Monday, February 25, 2013

Minimum Wage still kills jobs

It's stunning to me that man can rise to be President of the United States and be an economic ignoramus.

Want evidence? Here is what Barak Obama said during the State of the Union:

"Tonight, let’s declare that in the wealthiest nation on Earth, no one who works full-time should have to live in poverty, and raise the federal minimum wage to $9.00 an hour. This single step would raise the incomes of millions of working families. It could mean the difference between groceries or the food bank; rent or eviction; scraping by or finally getting ahead. For businesses across the country, it would mean customers with more money in their pockets. In fact, working folks shouldn’t have to wait year after year for the minimum wage to go up while CEO pay has never been higher. So here’s an idea that Governor Romney and I actually agreed on last year: let’s tie the minimum wage to the cost of living, so that it finally becomes a wage you can live on."

Of course the last sentence gets to the heart of one of the many causes of poverty. The government keeps printing more money, which is supposed to help "fix" the economy, yet it is just devaluing money that is already in circulation. Inflation makes everyone poorer, except those that keep getting raises like Obama's CEO reference. But that is another story.

Economics is complicated, so when a smart guy tells the people (who are also mostly economically illiterate) that raising minimum wage will solve so many problems, one has to wonder if he really believes it. He must have heard the counter arguments, so I can only infer that he is telling a bit of a lie to placate the working poor. Am I giving Obama too much credit? It doesn't really matter. What matters is that people understand what's going on, so that they can make educated decisions. So just in case you have not heard the counter arguments, do yourself a favour and watch this:

A problem identification strategy: by Zork Hun

Compared to large American cities, the Toronto (GTA) region has very little gun violence. But like those same cities, the gun violence that does happen, happens for virtually the same reasons. 

Zork Hun, a fellow libertarian, recently posted his take on the murder of black youth in the GTA. I think he has nailed it. 

Zork spent a rebellious youth growing up in Soviet Era Hungary, not a good combination. You can find his story here, and his original post and his very interesting view on life, here.

It is only the middle of February, but we already have the third teenage murder victim in the Toronto ghettos.
I am always amazed and puzzled when listening to the ‘nice’ people of the media talking about such subjects.
Like Matt Galloway, the host of CBC’s ‘Metro Morning.” He is the embodiment of the honest to goodness good intentions and its associated utter cluelessness when looking at the dismal results of the policies inspired by those good intentions.
Considering how much he is trying to understand, it is quite amazing how little he actually does.

Talking about ‘youth violence’ and an epidemic of ‘gun violence’ then another, this time ‘the epidemic of fatherlessness’ (which will sure make it into the books of epidemiology) Saying about the broken families that “somebody has to have the responsibility and stepping up”
I had to keep asking myself: Can anybody be this clueless? Isn’t this simply willful ignorance of the real issues or politically motivated avoidance of discussing the real subjects, the real questions? Is it stupidity, sleaze or cowardliness?

YOU TELL ME, because the answer to these questions is at the heart of the problem. What motivates the wide eyed puzzlement when we know the answers? There is an incredible amount of evidence to show us what the roots of the problems are and the volume of this evidence is growing constantly. The evidence is indisputable and so is the logic behind explaining it. Why is it ignored then by the leftist mainstream media? Why are some of the subjects taboo for discussion? Why are we talking about ridiculous “epidemics” and “youth violence strategies” while carefully avoiding any discussion about the real issues and real solutions?

These are not poetic questions. I will suggest some answers in the end but let’s start with the problems.

Call a spade a spade

Why don’t we start by not bullshitting about the problem? By calling the spade a spade. Black/ghetto/gang/drug violence instead of “gun” and “youth” violence? Stop calling ghettos “communities”. Stop calling the predictable and inevitable results of government policies “epidemics”. Stop treating the problems we created as if they were mysterious forces of nature. Stop blaming phantom causes and start examining the workings and the effects of government policies. Stop pointing fingers and looking for scapegoats and have an honest look at the problems and their causes.

Stop glorifying single mothers, stop destroying the institution of family

“Why aren’t we talking about the role of the family in this in shutting this down to make sure that this is not happening?” – asks Matt Galloway to get an answer that is not an answer but a description. So why don’t we? Why don’t we start with discussing the government’s role in destroying the institution? Our political left is glorifying single motherhood while our politicians are constantly working on making it an ever more acceptable and even attractive choice for young women on the margins of society. It used to be a stigma to be a single mother, but these days our media is celebrating them as if they were some sort of heroes. Restoring the stigma of illegitimacy will restore families. Taking away the financial incentives will get rid of the “epidemic”. Stop any financial support to single mothers and if they cannot take care of their children, put the kids up for adoption. Single parent families would disappear in a decade.

Get rid of welfare – stop subsidizing bad behaviour

Stop subsidizing idleness which breeds dissatisfaction, boredom and very often criminal behaviour. If “youth” would have to worry about how to pay the rent, put food on the table and help their families, they would not have the time to do all the bad things they do. Break the multi-generational cycle of dependence. Make welfare existence unattractive.

Get rid of minimum wage laws

In his 1984 book, “Losing Ground” Charles Murray made the point that minimum wage laws are the most racist laws in the books. It hurts the people who would need opportunity the most. Minimum wage laws are depriving young, unskilled, inexperienced workers from finding work, from stepping on the road toward a better future.

Get rid of government ghettos

They are ALL disasters, they are all destined to be disasters. There is evidence to show and logic to explain why it is so. The only way governments can run anything is into the ground. There is absolutely no excuse for the existence of organizations such as the TCHC unless we consider giving jobs to the corrupt bureaucracies running them an acceptable excuse. Even giving individual rent subsidies would be a better deal for society as a whole. No amount of revitalization, no amount of money wasted on it will change a ghetto as long as the government runs it.

Get the “youth” out of the government schools

As with all the other suggestions, people on the margins of society are also the most vulnerable group when it comes to education. Children from middle class and intact families get a lot more help from home so that they can fill the gaps left by our abysmal state run schools. Even simple things such as giving responsibility to parents to choose the school for their children may make the difference.

Legalize drugs

This would be probably the simplest way to turn around the “gun violence epidemic”. Most crime in the black ghettos are related to drugs as involvement in its trade is the most attractive job prospect for an unskilled “youth”. The most important benefit of ending drug prohibition would be crime reduction in general and the burden it would take off from the shoulders of the most vulnerable members of our societies. Legalization would make the illegal trade and the associated violence disappear. The lifting of the alcohol prohibition in the US resulted in an immediate sharp reduction in violent crimes and health problems such as alcohol poisoning. Drug legalization would have a similar effect, an effect that would be most marked in the environment where the prohibition today is causing the most harm. Ghettos are the trenches of the war on drugs and young black people are the cannon fodder.

Take crime and punishment seriously

Although I have not yet seen a Canadian jail from the inside, from what I hear, they are not like the ones of my own experience. For most members of the ghetto, getting locked up is a badge, a rite of passage. We have to stop indulging ourselves with delusional dreams about rehabilitation and focus on deterrence. For the crimes that remain after the drug legalization, making the prisons a bit more of a punishment would go a long way towards crime prevention.

Deport criminal immigrants

We do not know yet who the shooter in this last case was but we do know that an overwhelming proportion of the “gun-violence” is perpetrated by immigrants from cultures with higher degree of violence than ours. Maybe we can consider expediting deportation procedures for convicted felons.


Each of the above subjects would deserve a book on its own. Some of you may think that they are a little radical but I must tell you that there is nothing new about them. None are original, and they all have a large body of supporting evidence. Most have full books written about, yet none of them can be discussed in polite company. Why? We can disagree about them, but why can’t we even discuss them?

Matt Galloway’s interview with Gene Jones, the President of TCHC, was a flashback to the darker years of communism. Déja vue all over again.
Cocky, righteous aggression seeking a scapegoat. The phony bravery of telling a comrade that he was not a good comrade.
In the communist world, the system itself is always beyond discussions. If something does not work, it must be the fault of someone. The imperialist saboteurs, the enemy inside, maybe the people floundering in their devotion to the cause. Since we cannot question the idea of public housing, we must attack the people who run it.

Just about all the talk around this subject is substitution.

We can talk about the poor living conditions and the failures of management, but not about the systemic failures of government housing. We cannot question whether it should exist at all.
We can talk about poverty, but not about the welfare system that created the dependence for entire generations.
We can talk about ‘broken families’ but not about the racist government policies that created them, not about subsidizing bad choices and child abuse.
We can talk about lack of education, but cannot question the public school system that is responsible for not educating.
We can talk about crime, but not about the war on drugs that is responsible for the brunt of it.
We can talk about unemployment, but not the minimum wage laws that make it nearly impossible for the unskilled and inexperienced to get a job.
We can talk about the difficulties of immigrant life, but not about its cost or the difficulties of getting rid of the bad apples that slip in.

We don’t stand a chance solving the problems if we don’t even have the guts to talk about them honestly.


Why wouldn’t the CBC, the liberal media or politicians ever discuss these options seriously? Because it would go against the most foundational believes of the left.
The God of the left is the state, its most basic tenet is the unquestioning belief that it can be the solution to all problems known to mankind. If only the good people with good intentions would get together, elect the right leaders to come up with the good plan then our problems will be solved. The free market is evil because it does not have good intentions and how could we possibly create a good world without a plan and good intentions?

The faith in the state is just as impervious to reality as the faith in God and just as difficult to argue against. ‘Proving’ that something doesn’t work will only reinforce the desire to try harder DOING THE SAME THING! If fate (God) hits you with some misfortune, it must be because you are not a sufficiently devout believer. If the state causes harm it’s because we didn’t put the right people in charge, we did not have the right strategy or – the most typical answer – we did not devote enough resources to it. No evidence, no logic can work against this blind faith.

Self Interest

Let me ask again: why wouldn’t the CBC, the liberal media or politicians ever discuss these options seriously? Because it would also be in a way suicidal. Because they are part of the state, part of the very ideas they are promoting. Both guests on this morning show were rent seekers, people looking out for their own interest, looking for opportunities, looking for a well-paid role for themselves in that “youth violence strategy” they advocate.
The tremendous power of this interest should not be underestimated. After all, the state, the government, is people. People who want to do good and want to be paid well for doing good. What do you think they care more about? Their cushy jobs or the losers who are the excuse for it?

If I could guaranty to them that I can make the people in their charge much better off but only at the cost of their jobs, how many would go for it? How much bullshitting would you be willing to do to keep a $100K job?
(To understand this last point better, look for my next post: “Socialist Class Theory”)

We could disagree on what the best answer, the best approach may be, but I have no doubt that another youth strategy, another basketball program will simply not cut it.

This posting originally appeared here.

Sunday, February 17, 2013

Why are things so much cheaper in the United States?

Here is a view from an Austrian economist on the perplexing question of why prices on many items are some much higher in Canada, than the US even with the currencies at par value. This post first appeared here.

In 2011, Federal Finance Minister Jim Flaherty asked a committee to look into why Canadians are paying more than Americans for the same goods. Last week, the committee’s report came out, urging the federal government to close the price gap by lowering tariffs among other recommendations.
On the heels of a senate committee report on Canada-USA price gaps, Senator Joseph Day, chairman of the committee, acknowledged at a press conference there’s only so much government can do to address price discrepancies: “The government doesn’t determine prices. The marketplace determines prices,” says Senator Day.

To which Acting Vice-Provost and Program Head of Business at the University of Guelph-Humber, Dr. George Bragues, shakes his head.

“He’s being somewhat disingenuous,” says Dr. Bragues. He says that Senator Day is not realizing the full government role by neglecting the fact that while prices are mostly set by the market, the government influences the room in which the market has to operate.

“Sure, the market sets prices, but they do so within the confines set by public policy. And currently, public policy permits retailers to charge higher prices because they don’t have to worry about competition from the United States.”

“Canadians aren’t allowed to freely travel across the border and bring back whatever they want – without having to lie to a customs officer,” he adds.

The Chairman’s response to the problem of price discrepancies was to urge Canadians to bargain more aggressively with retailers for a better price.

Dr. Bragues: “The fundamental fact is, you really can’t be expected to bargain more aggressively for a pair of pants, or for a carton of milk at the store. Prices are set – and that’s just the way we do business in our society.”

Dr. Bragues explains that the leverage that a person has comes from the fact that there exists competitors that they can go to, who will offer lower prices. “That’s the bargaining advantage. And the government can provide that advantage with one simple solution.”

This brings Dr. Bragues to point out what he sees as the missing recommendation in the senate committee’s report.

“[The committee’s] recommendations focused on tariffs. But the key tariff is border crossing. Allow people to go to the United States – and as soon as they cross the border, allow them to bring back, say, $500 worth of goods without duty.”

“I guarantee that would jolt prices down. We would see a very different retail environment.”

Friday, February 8, 2013

Your money: The untold story

I've said many times I am not an economist, but I am interested in economics, as we all should be. 
My daughter posted an interview with a legitimate economist regarding the demise of the penny. Very briefly here is what the main stream media are missing from this story.

Withdrawn from circulation this week, the penny is suffering a battering of name-calling. An annoyance, a pest, a nuisance – a budget document on the penny’s elimination reads “Some Canadians consider the penny more of a nuisance than a useful coin. We often store them in jars, throw them away in water fountains or refuse them as change.”

But according to Dr. George Bragues, Acting Vice-Provost and Program Head of Business at the University of Guelph-Humber, the real story behind the end of the penny is one that has yet to be told.

Throughout mainstream media, the elimination of the penny is being touted as something we’re all happy to see disappear. But what’s the real story here?

The story that many seem to be missing is, Why has the government been compelled to give up the money in the first place? Why has the value of the penny become so minimal? And that story has to do with how the government has managed money.

How so?

The real story is that over the last couple of generations, we have seen inflation increase on average 2-3% per year. Seems minimal - but over time, that adds up.

We know that it now costs 1.6 Canadian cents to produce each one cent coin. To this end, Finance Minister Jim Flaherty declared the penny as “a currency without any currency in Canada.”

Again, this should raise the question – what has happened here? That the price of the copper that goes into the penny is now worth more than the penny itself is an indication of the government’s inflation of the money supply.

So the fact that we’re giving up the penny should be alerting us as to how the government has been systematically cheapening our currency. That tells me that the government has not managed its money as well as it should have.

Obviously not the message the government would want to send out.

Of course, the government has no interest in declaring that. They can’t say, We’ve inflated the currency for the last 50-60 years, so we’re now going to have to go to nickels as the smallest unit of account.

Also, the economic establishment tends to be in favour of the monetary policy we’ve had in the post WWII era – which has essentially been an inflationist policy, where we tolerate 2-3% inflation per year. Prior to WWII, and certainly prior to WWI, that was not the norm. Throughout the 19th century, prices were either stable or declining. But with the Great Depression – the most seminal event of modern economic history – came an interpretation of that event that has shaped our current policy.

The predominant interpretation of that event – what went wrong, where policy makers failed – has led to a phobia of declining prices, or in other words, deflation. This became viewed as economically destabilizing. And now because of this horror, we’ve since gone with this inflationist policy, which basically says we should do everything in our power to keep prices from coming down, which includes increasing the money supply.

Where do you see this headed?

There is the slippery slope argument – that this will inevitably lead to a recession or even a depression and the next thing you know you’re the new Zimbabwe.

I share the view that at certain times, like now, increasing the money supply out of fear of deflation leads to bad policy. I would argue that this fear of deflation led to the financial crisis of 2008 – and has since led to an excessively easy monetary policy that has put too many people into debt, particularly in the United States and around the world. I fear that the policy now, where we’re pumping up the money supply while having 0% interest rates, is going to create the same sort of distortion – perhaps not in the real estate market, but may appear elsewhere.

Originally posted here.

Sunday, February 3, 2013

Rounding OUT the penny

Beginning this week Canadian currency will be penniless, or should I say, 'less the penny.' That's right the penny is passé, about to be rounded out of existence.

For many Canadians, the penny has so little value it's looked upon as an annoyance, an unnecessary weight, for me, a strange way to view money. For the Canadian Mint, the penny is worth less than it costs to make (currently 1.6 cents).

The beginning of the end of the penny is Monday, February 4th, though we have known about it for some time now.  On Monday the mint stops distribution and businesses are encouraged to round all cash transactions up or down to the nearest nickel. As a result the Canadian government will save about 0.004% of its total budgetary expenses by not producing pennies. Apparently they believe 'every penny counts,' a phrase also destined for extinction.

The rounding of cash transactions will likely end up costing everyone just a bit more. Think of how many prices currently end in the number NINE. Lots, it's a gimmick to get customers, so, no more 99 cent sales for CASH transactions. Will 99 cent sales be kept for non-cash transactions? Will that discourage cash transactions in favour of debit or credit? Or will businesses start pricing things that end with '2 cents' -  which will be rounded down to encourage cash transactions, to make people think they are getting a deal? Who knows?

Either way, this is inflationary, and of course it is inflation, the debasement of currency, that caused the disappearance of the penny.

Is this just a Canadian problem? No. The Americans are in the same boat, and according to some sources both the US penny and nickel are in jeopardy. Am I getting carried away when I worry about the revaluation of our money? Well, maybe not in the near future. The Canadian dollar has actually appreciated considerably in recent years compared to its American counterpart. But many think that the US dollar and Euro are doomed. We trade with them, how can we not be affected?

The lesson of history is that the fall of nations is presaged by the collapse of their currencies. It's happened over and over, no fiat currency has survived the foibles of corrupt government practices. This time it's our turn.        

Saturday, February 2, 2013

Climate (or is it weather) Consensus

Years ago, whenever Groundhog Day rolled around, the official word for predicting the arrival of spring came from Pennsylvania, the town of Punxsutawney. That was the place made famous in the 1993 classic movie starring Bill Murray.

First of all, its difficult to believe that it (the movie) was 20 years ago, and second, (if I'm not mistaken, and I could be) it was shortly after that movie that prognosticating groundhogs started popping up all over the place like, well, groundhogs.

Wikipedia has a list of some 15 big rodent celebrations, including the largest and original one from Punxsutawney, and many much smaller ones. I guess people saw it as a way to cash in on once-a-year notoriety, and bring in tourists during the dead of winter.

So, I was amused today when my local all-news-radio station announced that a "consensus of groundhogs" agreed on a prediction, 2-to-1 in favour. I'm not certain if it was to be an early spring or six more weeks of winter, but to me that is six-of-one or half-a-dozen of the other, no difference.

Groundhog Day defenders claim that the furry creatures have uncanny accuracy, 75% accurate 90% of the time, which I think means being right about two-thirds of the time, not bad. However a Canadian study (who would pay for that?) claims only 37% accuracy in about 40 cities.

When I heard the news report of a consensus of groundhogs, I thought immediately about the UN and IPCC claims of catastrophic global warming (a measure of my deep respect for this claim). Now, I'm not really equating the IPCC scientists with groundhogs (as much as I'd like to), but their consensus opinion in some ways resembles any consensus opinion, even a groundhog's. 

If the premise on which the opinion is based is faulty, it doesn't really matter how many are in the group that makes up the consensus. They could all be wrong. The problem with catastrophic global warming is, that trying to reverse it by eliminating CO2 as a waste gas, by severely cutting back on fossil fuel use, seriously impacts those of us that live in places that are too cold and or too hot. That includes a lot of people. Then, saying that climate impacts will be felt in 50 years or so, well, that just means I won't see it, and those young enough now to appreciate the dilemma (if there is one) will be seniors by then. 

So, even if we humans are somehow unknowingly tinkering with the climate to some degree, is it worth the pain of slowing the warming? We did not start the warming, the ice age glaciers began melting while our ancestors were using spears to kill mammoths. The warming has continued and is ongoing, and possibly we are hastening the event, but like groundhogs we really don't know whats going on. What I'd like to know is this, do the groundhogs predict weather or climate?