Retailers' Pain in the Cards

To be able to offer credit cards as a payment option, businesses have to pay an average 2% fee which has started to put a toll on their expenses. Premium cards which offer travel insurance, financial rewards (air miles), have small businesses in a tough situation. The interchange fees for regulars like Visa and MasterCard range from 1.6-1.9% but premium cards require a high fee of 2.3-2.5%. Mr. Simmonds, one business owner, says "It has increased our average monthly cost of credit card processing for Visa by 10%, and for MasterCard by 18%." It is a big cost but recently the Senate and Commons committee has started to investigate the issue, due to companies across Canada suffering through the recession.


There are individuals who are willing to buy(demand) and lend money(supply). At times, the consumer also has to pay a service fee when they decide to bring out the plastic. If the government decides to put a limit on intercharge fees, consumers may be more willing to borrow the money and businesses aren't sweating to provide the payment option. This increases the amount of money circulation in Canada which influence the levels of unemployment and economic growth. (If people spend more, jobs are created, and more money is put into consumers hands.)




I think that credit or debit cards are a great option when trying to get consumers to buy more. Using the card almost doesn't hurt as much as using money because no actual money is being exchanged. It is almost like paying with someone else's money, although you are paying at the end of the month. Credit cards allow companies to create money by creating deposits through loans. If more money is loaned out, more money can be created. I think limiting the intercharge fees will help both consumers and businesses in the recession because it allows them to keep more money.



http://www.vancouversun.com/business/fp/story.html?id=1393636

Lowering Interest Rates to Stimulate Economy

In an effort to fuel the declining economy, the Bank of Canada governor Mark Carney has cut interest rates from 4.5% to 0.5% (within 15 months). The idea is that other banks will also be influenced to change their rates, giving people more incentive and a better chance at borrowing money, as well as paying it back. Statistics Canada report indicated that Canada’s economy had shrank by 3.4%, and while lowering interest rates are supposed to stimulate the economy, there will be a slow (12 to 18 months) or very minimal effect. The decline in the last quarter of 2008 has been the biggest since the recession of 1991 and Prime Minister Stephen Harper will only comment, "the economic plan of the minister of finance has spoken very clearly about the government's views on this and our action plan to deal with it."

GDP refers to the value of goods and services produced in Canada in a given year. When the level of savings and investments equal, GDP is said to be at an equilibrium (or stable). In an economic recession, people tend to try and save money which reduces the amount of money circulating (for businesses). Without consumers spending, businesses must cut back on production or lay off workers to maintain their profit (cutting costs). This reduces the flow of money to consumers and households have a lower amount of disposable income. If people do not spend money, business investment (spending) also decreases. When there is little investment, the GDP falls. With lower interest rates, consumer spending should increase because it is sometimes necessary for people to borrow money before they spend it. With low interest rates, the cost of borrowing is little (barely anything at 0.5% interest) and the opportunity cost of not saving is also less.

In most households, spending is determined by future prices and levels of income. During a recession, future incomes are definately not secure which leads people to believe that they need to save now so they will be ready to absorb a likely job loss. With lower bank rates, consumers are only affected indirectly and only affects consumers who are willing to spend money during a recession. Consumers don't benefit right away (like they do if the PST or GST is declined) which is what they need now to reassure them that they should be spending. I think that decreasing interest rates are a good thing, especially in the long run because recessions don't go away overnight. Eventually, as the situation gets worse, people will have the ability to obtain credit and spend money.

http://toronto.ctv.ca/servlet/an/local/CTVNews/20090303/BoC_cut_090303/20090303/?hub=TorontoNewHome

Vancouver's Downtown East Side

The Downtown East Side has a reputation for being a poverty stricken neighbourhood where the average annual income of a person is $14,024 - and half of this is covered by government subsidies. About 38% of the residents do not yet have their high school diploma which leads to a problem for those who would like to participate in economic life. While the unemployment rate is low (5%), 60% of the people in the DTES aren't counted as being part of the work force. (Being part of the work force includes having a job or looking for a way to participate in the economy in some way - or looking for a job.) The homeless, may or may not be part of this figure because they do not get counted in the census and it is difficult to know how many actually get counted. Aboriginals are also concentrated in this area, possibly because housing costs are much lower.

Unemployment is a big issue for both the individual and the government. The Labour Force Survey (which is taken on a monthly basis) account for the labour force which includes anyone who presently has a job, or does not have a job but is looking for one. The unemployment rate measures the percentage of the labour force who does not have a job. This does not include people that are in prison, in the army, or live on Indian reserves. According to the article, the low unemployment rate may not reflect what the situation actually is on the DTES. Most likely, the large number of homeless people, Aboriginals, and are not accounted for in this figure. Since these figures help the government effectively use their resources, how helpful are they in reflecting the issues in the Downtown East Side?

If the government is going to put money and effort into having a Labour Force Survey, I think the numbers should be a little more accurate. Anyone who looks at the survey results and has visited the DTES would probably agree that they contradict each other. The hidden unemployed (members of the population who are not actively seeking a job because they do not believe there are suitable jobs available) should definitely be factored into this survey because this includes the homeless who, if they don't have a high school diploma, may believe that there wouldn't be any jobs for them. I think this would be important so the governement can be forced to look at the situation for people in the DTES and help them accordingly.

http://www.theglobeandmail.com/servlet/story/RTGAM.20090209.wdtes_whatworks0209/BNStory/thefix/

Social Services in Canada

Although his weekly income had decreased by $250, 43-year-old Scott Campbell says he is alright. However, for many other unemployed workers, the recession and job cut offs have been tough. (Foreclosed houses, assets claimed) Unions and critics are fighting for fewer restrictions on who can receive the insurance and to increase the amount received as well as the duration of receiving the benefits. Economist Toby Sanger agrees there is a lack of coverage because approximately 40% of unemployed people receive these benefits. With the auto industry laying off workers, what are the 60% of people who don’t qualify for unemployment insurance to do?

Social services is the largest component of government spending. Employment insurance benefits require the bulk of the percentage total. In 2001-2002, over $11 billion was spent on aiding temporarily laid off workers. While each level of government spends money on social services, the federal government holds most of the responsibility. To do this, they must obtain revenue from different taxes and during tough times, the government requires more money to provide the services its citizen’s demand. Canada’s progressive tax approach (the more you make the more you pay in taxes) allows vertical equity by decreasing the difference between income groups.


Having social services is very important because it gives Canadians an opportunity to get back on their feet. Many people who lose their jobs may be very hard workers but during times of recession, bad luck cannot be helped. Although it may seem unfair at times to be paying taxes which don't benefit you personally, but go to someone else's family, you could be in their situation just as easily. In conclusion, taxes that are used for social services are like giving indirectly to chairity. Although it may hurt a little bit, it is neccessary for Canada to function and people to get much needed help.




http://www.thestar.com/News/Canada/article/533875

Privatization of Prisons

Arkansas is once again toying with the idea of private prisons. Arguments for this include the amount of money the state would save if there were some prisons run by private companies. It would also help the constant overcrowding of state prisons. If other companies were allowed to have their own prisons, the state penitentiaries would be under less stress to humanely house their occupants. A past failed attempt causes caution. In 1990, the state let the Wackenhut Correction Corp. take over two prisons. After only 3 years, they were taken over by the state because of allegations of poor conditions.

Privatization is the transfer of control of a company from government to private ownership. It has raised more than $600 million worldwide for governments from 1992-2002. It is economically very efficient for governments because money doesn't have to be spent on maintaining such Crown corporations and politically difficult decisions could be made more easily. However, profit is generally the motive of privatization and most Crown corporations protect the interests of society. Maintenance is a high priority because the voting citizens can pressure the government to provide effective and efficient services. This would not be so for private companies who could do as they wish to make a profit.

I think that such unmet public goods or services such as prisons and the postal system, it is better to have the power in the governments hands. Political parties are governed by the people that they represent and therefore must act on the people's wishes. I think it would be a very bad idea if private organizations got a hold of such powers because they don't have to obey or follow the morals of society. Their main concern would be making a profit and I believe that the services provided wouldn't be up to the standard of government run corporations. Although criminals have done bad things, giving them a reasonably humane place to serve their sentence should be mandatory, and therefore, prisons should not be privatized.

http://www.canada.com/windsorstar/news/letters/story.html?id=35af9fea-e91e-44cc-bd9c-435bcb44291a

Price Elasticity Smacks Sony, Blu-Ray, Playstation

Large, brand name companies could often ignore price elasticity because consumers were more willing to pay extra, for certain goods. The average citizen now knows that eventually, prices will go down and except for the early adopters, they will wait for cheaper times. Sony has dropped the price of their 60GB Playstation 3 after Microsoft dropped the price of their XBox 360 model. Electronic companies have realized that although there may not be any real competition (i.e. the iPhone) they were pushing their consumers away with their high prices.

Interaction between buyers and sellers is what helps to determine price elasticity. Consumer reactions to changes in the price of a product, result in an impact towards the quantity of the product that is demanded or supplied. For example, Blu-Ray products have gone down drastically due to the amount of downloaded movies. Substitutes are a major factor in supply and demand. Demand and supply elasticity will help companies estimate the demand of a product if they're price isn't constant.

The internet gives consumers a huge advantage in finding the best product at the best price. I thought this article was extremely helpful because living in a materialistic society requires such knowledge and insight. This article reminded me that although certain products seem like a must have, their prices will eventually be forced down because the demand for electronics quickly falls due to the constant upgrades.

http://industry.bnet.com/technology/1000425/price-elasticity-smacks-sony-blu-ray-playstation/

How to Make Your Home Energy Efficient

This article suggests different ways that people could save money by upgrading their homes by making it more energy efficient. Examples include adding insulation to attics or buying energy efficient appliances. Big energy consumers are from heating and cooling your home, cooking and lighting, and your refrigerator. Although making alterations to your home would cost money, the amount of money saved is significant. The author mentions the luxuries that he can live with, and use only a fraction of the energy that most households use. This energy reduction also results from frugality; taking shorter showers, turning off lights, etc.
This illustrates opportunity costs well. Insulating is a great energy saving strategy. The process costs a few hundred dollars but in the long run, it is well worth it. The average utility bill is about $200 – 300 per month. Alterations could save you 30%, but that means that you saved $60 that month. In one year alone, you could save $720. These alterations also don’t need much maintenance so after 5 years, the money that you have saved due to the energy conservation becomes $3600. Taking time to figure out the opportunity costs will save you a lot of money in this situation.
I think that making your home energy efficient is a great idea. You not only save money but you’re contributing towards the need to save our planet. Time is scarce and this article may help many people find the motivation they need to start doing something about global warming. I like this article because in a quick glance, you can obtain a handful of ideas that will help you easily play a role in helping the environment get better. So why not take a look? You get to save the environment and build up a savings account at the same time.

l.nguyen
http://www.motherearthnews.com/Green-Homes/2008-10-01/How-To-Lower-Utility-Bills.aspx