With the national debt getting ready to break through the $15 trillion mark, its worth noting that we can *easily* eliminate this current debt with 3 easy steps. I should note that this does not address Congress’ ridiculous spending and the deficit, but at least we don’t have the national debt.
The payday loan industry serves a specific market. People with bad credit need a place to borrow money to cover emergencies. In order to provide this service, high interest rates are needed to cover the defaults (remember, these are people with bad credit). Remember, high interest rates do two things. The first is deter people from borrowing unless their emergency justifies the cost. Second, high interest rates get other entrepreneurs into the market, increasing competition, driving down rates. If we prevent this market from existing, we will only be hurting the poor.
Some may say, but people are abusing the system. So! Let them. And when they default on the loans, let the pay day loan industry either absorb the cost of the defaults, or better discriminate between good loans and bad. You will see a diversification of the market. Some will have higher standards for borrowers with lower rates. Others will have higher rates for borrowers with worse credit.
The law’s intent is to protect the poor from high interest rates. Instead it will prevent the poor from making decisions that impact their families, like replacing the air conditioner in July.
To send a message to AZ legislators, see this AZcentral blog post:
A major part of the socialist platform is to protect industries that may not be feasible without government protections. Hell, one of the over 2000 federal government programs is to compensate milk producers for “lost” profits. Farmers get subsidies to “protect” their industry. GM received a very large check and transferred major chunk of ownership to the United States government to “protect” an American industry. It happens all the time. Its sad and crushes true innovation and prevents true wealth creation.
The reason I bring this up is I visited a train park in Scottsdale. A portion of the train park was a museum which dedicated a small portion of their floor space to Samuel Morse, the inventor of Morse Code, a necessary precursor to the telegraph. Prior the invention of the telegraph, mail traversed the country two ways, train or pony express. If the train system did not reach your area, you were forced to use the pony express. Within a week of the country’s first transcontinental telegraph, the pony express filed for bankruptcy. Now, lets imagine federal bureaucrats wanted to protect an American industry. Retrospectively, we know this would have proved an awful idea. The Telegraph led to the telephone, which lead to the internet and all the other wonderful things modern communications offer, like this blog! Bureaucrats could have placed regulations on evil telegraph companies to prevent the destruction of the pony express. Thank god they didn’t. We need to let businesses die as they lose their competitive edge. This allows the reallocation of resources to other more fruitful tasks. Everyone wins in the long run.
Recently, Walmart opened a store in my home town, Maricopa, AZ. I was discussing the recent opening with my wife, more specifically, why it took so long for Walmart to open a store. She mentioned that *they* should have attracted Walmart sooner. Additionally, *they* should attract other stores like Target, Best Buy, etc. I asked her who was *they*. She responded, the city government. Its this type of thinking that lends itself to large, obtrusive governments at all levels.
While the city may think it attracted Walmart, that is a terrible, shallow description of who attracted Walmart to Maricopa. There is only body that attracted Walmart to Maricopa, the free market. Until recently, it was not worth Walmart’s money to invest in a new building to capture Maricopa’s dollars. Most of Maricopa commutes to the Phoenix Metro area for work, passing at least one Walmart along the way. It was not until recently that Maricopa had a significant enough population to support the volumes necessary to make a Walmart profitable. As Maricopa grows, other stores will come, but not because of the city. Its because of you, the consumer.
Now, there are things a municipality can do to block or encourage businesses to move to Maricopa. Things like zoning requirements, property taxes, and sales taxes all inhibit new business growth. If Maricopa wants more business, we need to reduce and streamline zoning changes, grossly reduce property and sales taxes. To enable this, Maricopa needs to maintain a barebones staff, keeping local regulations to a minimum. Additionally, Maricopa will attract consumers with the same policies, making it a win-win for everyone.
Mises.org has a great article regarding the lies spread by our own government. It also references what sounds like two great reads.
The American Conservative has a nice introduction to Isabella Paterson, Ayn Rand’s source of history, economics, and government. I like the idea of “Separation of Economics and State“
Bloomberg has article discussing the situation surrounding many college campuses today. it goes into how colleges borrowed money to spend on things like new dorms, buildings, as well as rock walls, jacuzzis, and mini kitchenettes in all the dorms in order to attract students to their campuses. Well, with federal loans tougher to come by and private loans all but non-existant, students are no longer willing to pay for those amenities and are choosing cheaper alternatives, like community colleges. Well, those spend-happy colleges are now facing tough financial decisions because their tuition revenue is dropping.
That’s the point of a recession. To weed out those who conduct business poorly. People who spend their own money on college don’t choose it based on the jacuzzi count. Only those who allow others, including the federal government, choose based on that. Federally funded loans and state funded insitutions have shifted the cost of higher education from the student (where it belongs) to tax payers. We gave students money to get an education, and we let them make that decision based on jacuzzi counts.
College isn’t for everyone. It should be expensive. It should only be worth going to college for degrees where higher learning is needed. A four year degree isn’t necessary for political science, public works administration, sociology, and other fluff degrees. Some areas only require a few semesters like book keeping, etc. A good measure of how necessary a degree is how few electives are needed. For example, my electrical engineering degree required 16 hours of electives. My wife’s sociology degree required 64 hours. Which degree offers better marketable skills? Just guess.
This recession is just what higher learning needed, but now we have Mr. Obama offering stimulus money to keep these institutions afloat, the worst thing we can do. Let those schools fail. Force kids to re-evaluate their future goals and methods for attaining those goals.
This is the first of a series of articles to debunk common misconceptions regarding economics. This article is regarding price gouging. It was triggered by this Ars article. The article complains that a cable company is changing the way it wants to sell its products, cable-based internet in this instance. Previously, people could subscribe to Time Warner’s Cable (TWC) internet with no tangible bandwidth limit. This means they could download as much as they want per month. (Side note: most people download very little, only people downloading large quantities of video (10 per month) would come close to these the the proposed limits). Apparently, TWC has decided to charge $30 for a 5GB plan or $55 for a 40GB plan. Nate Anderson is whining that that is unfair for TWC to do. Many of the comments whine that things should be down to prevent this such as government legislation. All of this implies that TWC’s customers deserve unlimited cable downloads for a price below what TWC is willing to sell it for. Well, I think I deserve you to sell me your car for $1. What’s that? You don’t like that? Well, too bad. I deserve it. You say that’s crazy? Of course it is. Its just as crazy as TWC’s customer whining about this. If you don’t want to pay that price, don’t buy from them. Buy Verizon’s DSL service, DirecTV’s sattelite internet service, one of many dialup services, or no internet at all. Its your choice. Its the beauty of the free market.
I received this in an email today. I don’t usually forward things, but I thought this did a good job teaching what seems to me an obvious point.
Shortly after class, an economics student approached his economics professor and said, “I don’t understand this stimulus bill. Can you explain it to me?” The professor replied, “I don’t have any time to explain it at my office but if you come over to my house on Saturday and help me with my weekend project, I’ll be glad to explain it to you.” The student agreed. At the agreed upon time, the student showed up at the professor’s house. The professor stated that the weekend project involved his backyard pool. They both went out back to the pool and the professor handed the student a bucket. Demonstrating with his own bucket, the professor said, “First, go over to the deep end and fill your bucket with as much water as you can.” The student did as he was instructed. The professor then continued, “Follow me over to the shallow end and then dump all the water from your bucket into it.” The student was naturally confused but did as he was told. The professor then explained they were going to do this many more times, and began walking back to the deep end of the pool. The confused student asked, “Excuse me, but why are we doing this?” The professor matter-of-factly stated that he was trying to make the shallow end much deeper. The student didn’t think the economics professor was serious but figured that he would find out the real story soon enough. However, after the 6th trip between the shallow end and the deep end, the student began to become worried that his economics professor had gone mad. The student finally replied, “All we’re doing is wasting valuable time and effort on unproductive pursuits. Even worse, when this process is all over, everything will be at the same level it was before, so all you’ll really have accomplished is the destruction of what could have been truly productive action!” The professor put down his bucket and replied with a smile, “Congratulations. You now understand the stimulus bill.”
Arizona spends alot of money. We spend alot of money on education. Legislators are currently talking about cutting education spending to balance the budget. I strongly believe we need to always have a balanced budget. Here is how I recommend cutting educational spending.
Public Schools are organized like massive corporations. There are many layers of management supported by high profits (often protected by government regulations, but that’s another post). Teachers report to Principals. Principals report to Superintendents. But, superintendents have assistant superintendents. Everyone has assistants. There is an entire layer of bureaucracy that generates nothing. No teaching, no creation of wealth, just leaching. Don’t believe me? Tell districts they need to cut spending. Do you know what they say? Raise taxes or cut programs, both while whining about Arizona’s future, like Arizona will fall into a state of ruin without their school district’s overhead.
Superintendents make approximately $150-180k/year. Assistant Superintendents make approximately $100k/year. Paradise Valley School District has five assistant superintendents. If we can save $1-2million/yr by eliminating one district, we could save at least $150-300million/year. There are 150 school districts with websites known to the state of Arizona.
We don’t need school districts anymore. There may have been a time when that level of bureaucracy was needed, but not any more.
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