Tag Archives: consumption

Progressive Platform: Price Parity Program

Think of any product that you buy in Canada:

  • Books
  • Cars
  • Most food items
  • Clothing & Shoes
  • Gas
  • Basic inputs (eg. wood materials or drywall)
  • Etc

How many of you have gone to the US and found that your dollar goes much further there now, particularly now that the Canadian dollar is nearly at par with the US dollar?

How many of you have wondered if the price difference is because we believe we have a different tax structure (eg. higher ‘sin’ taxes on things like booze, smokes and gas) compared to the US?

I know I have for some time.

However, I’m beginning to question these prices more and more every day and I’m beginning to convince myself that Canadians are being taken for a ride.

We’ve experienced a state of ‘currency stability’ with the US for more than two years where the value of the dollar has been in lock-step with the US dollar.

Prior to rise in the value of the Canadian dollar, most prices in Canada reflected a reasonable difference.  Think of a book you may have bought 6-8 years ago when the Canadian dollar was in the $0.75-$0.85 range compared to the American buck.

You can picture it now:  $12.99 US / $16.99 CDN (or something similar).

Today, you don’t even see the US price.  In fact, I think it was more profitable for publishers to do a run of Canadian editions than continue to show how much they were gouging us as we bought the latest and greatest from Nick Hornby or Marci McDonald.

And don’t even think of getting me started on car prices.  They’re all made in North America and they all (within certain ranges) follow the same safety requirements, so the prices shouldn’t be that different.  The result:  many cars in Canada usually have anywhere from a 20-50% premium placed on the final sticker price.

The numbers on this category are outrageous.  Think of the volume of cars that are bought in 2009 (New Motor Vehicle Sales, Canada, 2009, StatsCan) was nearly 1.5 million.  If the prices were actually reduced in 2007 and 2008 as the value of the Canadian dollar rose, we may not have seen the drastic drop in sales that we did in 2009.  As a result, we may not have needed to bail out GM and Chrysler.

While this is speculation (on the scale of 100%), the numbers are eerie in their similarity.  If car manufacturers were charging $10,000 more in Canada than the US (on average), that would amount to $15 billion in value.  We loaned them $20 billion (ignoring for the moment that the US loaned GM and Chrysler substantially more and that and that we’re only talking about two companies).

If we had pressured those companies to reduce prices, the reduction in sales may not have been quite as profound, at least in Canada.

Summary: despite our dollar appreciating more than 20% in recent years, we have not seen a similar decline in prices or what economists call ‘buying power’.

When you add in what should be happening with price decreases in Canada to the fact that the Conservatives have brought in unprecedented levels of corporate tax cuts, we should seriously question the economic policy of our current government, particularly with respect to what ‘Joe and Jane Average’ can buy in this country.

Currency issues present a double-edged sword, particularly for a country like Canada that relies very heavily on exports. As the value increases, the cost of our goods to foreign buyers is higher as well.  This is why we lose jobs and business to countries that habitually depreciate their currency (eg. the US).  Manufacturing jobs evaporate because we lose the competitive advantage that’s embedded in cheaper exchange rates.

The trade-off is that there should be a balance achieved with demand-driven consumption fueled by a sharp decrease in the cost of imported goods, including imported materials.  Since this hasn’t happened, we lose both jobs and buying power.

Something smells.

Canadian politicians need to latch on to the grass-roots opportunity that this policy represents.

By pursuing price parity, they will be able to promise lower prices for anything from books to corn seed to new cars.  They will be able to push for price breaks and not tax cuts, giving them the opportunity to increase what should be increased:  Canada’s consumption tax (now commonly referred to as the HST).

There are many ways to approach this situation.

  • You could promise a basic investigation.  The mere threat of a review of prices will likely result in an instantaneous drop in prices.
  • Expand the scope and mandate of Statistics Canada to include price comparisons for common goods converted to local dollars.  Start with a basic list of items that might change in price immediately and continue to add to the list and monitor the differences.
  • Create an information campaign that focuses on the value of excise taxes, the common point of blame by industry when it comes to purchasing disparity.

What are your ideas for expanding the scope of such a project?

Do you have specific examples of price differences that should be addressed immediately and showcased in campaign slogans?

The United Stale Economy

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Back in Feb 2009, I wrote ‘Why Can’t We Just Spend Our Way out of the Depression‘, knowing full well that the American and US economy was being supported by smoke and mirrors and little else.

At the core of this article was the rationale that we’re facing a seismic shock in spending, not because of what people’s attitudes are about the economy, but because of a totally different economic issue:  life-cycle planning.

Boomers have always influenced our economic fortunes or issues.  Bananas, oil shocks, market gyrations and soon, market collapse.

Nearly a year later, I followed up with this piece on the US housing crisis.

It finally seems like the mainstream is catching on to this idea.

Wall Street Journal:  Another Threat to the Economy: Boomers Cutting Back

This piece has an excellent chart in it:

Boomers-Cutting-back

For those brilliant no-minds that just dumped billions into the auto industry:  your (and ours) investment will likely be cut in half within the next couple of years because boomers have cut their demand in half.  This makes sense because we’re seeing the steep rise in empty nesters that don’t need two or three SUVs sitting in their lot.  Instead, they’re buying one convertible or Honda Accord (for those that lost their shirts on one of the many manias in the last 30 years).

Any recovery that we’re seeing with car companies will be short-lived.  GM will have to design a marketing strategy other than giving cars away.  Chrysler will have to end ’employee’ pricing.

A lot of change will happen in the next 10 years and it won’t be pretty.  Pensions will go bust and pensioners will have to take up part-time work at dumps like Wal-Mart of Costco.

The notable increases are with health insurance and drugs.  These companies will likely be one of the only profitable sectors over the next decade, despite the cries of communism coming in the wake of Obama-care.

To pay for everything, all savings will be liquidated and converted to Viagra, Lipitor and a moderately decent nursing home.  Don’t be surprised if the best-selling horror stories are those related to retirement home abuse (or STDs).

US Is Bankrupt …

This one comes to us from Bloomberg.

The US is incapable of paying its bills and there’s suggestion that the situation will be worse than Greece within a few years.

Gerald Calente Video

Believe it or not, Gerald Calente is not the source of my predictions.  One of the people that captured some of these ideas best was David Foot, who wrote Boom Bust Echo a while ago.

Next Steps?

The US administrators will continue to try to bail out industry over the next decade.

Every time they do, they will face an economic wall.  Bailouts require that they print money, printed money = inflation, inflation = dollar deflation, falling dollar = rising commodity prices, rising commodity prices = economic collapse.

This cycle was best recently described by Jeremy Rifkin as an Economic Endgame.

What To Do?

Realistically, there are three things we can do:

  1. Stop spending, particularly on stupid wastes like car companies, prisons and military;
  2. Start taxing the rich and taxing consumption;
  3. Start slashing what corporations can deduct from their taxes.

People like Bill Gates and Warren Buffett are smart because they’re getting old and they saw it coming a while ago.  The Bill and Melinda Gates Foundation and other efforts are great ways to say ‘I’ve made all of this money and I’m going to protect it before the government comes and takes it away’.

Fine … we’ll tax the charities too, especially the religious ones.

As people like me get older, we won’t have the luxury of avoiding the wealthiest in our effort to feed our parents and kids at the same time.

We’re going to lift every rock to find money and we’re going to start at the top.