All of those paperbacks were purchased from the US publishers before the US/CDN dollar parity and are currently sitting in huge warehouses or on store shelves collecting dust. I can certainly understand why book sellers are still charging the book price since their inventory lost around 30% of its market value in the last year. 30% of the billions of dollars worth of unsold books is an insane amount of money! A lot of smaller book stores would go out of business if they had to sell their books at the US listed price.

Most likely you recently bought Book 7 in the the Harry Potter series. I paid around $22 at Walmart where the actual price on the book jacket is $45. Wow, what a savings! How can they afford to give me 50% off? Oh wait. Between volume discount and the higher CDN dollar it makes perfect sense.

I really feel for the book selling industry but I am boycotting physical books until price comes back to reality. The book sellers are just going to have to take the hit. They should lower the price to sell off current inventory to provide capital to buy new books at the parity price. Of course that is assuming that the population of Canada has slowed their book buying and that US publishers have lowered their price to Canadian book sellers.

Bring on the e-books! Cory Doctorow offers all of his books as free e-book downloads.

Over the last year or so focus has turned to the coming election and the failures of the Bush administration. Every other story is about a new Bush policy or the Iraq war or political candidates for the next term, etc. It is very frustrating to read since as a Canadian it affects me indirectly but I have no voice. We Canadians don’t have the same mind set as sub-border-eans so it is obvious how I feel about the US currently. “Stop the War”, “Impeach Bush”, “Stop the corporate bailouts”, “Separate religion and State”, etc. These issues are all easy to pick a side and yell about. The big problem is that it doesn’t really matter since their economy is about to collapse and take many countries, including our own, down with it.

I don’t want to live through a recession as bad as the Great Depression but inevitably we are heading in that direction. Our economy is so tied to that of the US that a blip across the border ripples out and affects us quite strongly. I don’t know very much about why this is but I assume it has to do with trade and our fiscal policies. We sell a lot of wood and uranium to the US and import a lot of corn based products and manufactured goods. Our banks follow the lead of those in the US pretty closely since it is practically required of us.

2008 will be a telling year in terms of our fate. The housing bubble in the US has recently popped so the markets and the government are scrambling to figure out what to do. The issue is that people who shouldn’t have been able to buy homes were given sub-prime mortgages for huge amounts of money that their income could never support. The trick was to give them low payments for the first couple years and tell them not to worry until it goes up in the future. I can imagine most people expected the American dream to kick in for them, at least doubling their income. Of course the lenders who sell these mortgages then turn around and sell the debt to the banks with the backing being the house. Banks in turn flood the markets with securities backed by sub-prime mortgages which are bought up by other banks and investment firms. All seems well until somebody realizes that the house backing the mortgage really isn’t worth $400,000 and is only priced that high because of the housing bubble. Suddenly the developers and the current “owners” who are trying to sell are stuck with houses that will never sell for the price they are asking. Housing prices, as a result, start to come back down to reality which in some markets is about 33% of their price. What usually happens now is people start defaulting on their mortgages since they can’t sell the places or afford to pay for them. Quickly the market would come back to the correct housing value and lots of people would be out lots of money especially the sub-prime lenders and the banks who bought their debt. [The Dangerous Disconnect Between Home Prices and Fundamentals]

At the moment the Bush administration is about to enact a policy that would help people who can’t afford their house to not default on their mortgage. This is not technically a corporate bailout of the lenders but is only one step removed. If money is injected so that people can pay the lenders then the lenders will not go bankrupt and are bailed out. This very policy sent Japan into a recession that has taken around ten years to recover from. [Bush Moves to Aid Lenders] On a second front the Federal Reserve bank is injecting mountains of cash into the economy to keep it liquid so it will keep on working. With all the sub-prime mortgage debt floating around the market, banks and other investors are slowing down and being very careful which in turn shrinks the economy. [Fed Injects Reserves Into System] However, injecting money isn’t the miracle that it seems to be since essentially the government is reaching into everyones pocket collectively and taking out a portion of their cash. Injecting money makes the US dollar worth less and so each dollar in your pocket can buy less goods. This is called an invisible tax since you pay it but don’t realize it and is present in all economies the world over. [Why does fiat money seemingly work ?]

All in all it is shaping up to be scary times ahead. The US dollar has already dropped to almost par with the Canadian dollar (1USD = 0.95CDN, Sept 06, 2007). Foreign countries are dropping use of the US dollar as payment (can’t find the articles for this). China is rattling the American cage with its substantial supply of US dollars; they threaten to collapse the value of the dollar. The wars continue. Domestic terror is being perpetrated on the people by their own government (too many links to choose from).

An election is on the horizon and the only candidate that I seem to hear about is Ron Paul. He seems to have the backing of the Internet and it isn’t surprising why. Check out this video of him answering questions at Google (long). It gives me hope since he addresses the issue I talk about here at around 23 minutes in. Ron Paul would have my vote and I hope who ever actually wins will hold some of the same values and can rescue the American economy from collapse.

Recently an advisory group suggested to the Canadian government to demonetize the penny and then shortly after the nickel. Immediately you wonder how a transaction would be completed that came to an unpayable amount. Other countries use a system called Swedish rounding which is a symmetrical system of rounding to the nearest available currency amount. It would be hard for merchants to fix the system always in their favor because the purchase of multiple items would come to an unpredictable value. I think it is a very good idea and would save the country millions of dollars in minting.

Take a look at the article yourself and let me know if you agree it is a good idea.

Save the penny or leave the penny?

The term “managing expectations” may be familiar to some but is probably not generally known. It is a common marketing term that refers to the practice of making sure the clients expectations for a product meet the reality of what can be provided so that there isn’t wide spread disappointment. As an example let’s take a group of people attending a conference. The conference provides several events that people can participate in which run the gamut from boring to extremely fun. Unfortunately not everyone can attend the fun event since there are not enough slots, in fact let’s say only around ten percent will be able to attend. The conference must now manage the expectations of the people by only hyping the average events so that only the people in boring events will complain rather than everyone not in the fun event.

For years the recording industry had brought in record breaking sales every year. The popularity of physical media was so high that it allowed them to go through two standards changes without losing ground; from records to tapes and from tapes to CDs. If the recording industry tried another change at this point it would almost be guaranteed an abysmal failure. The introduction of CDs was an incredible success due to their low cost production and high initial price point they made a great deal more profit per sale than ever before. Over the years the price per CD really hasn’t gone down and the profit expectations of the industry have become wildly inflated. Some would call the pricing collusion and extortion by the RIAA but the argument doesn’t really matter any more. Today the demand for physical media has severely declined leading to a sharp drop in profits. Everyone agrees that the reason is the Internet but very few people agree on the specifics whether piracy, iTunes, radio, etc.

It is not surprising, given the hit that profits have taken, that the RIAA is striking out to try to increase revenue from other aspects of its business. Recently they pushed for a extremely large increase in the royalties that Internet radio stations need to pay to play music. Unfortunately the planned increase is based on greed and is more likely to have an opposite effect on royalty profits. Most radio stations will immediately close their doors since they could not hope to be able to pay without going bankrupt. In protest, Internet radio stations went dark today showing solidarity on the issue. Given the power the RIAA has in the American political system the protest will likely fall on deaf ears but here is hoping.

I learned something about business when I was younger that I will never forget. “In a finite universe an economic model based on constant growth doesn’t make sense”. Yes it is a quote — by who you ask? David Suzuki. All business can only grow finitely before slowing and eventually contracting. There are of course various reasons for this but it is absolutely true; no exceptions. In the last few years the recording industry has seen its core business contract and the trend will continue. It is time for them to realize that physical media will only generate less and less profit and adapt by managing their expectations. The only problem is that it is almost impossible to manage your own expectations, especially for a corporation. I foresee a crash in their future and I can only hope that music as a whole will not suffer.