Ryan Cleary is Either Economically Naive or a Demagogue

Letter I'm sending back to Ryan Cleary

I came home last night after being away for some time and received not one but two Ryan Clear pamphlets with his new ideas to make the world a better place. NDPers have such an easy job. They go around and look for problems in society and then just propose a law to make that not happen anymore. It's like they have a magic wand they can just wave and it makes everything better.

So continuing on this trend, Cleary outlines some of the steps his visionary government will take to make our lives better. Specifically he is addressing credit card and other debt. He blames our household debt levels on the government. They may be responsible by imposing taxes which makes life worse, but I'm pretty sure the NDP wants even higher taxes.

Anyway, his 4 suggestions are:

• cap atm fees at $0.50
• lower credit-card interest rates.
• outlaw companies from charging clients for paper bills.
• crack down on payday loans

Although these suggestions make people feel all warm and fuzzy inside, they have negative consequences. If Cleary cannot see that, I do not think he should be a leader of any kind. Let's go through them one by one and look at why his ideas would not work.

ATM Fees
Contrary to popular belief, companies cannot charge anything they like for ATM fees, it is actually market driven. Most banks offer free bank machines to its clients, despite the fact that a bank spends thousands on a machine. To give you an idea how much they cost, a simple machine which cannot accept deposits costs around $3000. Let's say the deposit-ready machines cost $5000. That's a lot of money.

But what would happen if all ATMs could charge a maximum of $0.50 per transaction. Just like with everything in our economy, ATMs follow the rules of supply and demand. At a low price, demand is high, but supply is low. Companies that decide to install an ATM are making an economic decision. Here's an example: It is estimated that between 3-5% of foot traffic will use an ATM. If a private business gets 100 people on an average day, that's 3-5 transactions. If they charge $2 to withdraw money, they will earn $6-$10 per day from the machine. If the machine costs $3000 to buy, it will take about 300 days to recover the initial investment before they begin to make money. That doesn't include the cost for repairs, upgrades, and maintenance.

If Ryan Cleary's law goes through, instead of taking about a year to recover the investment, it may take 4 or more times that long. It could take four or more years to recover that investment, which makes it far less desirable. In fact, $0.50 may be the perpetual break-even point since there are fees and maintenance that must be paid making ATMs completely unprofitable. The result: far fewer ATMs being available.

But what about the banks you ask? Well, the same may hold true, but they may approach it different. Banks must pay a substantial amount to maintain bank machines. At the moment, they accept clients from other banks and earn usually around $1-$2 per transaction. However, if they can only charge $0.50, it may not be worth the extra maintenance that will be required and they may choose to not allow non-bank customers.

Lower credit-card interest rates:
It just seems kind-hearted to want to give people lower credit-card interest rates, but once again there are many negative consequences to legislated that. Right now, believe it or not, credit cards are a very competitive industry. It is simple to transfer your money from one credit card company to another. Companies are not charging sometimes 20% because they just arbitrarily decided to make that much money. Rather, they must balance their desire for profit and the laws of supply and demand. The fact is, right now the legal highest interest rate is 60%. When was the last time you saw a credit card charging that much? Why wouldn't they charge the maximum allowable amount? The reason is consumers would simply go elsewhere.

Credit card companies are subject to the laws of supply and demand just like ATMs are. 20% is how much the company believes it must charge some groups of people in order to make a profit but stay in business. Many people with bad interest end up not paying at all or declaring bankruptcy. That's a loss for the credit card company. For high risk individual, 20% is the amount they must charge to account for defaults, non-payment, and high risk. That's also why there is such a huge variety of card out there. Many offer 0% initially. Obviously the card companies make nothing on this. In fact, they lose money. I know people who perpetually switch from one 0% card to another, and essentially never pay interest.

If the government arbitrary limits the interest rate, the supply of cards will diminish. People with poor credit ratings will be unable to get a card from anywhere. They won't get lower interest, they'll get none. The fact is there are credit cards at all kinds of different interest rates. 5%, 10%, 15%, 20%. Why don't the people paying 20% get one that charges 10% if they are available? The answer is, they don't qualify, and eliminating 20% cards will just take away that option.

Outlaw companies from charging clients for paper bills
There are obvious flaws with this proposal as well. This law can easily be put into place and probably lots of people will applaud it, but ultimately no one is better off, here's why. Companies have a lot of expenses. Revenue - expenses = profit. Whether an expense is explicitly stated or not, the company must pay for it. Sending out paper bills costs money so they charge clients for that service. Making a law saying they can't charge for it doesn't take away the expense. Companies are not going to go into the red or go bankrupt to please Ryan Cleary, so what will they do instead? Basically companies will just charge everyone for the paper bills and just include that in the price. In fact, the companies really don't care about this much.

Right now, Rogers customers pay $2 extra if they want a paper bill. This includes the cost of printing, the paper, the envelope, the people hired in the department that does this, and the postage. Just say half the clients of Rogers avail of this. If the $2 was outlawed, Rogers would simply charge everyone $2 extra per month. They wouldn't say it was for the paper bill they would just add it to their service fees. Think of it this way. Rogers doesn't send out a detailed list of expenses. They don't say $8 went to tech support, $10 went to technicians, $7 went to advertising, etc. Instead they say it costs $80 per month for your telephone and internet bill. Right now they say if you get your bill online, you only have to pay $78 per month. If it became a law that you couldn't charge $2, they would just say it's $80 for your telephone and internet bill.

If you take it to an extreme, imagine Ryan Cleary said companies must send a representative to your door to announce your bill with a singing telegram and that companies couldn't charge for this. Your bill would just increase to $200 per month and they'd just say it's for service.

Crack down on payday loan gouging
The same principles of why banning high interest rates for credit cards or artificially lowering ATM fees will not work apply here. Payday loan companies operate in a competitive environment. If one company charges 10% per week for a loan, in order to compete another company will have to charge the same or less. Companies cannot simply charge whatever they like. Competition keeps them in check. I will not say more about this, since I've written a lot on the other subjects.

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Overall, these proposals represent a complete lack of economic understanding and are simply designed to garner support. Nobody likes paying high interest rates, but this is not the way to change it. Ryan knows these steps are popular and he is either simply appealing to the masses or he is completely naive about economics. Either way, I do not want him as my "leader".

Tragedy of the Commons

cbc on crusade against shady business

The CBC seems to have stepped up its game of finding shady businesses and exposing them. They not only have marketplace, now it seems have the news articles are about companies ripping people off. Many would say this is a public service, but I say there's more to it.

They have a new show called "Go Public", as in expose this to the public. But could there be an implied idea, a sort of subliminal message, of changing something from private to public, as in "public" broadcasting.

The biggest fear of the CBC is that people will start questioning government spending. Of all the reasons people advocate spending by the government, the last is for really bad tv shows. So CBC recognizes that if people start thinking in these terms, they're the first to go.

So they have made an all-out assault on private business. That's one of the reasons why most people I talk to loathe business. They think government loves you and wants to protect and take care of you, while business just wants to hurt you in some way. The CBC is just continuing to push this agenda.

The irony is that the government violates the very things people fear from companies. Government healthcare is a disaster, the government runs many monopolies, etc. If a company gave terrible service, people would be up in arms, but not with government. A company with a monopoly? That's some people's greatest fear, but somehow it's okay when the government does it.

Hopefully people will realize soon that there are just two ways of doing things: voluntarily or coercively. The government represents the latter.

Chocolate price-fixing accusations very hypocritical

Canadian chocolate companies are being charged with "price fixing", meaning they colluded and artificially increased the price of chocolate in Canada. Now there's a class-action lawsuit. I heard that the people who can enter the lawsuit are Canadians who spend $1000 or more in less than two years. It must be for personal consumption and they must provide receipts. I doubt many Canadians could enter the lawsuit.

But the irony is that the charge against these companies is that they "conspired, agreed or arranged to fix prices of chocolate products." Well, that's such a crime! You can easily find chocolate bars for $0.75. So how much were the prices increase? 10¢, 20¢? Oh, the humanity! But the irony is that the GOVERNMENT price fixes ALL THE TIME! Now, they turn around and get upset because some chocolate company is doing the same! How hypocritical!

The government doesn't add 10 or 20% to the price though, they commonly DOUBLE the price! Look at milk. It's controlled by the milk marketing board, and the price is about double. Look at cigarettes, even worse. A carton of cigs costs $29 before taxes. After taxes, it's $94! That's over triple!! Alcohol also has some crazy taxes on it, as I discussed yesterday.

Now the government has the gall to act all indignant that a company dares rip people off. GIVE ME A BREAK.

But the other side of the story is that this sounds awfully suspicious to being with. Most of the time these anti-trust or similar lawsuits are manufactured by competitors in the industry who are unable to compete. Apparently in this case, the suit was brought on by Hershey.

So I'm suspicious to begin with, but even if it's true, the government has no moral authority to condemn this activity.

Newfoundland Labrador Liquor Corporation Gauging Public

There is no good reason to maintain the government monopoly known as The Newfoundland Labrador Liquor Corporation. It only enriches a tiny minority at the expense of the vast majority. It is an assault on freedom and just another example of government force.

First, the price. NLC charges about 52% excise tax on alcohol. This varies by product, but this is the average. On TOP of this, consumers are charged an additional 13% of "normal" taxes. Meaning, right off the bat, you are paying more than double for your alcohol. This is enough of an argument for why alcohol taxes are bad. It rips off consumers. People have limited money, and when a violent, coercive organization FORCES people to pay more for the products they want, it hurts them. They cannot pay for a vacation or a house renovation, or food as easily, because the price of goods they buy is artificially raised. This lowers their quality of life.

Compare this to the United States. There, the average excise tax on beer is a mere 10%! Americans don't have to break the bank to buy a 12-pack. A case of beer that here costs $25, there would probably cost about $15. The American can go to a movie, then come home and enjoy some beer. The Canadian, on the other hand, can only afford the beer.

Some people claim taxing alcohol is good because it recoups some of the cost incurred by government for having to deal with the negative externalities caused by heavy drinkers. For example, heavy drinkers are involved in accidents or require medical assistant and this costs the government. So in order to recuperate lost money, the government adds a tax. However, according to the CATO Institute, a 1989 study showed this would only justify an excise tax of a few percentage points, not 52%!

Another argument put forth is that higher alcohol prices will discourage binge drinking. There are several problems with this reasoning. First of all, once again the majority is being punished for the sins of the minority, a philosophically unjustifiable position to take. Secondly, studies have shown binge drinking rates in Canada to be the same as the United States, even though Canada has significantly higher average prices. It would seem the price of alcohol does not affect binge drinking rates.

Philosophically I believe each individual is responsible for himself and that I am not guilty of someone's else's sins nor should I pay for them. Ultimately high alcohol taxes hurt people like me. To be honest, I haven't bought an alcoholic product in years, and part of the reason is I cannot afford to spend that much money. I am not a teetotaler.

But another aspect of the NLC that I find both annoying and comical is how seriously the people in the organization see themselves. Everything is so "professional". They spend millions of dollars on marketing and advertising. They conduct studies and use focus groups. I have first-hand knowledge of many of the things they do in this area. But they are a MONOPOLY.

It's comical to me because it reminds me of a child who dresses up in his daddy's suit and thinks he is a big business executive. If the NLC was exposed to any real competition, they'd be eliminated before you could say "excise tax". It's easy to appear as a strong, professional organization when you're the only game in town and the police will shut down anyone who tries to compete. I love, for example, the advertising which proudly proclaims you can save $1.50 on a $60 bottle of alcohol which should cost $20.

The whole operation is such a charade. Marketing studies, focus groups, telephone polling, etc, etc. is just so vacuous when you're not even a business, but rather a government monopoly. I realized perhaps they are afraid. Afraid enough people will wake up and realize they are being gauged by these wannabes. If they woke up, their entire mafia operation would be exposed for what it is.

On top of that, they are building an enormous monstrosity near Robin Hood Bay Dump. At least the location is appropriate, given the garbage we put up with from them. This monolithic structure does not contain product or distribution, it is just a huge number of offices, paid for by our excessive taxation.

Low level cashiers at the NLC are usually paid double what someone with a similar job and skill level is paid in the real world. They are often teenagers. Is this fair to hard-working teens who do not work there? Don't get me wrong, I'm all for people earning as much money as they can, and I certainly do not blame anyone for wanting to work there, but should money be stolen from law-abiding citizens to pay for this? I do not think so.

But that's not the half of it. The teens may be making $20 per hour as cashiers, but the real waste is going to the dozens upon dozens of managers and executive who are "playing business" like a child would play house. Any "economic" benefit which may be derived from having a government-run monopoly evaporates when the people in this monopoly pay themselves handsomely and erect giant structures in which to do business.

The NLC is nothing more than legalized theft which hurts the people of the province.

Sources:
http://www.faslink.org/Frequency_of_drinking.htm

Women in Politics

I was just listening to a CBC program about women in politics. As usual, the theme was we need more women in politics, but the question was how do we achieve that.

To start with, it doesn't matter if my overlord is a male or female. What I care about is the restriction of my economic and personal freedom. But assuming we need politicians, why do we need more women in politics? I don't see it as a necessary conclusion.

If there is a particular characteristic of women that people want in a politician, does this have more to do with their gender or their political belief system? For example, in our Canadian parliament 16.9% of Conservatives are women compared 17.6% of Liberals. Women are equally represented on both parties. Therefore, it does not seem clear that women represent more a certain ideology than men.

Plus, if you want a certain ideology represented, wouldn't it make more sense to vote for the party or candidate who represents it, rather than voting for a woman hoping she does?

Many will say that women are less divisive and more conciliatory and therefore must be represented more because some prefer this type of politic. I would repeat what I said earlier: if you want a conciliatory candidate, vote for one, don't vote for a gender hoping that's what you'll get.

In any event, look at some famous female politicians and tell me if they are less controversial and more conciliatory. Think of Sarah Palin, Margaret Thatcher, for example. These women had two things in common: they were not conciliatory, and they are/were either loved and hated. Any politicians, male or female, who is too "nice", is usually not very well known or successful.

But the one thing people rarely consider is: what do people actually want? We have a democratic system where we vote for our leaders. Women are free to run just like men. Yet often the electorate chooses more men. If one believes in the values of a democracy, then you cannot slap the collective public on the wrist for "making the wrong decision". Who are YOU do decide what the RIGHT decision is? This is not a dictatorship.

Many claim that women don't have the same access to becoming a politicians because of family issues. Once again, because I believe in human freedom, I hate to say it, but this is a personal choice. Families don't arise accidentally. They are a deliberate choice. Women can choose to have and raise a family, and this will limit their options. Hopefully they will recognize the benefit of having a family entails a cost, but also provides benefit. Some say men should do more. If a woman feels that way and wants a man to contribute 50% to housework, then she should seek out such a man.

It's unjust for a woman to steal money from me to provide her with free daycare simply because she made certain life choices. Would we have sympathy for a man who agrees to do 90% of the housework and then runs for politics? Would we say we must provide him with a free babysitter? If so, I suggest you go ahead and provide this service to politicians who need it.

Choices have consequences and I should not be forced to bear the cost against my will. Many people have many life situations they must deal with, but who should pay the price? Of course, they should, or their family or friends. It's about voluntary interaction. Especially when those choices are freely made.

Finally, I would think many women would not want any unfair advantages provided to them at others' expense. Where is the sense of accomplishment? If a woman makes it to a political career, but only because she was the recipient of all kinds of affirmative action and government handouts, does it carry the same level of pride as if she had accomplished it on her own? I doubt it.

Public schools

Unbeknownst to some, one of the main reasons for public schools was assimilation. This is especially true in the United States. Advocates of public schools wanted to create a homogenized public who shared the same values and the "American way". This movement became especially important when there was a large influx of Irish and German immigrants. They were concerned that these Irish Catholics and Germans could not assimilate into American Protestant culture.

In Oregon, the governor went so far as to try to ban parochial (Catholic) schools altogether. Fortunately, this case went to the Supreme Court where they ruled it was unconstitutional.

Low Cost Housing and Strict Zoning are not compatible

Dennis O'Keefe is once again running for the position of mayor of St. John's, Newfoundland. His only challenger is the nearly ideologically-identical Sheilagh O'Leary. If you go to her website, you'll find she never mentions her last name anywhere. I guess she is trying to turn her name into a sort of brand-name or something.

Anyway, Overlord O'Keefe has two desires - strict city planning, building height restrictions, minimal "urban sprawl", etc. and also affordable housing. Because he has no knowledge of economics, Dennis O'Keefe cannot see the contradiction in wanting these two things. Had he attended one economics 101 class, he would have discovered that as demand goes up, if supply stays the same, price will increase. It's the most basic economic lesson.

The fact is St. John's has some of the strictest building restrictions in a country which loves restrictions. Property values are at an all-time high. The natural desire of developers in such a context is to build skyward. The more property built on a space, the less cost per unit. Another option is to build outward, expanding the size of the city. Both of these options would decrease the price of housing. But of course, this is logical and therefore no one in city council will consider it.

One objection to unrestricted building is that the Harbour will lose its cozy fishing-village look. I mean what would happen to the enormous post-card industry if multi-colored houses weren't the only things you could see! How ugly would the harbour look with those skyscrapers. Better to keep St. John's 100 years behind everyone else. Those families who want affordable housing can live somewhere else! My nostalgia matters more!

Guess what St. John's, EVERY city in North America once looked quaint. And most cities have since embraced development and modernity.

But that's not the only thing. Buildings are subject to hundreds, if not thousands, of nit-picky regulations which stifles development. I have first-hand knowledge of a building proposal for a successful company. They complied with the height requirements, were going to build parking spaces, etc. The building design which was beautiful was not approved because it didn't look like it was from a hundred years ago. By the way, the building that currently occupied the lot was a 1960s monstrosity that was now a giant nest for birds and rodents.

I always find it strange how some people think they are so important that their "desire" to keep St. John's like a little bonsai tree is more important than people's ability to live here. How much bigger and how many more thousands of people would live here if it weren't for these control freaks.

You have a right to your own property, but not everyone else's. Many people complain about large buildings destroying the view. However, if large skyscrapers could occupy the harbourfront, many MORE people would get a spectacular view. Put it this way, if there is a height restriction of 50m and that is increased to 120m, then 140% more people will get a view of the harbour.

You can't have it both ways. You either allow people to own a home at an affordable price by increasing the supply of housing or you keep your subjective post-card worthy city going and keep the price of housing very high.