? A practical way of organizing distribution would be to provide each citizen with a plastic card which is electronically charged each month with the sum of CC allotted to him or her.
Who are included in the category of citizens? A monthly CC is provided to all inhabitants of a nation who have received official residence permits.
What does basic income mean? Basic income is distributed without any requirements or duties to be fulfilled by the recipients. The sum of CC paid to an individual each month can be determined in relation to the currency's purchasing power and to the individual's age. The guiding principle should be that the sum provided to each adult should be sufficient to enable basic existence, and that the sum provided for each child should correspond to the additional household expenses it represents.
Why would people want to use their CC rather than regular money? As the sum of CC provided each month would correspond to purchases representing a claim on his or her regular budget, the basic income would liberate a part of each person's regular income and thus amount to substantial purchasing power, albeit restricted only to local purchases. The basic income in CC would reduce a person's dependence on wage labor and the risks currently associated with unemployment. It would encourage social cooperation and a vitalization of community.
Why would businesses want to accept payment in CC? Business entrepreneurs can be expected to respond rapidly to the radically expanded demand for local products and services, which would provide opportunities for a diverse range of local niche markets. Whether they receive all or only a part of their income in the form of CC, they can choose to use some of it to purchase tax-free local labor or other inputs, and to request to have some of it converted by the authorities to regular currency (see next point).
How is conversion of CC into regular currency organized? Entrepreneurs would be granted the right to convert some of their CC into regular currency at exchange rates set by the authorities.The exchange rate between the two currencies can be calibrated so as to compensate the authorities for loss of tax revenue and to balance the in- and outflows of CC to the state. The rate would thus amount to a tool for determining the extent to which the CC is recirculated in the local economy, or returned to the state. This is important in order to avoid inflation in the CC sector.
Would there be interest on sums of CC owned or loaned? There would be no interest accruing on a sum of CC, whether a surplus accumulating in an account or a loan extended.
How would saving and loaning of CC be organized? The formal granting of credit in CC would be managed by state authorities and follow the principle of full reserve banking, so that quantities of CC loaned would never exceed the quantities saved by the population as a whole.
Would the circulation of CC be subjected to taxation? No.
Why would authorities want to encourage tax-free local economies? Given the beneficial social and ecological consequences of this reform, it is assumed that nation states will represent the general interests of their electorates and thus promote it. Particularly in a situation with rising fiscal deficits, unemployment, health care, and social security expenditures, the proposed reform would alleviate financial pressure on governments. It would also reduce the rising costs of transport infrastructure, environmental protection, carbon offsetting, and climate change adaptation. In short, the rising costs and diminishing returns on current strategies for economic growth can be expected to encourage politicians to consider proposals such as this, as a means of avoiding escalating debt or even bankruptcy.
How would the state's expenditures in CC be financed? As suggested above, much of these expenditures would be balanced by the reduced costs for social security, health care, transport infrastructure, environmental protection, carbon offsetting, and climate change adaptation. As these savings may take time to materialize, however, states can choose to make a proportion of their social security payments (pensions, unemployment insurance, family allowance, etc.) in the form of CC. As between a third and half of some nations' annual budgets are committed to social security, this represents a significant option for financing the reform, requiring no corresponding tax levies.
What are the differences between this CC and the many experiments with local currencies? This proposal should not be confused with the notion, or with the practical operation, of local currencies, as it does not imply different currencies in different locales but one national,complementary currency for local use. Nor is it locally initiated and promoted in opposition to theregular currency, but centrally endorsed and administrated as an accepted complement to it. Most importantly, the alternative currency can only be used to purchase products and services originating from within a given geographical range, a restriction which is not implemented in experiments with Local Exchange Trading Systems (LETS). Finally, the CC is provided as a basic income to all residents of a nation, rather than only earned in proportion to the extent to which a person has made him- or herself useful in the local economy.
What would the ecological benefits be? The reform would radically reduce the demand for long-distance transport, the production of greenhouse gas emissions, consumption of energy and materials, and losses of foodstuffs through overproduction, storage, and transport. It would increase recycling of nutrients and packaging materials, which means decreasing leakage of nutrients and less garbage. It would reduce agricultural intensification, increase biodiversity, and decrease ecological degradation and vulnerability.
What would the societal benefits be? The reform would increase local cooperation, decrease social marginalization and addiction problems, provide more physical exercise, improve psycho-social and physical health, and increase food security and general community resilience. It would decrease the number of traffic accidents, provide fresher and healthier food with less preservatives, and improved contact between producers and consumers.
What would the long-term consequences be for the economy? The reform would no doubt generate radical transformations of the economy, as is precisely the intention. There would be a significant shift of dominance from transnational corporations founded on financial speculation and trade in industrially produced foodstuffs, fuels, and other internationally transported goods to locally diverse producers and services geared to sustainable livelihoods. This would be a democratic consequence of consumer power, rather than of legislation. Through a relatively simple transformation of the conditions for market rationality, governments can encourage new and more sustainable patterns of consumer behavior. In contrast to much of the drastic and often traumatic economic change of the past two centuries, these changes would be democratic and sustainable and would improve local and national resilience.
Why should society want to encourage people to refrain from formal employment? It is increasingly recognized that full or high employment cannot be a goal in itself, particularly if it implies escalating environmental degradation and energy and material throughput. Well-founded calls are thus currently made for degrowth, i.e. a reduction in the rate of production of goods and services that are conventionally quantified by economists as constitutive of GDP. Whether formal unemployment is the result of financial decline, technological development, or intentional policy for sustainability, no modern nation can be expected to leave its citizens economically unsupported. To subsist on basic income is undoubtedly more edifying than receiving unemployment insurance; the CC system encourages useful community cooperation and creative activities rather than destructive behavior that may damage a person's health.
Why should people receive an income without working? As observed above, modern nations will provide for their citizens whether they are formally employed or not. The incentive to find employment should ideally not be propelled only by economic imperatives, but more by the desire to maintain a given identity and to contribute creatively to society. Personal liberty would be enhanced by a reform which makes it possible for people to choose to spend (some of) their time on creative activities that are not remunerated on the formal market, and to accept the tradeoff implied by a somewhat lower economic standard. People can also be expected to devote a greater proportion of their time to community cooperation, earning additional CC, which means that they will contribute more to society – and experience less marginalization – than the currently unemployed.
Would savings in CC be inheritable? No.
How would transport distances of products and services be controlled? It is reasonable to expect the authorities to establish a special agency for monitoring and controlling transport distances. It seems unlikely that entrepreneurs would attempt to cheat the system by presenting distantly produced goods as locally produced, as we can expect income in regular currency generally to be preferable to income in CC. Such attempts would also entail transport costs which should make the cargo less competitive in relation to genuinely local produce, suggesting that the logic of local market mechanisms would by and large obviate the problem.
How would differences in local conditions (such as climate, soils, and urbanism) be dealt with? It is unavoidable that there would be significant variation between different locales in terms of the conditions for producing different kinds of goods. This means that relative local prices in CC for agiven product can be expected to vary from place to place. This may in turn mean that consumption patterns will vary somewhat between locales, which is predictable and not necessarily a problem. Generally speaking, a localization of resource flows can be expected to result in a more diverse pattern of calibration to local resource endowments, as in premodern contexts. The proposed system allows for considerable flexibility in terms of the geographical definition of what is categorized as local, depending on such conditions. In a fertile agricultural region, the radius for local produce may be defined, for instance, as 20 km, whereas in a less fertile or urban area, it may be 50 km. People living in urban centers are faced with a particular challenge. The reform would encourage an increased production of foodstuffs within and in the vicinity of urban areas, which in the long run may also affect urban planning. People might also choose to move to the countryside, where the range of subsistence goods that can be purchased with CC will tend to be greater. In the long run, the reform can be expected to encourage a better fit between the distribution of resources (such as agricultural land) and demography. This is fully in line with the intention of reducing long-distance transports of necessities.
What would the consequences be if people converted resources from one currency sphere into products or services sold in another? It seems unfeasible to monitor and regulate the use of distant imports (such as machinery and fuels) in producing produce for local markets, but as production for local markets is remunerated in CC, this should constitute a disincentive to invest regular money in such production processes. Production for local consumption can thus be expected to rely mostly – and increasingly – on local labor and other resource inputs.

I wrote an article called "The Solution to Poverty in America" for my newsletter Headway to try to address the issue of poverty and ideate on some solutions. Please let me know what you think.
I'll post the whole article below:
​
I grew up in abject poverty in an economically ravaged city of East Orange, New Jersey. When I was 10 years old, while walking to school, I was robbed at gunpoint by a tall man in all-black clothing wearing a black skull cap. I told him I had no money, so he stole my sneakers. I walked home barefoot and my mother blamed me for being “stupid” because I must have “done something wrong.”
That same year, right outside of my school, a cop car speeds to a stop near me. Two White officers leave their car and forcefully slam my body to the ground, face-down. They grabbed by (10 year old) small arms, and crossed them behind my back, as I scream out in pain:

“Why are you doing this to me?”

No response from the officers.
One of them emptied out all the contents of my book bag (i.e. notebook and pens) to the ground; then he drops the bag. At this point, 30 or more fellow students, teachers, and strangers are circling around this scene. Adults yell out angry words at the cops, and the kids are laughing at me.
The bystanders start aggressively asking why. One cop replied:

"We had an anonymous phone call that a kid wearing red gloves had a gun in his book bag.”

An obvious lie. When they were done, there were no apologies from the cops. They didn’t apologize for throwing my school materials all over the street; and the protectors of society didn’t apologize for the several cuts on my face from being physically held face-down on cold pavement (I was a small-framed child that was not resisting).
During my childhood and adolescent years, going to bed with a full stomach was a luxury. Continued housing was not a given. Healthcare and nutrition were afterthoughts. I had chronic social anxiety, fueled by self-consciousness. When your basics are not taken care of, a child cannot take the time to search for their sense of self-worth.
My educational experiences were real bad. East Orange schools had low amounts of funding per student; were racially monolithic (primarily BIPOC); had poorly-qualified teachers (they were all terrible); and large class sizes. This led to unequal achievement in the community (i.e. expectations, grades, retention rates, proficiency test scores, course-taking, graduation, and post secondary education enrollment).
I was an often-ridiculed, painfully shy, unhappy child. I now realize a truth about those students (and teachers) that mocked me: they shared in my hopelessness - not of social dynamics, but of socio-economical and environmental despair. They masked their troubles in a camouflage of sarcasm and immature cruelty. But, we were all trapped - locked away and secluded in a segregated region by systems shaped by race and power. Millions of Americans (of all races), are still trapped in housing projects, ghettos, and trailer parks across the United States; and they intimately understand this reality.
All of these experiences are very common in such communities all across the United States. People in deep poverty live with compounded limitations making it hard for them to lift themselves out of poverty. Equity gaps in health, wealth, income, gender, and education persisted through my youth and through generations of the millions impoverished. This provided me firsthand experience of how the complex interaction of contextual, psychological, social, and environmental factors shape poor developmental outcomes - and would have destroyed me, had not luck, grit and divine intervention saved me from my unnatural reality.
Today’s topic is near and dear to me. Income drives major decisions about housing, schools, neighborhoods and social opportunities. And I have seen how these decisions influence adolescents' health, development, and well-being. I think it’s time we address poverty, not wealth. It’s time to stop demonizing low-income individuals (e.g. absentee fathers or low-income mothers), and build a coalition of science, religion, journalism, private activism, and public advocacy. The antidote to public indifference to poverty is heroism and public service. Below, we’ll diagnose poverty’s symptoms and expound on a set of solutions.
While writing this week’s newsletter, I cried, I smiled, got angry, lost hope and gained it back again. I hope you connect with it. Enjoy.
But first, big thanks to all of you for supporting this newsletter. Headway’s subscriber base is growing rapidly. If you enjoy it, please share it with folks you know. If you have any feedback or ideas on future topics, email me or comment below.

We’ll cover the following:

1. Definitions & Statistics
2. Solutions (I’ll provide my ideas on how we can solve for poverty in America")
3. Myths and Objection Handlers (I’ll give you words to overcome any objection from your friends, family, or strangers)

PS: this is my contribution to the discourse. It is by no means the only solution. I would love to hear other thoughts on items I missed or new ideas to solve the problem!
​

Definition and Statistics

Poverty

Caused by socio-economic class inequities: In Headway’s first article, Death of the Intellectual, we discussed the resurgence of nationalism and tribalism in the United States, driven partially by the disenfranchisement of the working class. In an attempt to level the playing field, these socio-economic class inequities contribute to societal dysfunction by exacerbating sexism, racism, and poverty, and we all either suffer or rejoice in its consequences. Poverty is debatably the most egregious of these consequences, as it affects the greatest number of people regardless of sex, age, or race.
Quantitative Definition:

• Poverty is defined globally as living off of $2.00 per day.
• Extreme poverty, defined globally as living off of $1.25 per day, has held steady at 15% of the global population. If the needle is moved from $1.25 to $2.00 per day, then the percentage swells to about 50% of the global population. 50 percent!!!
• Deep poverty in the United States is defined as having an annual income below $6,165 for single individuals and $12,018 for families.
• Another rough proxy for poverty is % of students eligible for low-income federal lunch programs (currently about half of the United States).

Qualitative Definition:

• Poverty should be defined as the state of not having enough money to afford basic needs, including food, shelter, clothing, and more. It is a multivariate condition about involuntary limitations and lack of choice. Therefore, poverty should not merely be defined in income-related terms. Thousands of middle-class American families experienced this reality of true poverty for the first time during the Great Recession of 2008.
• For children, poverty can be defined as an environment that is damaging to their mental, physical, emotional and spiritual development.

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Impacts:

• Poverty has led to lower life expectancies, proliferation of violence, debilitated communities, and several global health epidemics.
• About one billion people across the globe experience extreme poverty, and 963 million people go hungry each day.
• In the United States, 50% of the population qualifies as low-income or poor, while 43 million Americans live in poverty.
• Housing: discriminatory and non-existent tenant screening helps determine failing schools, dangerous streets (incl. gang activity), and the variability of an area's civic engagement. And one in five families miss rent payments and have their utilities discontinued on a monthly basis.
• 19 million Americans live in deep poverty.
• Poverty has led to increased rates of divorce, increases in the number of single parents, and increases in the rate of female unemployment.
• Women and children constitute the majority of impoverished individuals, with 25,000 child deaths each day due to poverty (UNICEF, 2016). The child poverty rate in the United States is 32.2%, the highest rate amongst all developed countries in the world.
• For the first time in 50 years, 51% of students in pre-kindergarten through 12th grade of the 2012-2013 school year were eligible for low-income federal lunch. Moreover, these results are disproportionately distributed, as three-fourths of all African-American and Latino students attend majority-low income schools. In 2014, children of color became a majority among K-12 public school students in the United States.
• Domestic and sexual abuse accounts for more death and disability than war, malaria, and car accidents combined. And the reality is that most poverty-stricken families and communities are thrown into destitution by domestic violence, neighborhood crime, drugs (e.g. the 2017 national opiate epidemic), divorce, lack of access to resources, and generational pessimism reinforced by failing public school systems.
• 40% of low-income children experience multiple instances of adverse child trauma, such as getting physically abused, demoralized by parents, or watching someone abuse drugs or alcohol. These children are more likely to do drugs, drop out of high school, get incarcerated, and pass down the same trauma to their own children. More importantly, they are more likely to remain in poverty. In contrast, only 29% of upper-income children experience childhood trauma.
• Income inequality is a significant issue plaguing the lives of millions of citizens, and contributing to generational disenfranchisement in the United States. The top 1% of U.S. families own 23% of the nation’s total pre-tax income, and only one-tenth of 1% of families own as much wealth as the bottom 90%. This has led to the greatest amount of wealth and income inequality since the Great Depression. The gap between capital and labor income, which is consistent with the gap between labor productivity and wage growth, has been caused by globalization, automation, weak bargaining power of labor, political capture, and higher markups. Technological change, including automation, is largely to blame for the disparity from an economics standpoint, because it has enabled firms to use more labor and less capital to produce a given quantity of output. This lowers the effective capital-labor ratio, resulting in a reduction of labor’s share in income. In summation, since the year 2000, labor’s share in national income has fallen by 7%, and by 11% in the corporate sector, while share of corporate profits in national income has increased 57%.
• Lastly, despite residing in the wealthiest nation in the world, most U.S. citizens in poverty actually live outside of the protection of the law. Effective public policing – with strong community-police relations - is not evenly distributed across cities, favoring more middle-class neighborhoods. At the same time, it is also true that poverty-stricken communities have a disproportionately higher intensity of police presence, most of which is effectively negligible as it is flawed by negative public perceptions regarding legitimacy of intent, procedural justice, relatability to police, racial bias, and questionable application of community policing principles. In addition, private police officers (i.e. guns-for-hire paid for by corporations) outnumber public police officers more than two to one, have an increasingly large presence in every state, and operate beyond the reach of the Fourth Amendment. These privatized officers have the powers of public police officers, but with a lack of accountability that has led to more abuse of power and illegal behavior than real police.

Solutions

I believe the solutions to poverty are multi-modal and my solutions below must be perceived as a “package” of solutions, all them necessary to accomplish the goal.

1. We need to be re-trained on how to be a true citizen of this nation (and of the world). We must be able to have compassion for others, as this breeds action and helps society to care for and empathize with the impoverished. If we can self-develop our own character and train on ethical decision-making, then we can help to foster altruism in our society and yield significant rewards. Studies show that our instincts tell us that deliberately causing someone’s death is different than allowing them to die as collateral damage. If you truly believe that we are not deliberately causing our poor to suffer, then are you comfortable classifying their suffering as collateral damage? I’m not. Actively mobilizing to eradicate poverty in the United States is the right choice.
2. Housing programs: housing (i.e. evictions, homelessness, rent payments) is the single greatest cause of poverty in the United States. Majority of poor renting families dedicate 70% of their income to paying the rent and keeping the lights on, and our cities have become unaffordable to our poorest families. The federal government needs to institute multi-billion dollar public initiatives that provide low-income families with decent housing they can afford. We need more programs that allow families to devote more of their resources to healthcare, transportation and food. Establish a universal housing voucher program. This would change the face of poverty in the US because evictions would plummet and homelessness would disappear. Also, publicly funded legal services for low-income families in housing court would be a cost-effective measure that would prevent homelessness and decrease evictions.
3. We need to level the inequalities in the educational system to improve opportunities to learn: increased federal and state funding of school resources (with heavier weight towards disadvantaged communities); optimize resource allocation of school funding towards improving internal and external school environments; and allocate more funding towards ideation and experimentation of school curricula. Poverty and the state of education in the United States has fallen victim to the ‘chicken or the egg’ paradox. Which came first? The American public school system significantly limits the opportunities of those in poverty, while conversely, meaningful school reform cannot occur without first addressing the broken communities from which these students come from. The public school system was originally developed and funded by the profits from the African slave trade, while African Americans were prohibited from those very institutions that their labor helped to develop. Public schools in today’s society are generally funded by property taxes, which inherently limits those living in areas with low property values, such as low-income areas. Affluent children benefit from state resources, while communities of color lack necessities such as books, instruments, sports programs, and healthy lunches.
4. The issue of income inequality must be curbed in order to make real progress in the fight against poverty. Several anti-poverty programs exist to account for the lack of upward mobility, such as sponsorships and micro-loans. These programs are not enough. Public measures that boost investment and capital formation (i.e. additions to fixed assets such as buildings, equipment, and machinery) would lead to higher wages and reduce income inequality. In execution, this may mean reduction of corporate taxes, as this would boost investment and capital formation, raising labor’s share in income.
5. But, a more effective monetary solution (vs. corporate tax reduction) would be instituting a consumption tax, which would boost investment by removing taxes on capital while allowing redistribution of income through higher taxes on people with higher levels of consumption. This would also lead to increased international investment into the United States, benefiting all socio-economic classes.
6. We need to maximize efforts to increase the flow and redistribution of economic aid in the form of venture capital and private equity towards more community-saving programs and organizations. More importantly, however, we need the leaders of these organizations to devote their time and mental resources, leveraging their leadership and organizational development competencies to ensure the sustainability and effectiveness of the fight against poverty. Corporations must expand their philanthropic efforts, in support of corporate social responsibility. The WIIFM (“What’s in it for me”) for corporate participation would be the understanding that it creates business value through a positive public brand image, boost in employee morale, and increased attraction of external investors.
7. We need more private sector professionals dedicated to human development within the United States, including health workers, teachers, and vocational trainers. Public-focused scientists and engineers can impact society and make contributions to academia or policy-making that can permanently circumvent the equation of poverty.
8. Industries such as coal and steel are prominent employers in blue-collar areas of the country - a reality that negatively impacts the structural economic stability of those areas as society continues to evolve towards higher-skill industries. We must leverage technological tools to help us analyze, monitor, and distribute life-changing resources in disadvantaged areas that need them the most. In the education sector, we can reverse the employment and income trends (high-paying jobs for the less-educated are vanishing) by utilizing technology to deliver free and low-cost training in higher-skilled labor, such as computer operators, administrative assistants, law enforcement, electricians, and so on. This can be accomplished by increased investment and promotion of MOOCs (Massive Open Online Courses), of which several organizations already exist. These online organizations must be granted national accreditation and endorsed as legitimate by employers in order for society to see the pull-through of individuals that experience upward mobility through success in employment.
9. Also, we can use technology to share expertise across communities and states to support disadvantaged communities and develop public systems of justice that gives everyone a chance to be safe. Federal and state governments must eliminate the ability to utilize private security as public police officers; at the minimum, new regulations must be placed on corporations profiting from this growing sector of law enforcement. We need more interstate collaboration in this area to share best practices, including effective training and technical assistance focused on reconciliation discussions with members of local community. This should help to rebuild mutual trust, curb negative perceptions, and reestablish local confidence in neighborhood safety and personal well-being.
10. Social capital resources: We must utilize data science to identify target communities, inform our decision-making on resource deployment, and monitor our progress down to neighborhoods, families, and even individuals. We can more effectively utilize social media to connect relevant stakeholders with impoverished individuals seeking mentorship or softer skills, such as financial management and conflict resolution. Big Data analytics can help make these connections, providing essential social capital resources to children and adults who need it.
11. All citizens must register and vote public officials into office who can truly take action on the pandemic of poverty in the United States. Too often, the issue of poverty gets reduced to mere political fodder and discussed through prepared talking points on wealth and income inequality. Shamefully, the issue gets used either to gain electorate favorability or as a distraction from a candidate’s personal scandal. After an election, none of the promises are executed, and the struggles of our fellow man get ignored once again by the government and the general populace.

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Myths and Objection Handlers

Let’s refute some of the key rationalizations we explored earlier:

Objection (Reverse-Utilitarian): “Poor people must suffer for the benefit of the rest of us because our economy can’t save everybody.”

• Your answer: “Failing to help those in poverty will negatively impact our current economy and decrease quality of life for all classes because there will be a disproportionate amount of citizens in lower-paying jobs as baby boomers retire.”

Just because you currently live in an economy that does not help everyone, that does not mean that such an economy cannot exist. We need innovation, inclusive of public and private support, to design an economy that works for all.

Objection (Personal accountability): “Poor people don’t deserve success because they don’t like hard work.”

• Your answer: “Poor people are not lazy freeloaders - most of them are actually the hardest working people on the planet. Successful people ‘made it’ mainly because they had access to food, shelter, monetary support, social capital, and an abundance of other resources not so readily available to the working poor.”

The narrative that hard work leads to success allows those who are successful to believe that they deserve it – and that those who don’t make it, don’t deserve it. This is baloney. We need to make a more intentional effort to seek out and connect with marginalized families and communities.

Objection (Anti-government involvement): “Jesus commanded we give charitable assistance as individuals; he never specified governments.”

• Your Answer: “I would advise you to partake in more prayer, because you should not leverage Jesus Christ in an argument against helping the poor. That mindset does not align with the teachings of Christianity.”

A government cannot exist without individuals. And regardless of your opinion on the appropriateness of using religion to dictate economic policy, all I would say here is that leveraging Jesus Christ in an argument against helping the poor requires no rebuttal. It refutes itself.

Objection (Personal liberty): “Forcing me, through taxation, to help someone else is a violation of my personal liberty.”

• Your Answer: “The reality is that not all rights were created equal. The right to be alive (in the case of the poor) is greater than your right to not contribute to the society in which you live in.”

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