Mar 242009
 

Republican lawmakers in America are concerned: they think that the request of the Obama administration and its treasury secretary for additional powers represents an unprecedented power grab. Being a libertarian at heart, I share their concerns even as I recognize the necessity for unprecedented government intervention at a time of unprecedented crisis.

But, it is difficult not to notice of the hipocrisy. The same lawmakers did not appear to be nearly as upset when the Bush administration grabbed unprecedented powers… not in the economic arena, mind you, but in the area of safety and security, directly impacting the personal freedoms and liberties of not just Americans, but also foreign nationals on American soil, such as Canadian Maher Arar who was deported to Syria for torture and unlawful imprisonment. If only Republican lawmakers were as eager to guard constitutional freedoms back then!

 Posted by at 8:07 pm
Mar 172009
 

This phony, populist outrage over the AIG bonuses is really becoming ridiculous. They make it sound as if AIG’s top executives just took the bailout money as bonuses and ran with it. But that’s nonsense. First of all, the bonuses in question amount to barely 0.1% of the bailout that AIG received. Second, there are managers and there are managers… the ones getting these bonuses, are they the top level managers responsible for AIG’s demise, or are they the managers running, say, a successful branch office of AIG insurance?

Of course answering these questions might require some investigative journalism, some thinking, some hard explaining… not the kind of stuff the soundbyte journalism of the cable news universe likes. Glad I am not going to be home tonight, as I will not even accidentally watch the populist tripe of Lou Dobbs on CNN as he, no doubt, will take his turn at expressing outrage. Now if instead of spewing indignation, he actually took the trouble of locating a typical AIG executive who received a bonus and sat him or her down for a meaningful interview… of course I am quite willing to bet that this is not going to happen, not on CNN nor anywhere else… with the possible exception being BBC News.

 Posted by at 9:47 pm
Feb 112009
 

OK, so after three decades of surpluses, we can certainly afford it, but it’s nevertheless an alarming sign of the times: Canada’s first trade deficit since, what was it, 1974 I believe. It is not a pretty thought.

 Posted by at 9:03 pm
Jan 202009
 

While we were celebrating President Obama, the Bank of Canada made its move: the Canadian prime rate is now lower than ever, at 1%. The expectation is that the economy will not fare well in coming months.

Being the holder of a variable rate mortgage, I have no reason to complain. Still, it’s an unsettling development.

 Posted by at 11:37 pm
Jan 112009
 

I just saw the documentary “I.O.U.S.A.” on CNN. Or, to be precise, I saw the last half hour of it, and then I went to the I.O.U.S.A Web site and viewed the “bite-sized” 30-minute version.

It’s alarming. I am not an American, and our country has so far maintained a modest budget surplus (this year, it may yet turn into a deficit, but perhaps not, as the days of the present government may be numbered) but I am still gravely concerned: a collapse of the U.S. economy or, more precisely, that of the U.S. dollar would make the Great Depression seem like child’s play in comparison.

No wonder many are expecting a near miracle from the incoming Obama administration. That is because it’s abundantly clear that “business as usual” means certain disaster. But what can Obama do? He may be exceptionally talented, but even so, miracles may be beyond his reach.

 Posted by at 10:47 pm
Jan 082009
 

Watch out, you are being cheated.

Chances are you receive many offers like I do, from credit card companies offering incredibly low interest rates, no fine print, no questions asked, often not even a transaction fee. It makes sense to put these offers to good use, does it not? Or perhaps there is a subtle catch?

Indeed. And subtle it is, not very easy to explain. Let me try to use an example with numbers.

Suppose you have a VISA card and you spend $1,000 on it every month, but you’re like I am, and pay it off at the end of every month. So you don’t even care that the interest rate is high, say, 18.5%, since you never pay any interest (much to the regret of your friendly neighborhood credit card company.) But then comes this hard-to-ignore offer: you can pay off another debt at the low-low interest rate of just 2.99%!

So you do that, pay off a $10,000 debt using your VISA card, figuring that you’d do like before, and pay your $1,000 plus any accrued interest in order to keep your card in good standing. Meanwhile, you ignore the small print that says, in part, that “if you have low rate offers, which apply to a portion of your overall cash advance balance, then your payments are applied to these low rate offer balances first”. Yet this text is critical.

For here is what happens. At the end of your first month, you’ll be owing $11,024.58 to the credit card company: $10,000 was the loan amount, $1,000 is your monthly expenses, and $24.58 is the “low low rate” interest on the $10,000. So you send the credit card company a check for $1,024.58.

The next month, you find that you owe the company $11,036.37. Of this,$22.12 was interest on your low interest loan amount of $9,000 (!), while the rest is your present month’s spending of $1,000 along with high-rate interest at $14.25 on last month’s spending of $1,000. In subsequent months, things get worse: every time you send $1,000 to your credit card company, instead of being applied against your current month’s expenses, it is used to reduce the low-interest debt. In the sixth month, you’d be paying them $1,085.22: $1,000 is what you usually pay, last month’s spending that is, $11.94 is the interest on your preferred loan (now only $4,855.50), while $73.29 is interest on your accumulated high-interest balance of $5,144.50!

Whoa! On average, you will have paid interest at the rate of 6.66%, which is well over twice the advertised rate!

If your monthly spending is higher, things get even worse: at $1,500 a month, your effective interest rate will have increased to 8.53%. Not a very good deal, is it.

The only way to take advantage of a special offer of this kind is with a credit card on which you have no unpaid balance and which you are not using for any other purpose until the loan is repaid. Otherwise, you’ll be paying through your nose.

Here’s a little calculation with Microsoft Excel that demonstrates the six-month payment schedule:

Preferred rate: 2.99%    
Regular rate: 18.50%    
Loan amount: $10,000.00    
Monthly spending: $1,000.00    
         
Low-interest
balance
Interest High-interest
balance
Interest Monthly
payment
$10,000.00 $24.58 $1,000.00 $0.00 -$1,024.58
$9,000.00 $22.12 $2,000.00 $14.25 -$1,036.37
$7,985.75 $19.63 $3,014.25 $28.69 -$1,048.32
$6,957.06 $17.10 $4,042.94 $43.35 -$1,060.45
$5,913.71 $14.54 $5,086.29 $58.21 -$1,072.75
$4,855.50 $11.94 $6,144.50 $73.29 -$1,085.22
    Effective rate:
6.66%
 Posted by at 7:51 pm
Dec 222008
 

The other day, David Letterman had a segment called The Ten Most Hated Christmas Songs. They were well known Christmas tunes with twisted lyrics. All of them were funny, but two I found especially memorable. The first said,

“Joy to the world, George Bush is done.”

The second one was really creepy:

“It’s beginning to look a lot like Christmas,
“Nineteen-twenty-nine…”

Indeed.

 Posted by at 12:48 pm
Nov 292008
 

I am sure this is a fine CBC journalist and her report about OPEC was interesting, but I do wonder: why did she have a dead Christmas tree (looks like leftover from last year) to her left in the background?

OPEC and last year's Christmas tree

OPEC and last year's Christmas tree

 Posted by at 6:31 pm
Nov 232008
 

I’m listening to Mitt Romney. He’s not the only one suggesting that the big problem with Detroit is that it is burdened by its unions: that excessive benefits like generous pension plans are the reason why Detroit cannot compete with others, and that the solution is a restructuring that helps the automakers get rid of these undue burdens.

I don’t want to sound like a grumpy socialist (which I am not, or at least I sure hope I am not) but is the rolling back of worker benefits really the right solution in this time of crisis? I am certainly not advocating an isolationist economic policy that protects an inefficient industry from foreign competition, but how about requiring that other automakers who either manufacture cars in, or export cars to, the United States, play by the same rules as the “big three”?

Either Romney is wrong, and the unions can take solace in the fact that a Democratic president with a large Democratic majority in both houses is about to be unaugurated. Or, Romney is right and Obama and the Democrats are about to make some colossal economic mistakes. Time will tell.

 Posted by at 4:10 pm
Nov 202008
 

Here are some depressing charts that I just created:

US unemployment, 2000-2008

US unemployment, 2000-2008

Crude oil price, 2000-2008

Crude oil price, 2000-2008

Dow Jones Industrial Average, 2000-2008

Dow Jones Industrial Average, 2000-2008

I don’t mean to be panicmongering, but I do wonder what the future will bring.

 Posted by at 6:32 pm