LCBO & profit

Again I heard on the radio that the LCBO (liquor control board of Ontario) was great for Ontarians because it generates a profit. This is hogwash.

The LCBO is a pure monopoly with a product that is relatively price inelastic. Inelastic means that if the price changes, sales do not change by much. If the price of a 6 pack goes up by 1$, I will still by the six pack (my name is not Joe).

The LCBO generates a profit by inflating prices with the full knowledge that sales won't decline by much. Who pays the bill? Me the consumer and other business. If I have $100 of disposable income per week and I pay $13 for a 6 pack, I have $87 to spend elsewhere. If the price was $7, I would have $93 to spend elsewhere. I lose by not being able to buy an additional $6 of other goods and other business loses by not selling me an additional $6 worth of goods. Should I decide to save the $6, the banks have more money to lend to a budding entrepreneur.

Government should not be in business. Government business reduces disposable income and crowds out other business.

Right On

Pension payments to public servants is where we get taken

I sat down with a 55 year old lady who is contemplating retirement. She works for the federal government and earns $90,000. She has been with them for 30 years. Because she has been there 30 years she is entitled to full pension. She will get $55,000 per year plus inflation starting now. I did a present value calculation. If inflation averages 2.5% and she lives to 85, the present value of her payment stream is over $1,000,000. The RRSP account of someone her age without a pension would have to be over $1,000,000 to be in a similar situation. I have never seen an RRSP account over $1,000,000.

You can argue that her salary of $90,000 is too much. But, her pension is definitely too generous. This is where the tax payer gets shafted.

Unions inflate pensions rather than wages because they know that this draws little attention from the taxpayer.

Right On