from the hip

The Scandinavian countries are known all over the world for their welfare states. The Scandinavian countries have provided their citizens with low priced kindergartens, free education, great universal care programs, social security, care for the elderly, and much more.

But the current international crisis challenges the welfare states of the Scandinavian countries as well. The Danes have now started discussing the future of the Danish welfare state. Danish newspaper Politiken writes:

The prospects for the Danish economy are so bleak that reforms are needed if the country is to avoid cutbacks in schools, elderly care and other public services according to Minister of Taxation Kristian Jensen (Lib).

“With the current state of the economy there are two choices for the future – either less welfare or extensive reforms. The economy is not sustainable in the long run with the reforms and agreements that we have introduced to date,” says Kristan Jensen.

The Danish government is planning to enact a tax reform that will increase the already very high taxes in Denmark substantially. However, the secretary of Finance does not think even this will be sufficient in the currently difficult situation:

“The first step is that we carry through a hopefully ambitious tax reform this spring – and then, when that has been enacted, we must see what the status is. But my view is that a tax reform is not the only tool needed to move forward,” says Kristian Jensen.

The question now is: Will the welfare state of Denmark as we know it surivive? And: Which is the next Scandinavian country to reform its welfare state? My guess is Sweden!

As a kid, I used to love playing a pirate. There was something mysteriously romantic and exotic about pirates. When we played pirates, we all had pistols, some of the guys would also have swords or knives. And masks and eye patches, of course, was a part of it, as pirates, in our conception, were usually one eyed.

Later I admit to liking to read historical novels with fights with pirates, like for instance Dewey Lambdin’s books about the fictional naval hero Alan Lewrie or Steve Brennan’s The Gigantic Book of Pirate Stories. But until recently I have considered piracy something remote, something belonging to ancient times, even though I knew that the practice has persisted in the Malacca straits and a few other places.

However. I can’t say that I find the surge in piracy that we have witnessed recently very romantic. Piracy seems, oddly, to have become a booming business in some parts of the world. Sea borne piracy against transport vessels is a significant issue (with estimated worldwide losses of US $13 to $16 billion per year), particularly in the waters between the Pacific and Indian Oceans, off the Somali coast, and also in the Strait of Malacca and Singapore, which are used by over 50,000 commercial ships a year. You can see a list of the pirate prone areas at the ICC web site.

The business model employed by some of the modern pirates, most notably the pirates in Somalia, is fairly straight forward. They hijack ships, take over control, bring them into harbor some place along the coast, and then negotiate a price for freeing the ship, including, usually, its crew and cargo. The modern pirates favor small, fast boats and take advantage of the small number of crew members on modern cargo vessels. They also use large vessels to supply the smaller attack/boarding vessels.

Modern piracy thrive on conditions of political unrest. Thus, countries with limited territorial control provide good bases for modern piracy. You can see a movie of pirates taking a capture super tanker into a little fishing village in Somalia on Guardians web site! (See also New York Times on this).

It is to some extent odd that this practice can exist today. The Romans fought piracy, and at one point largely wiped it out in the Mediterranean. But today, with modern fighter planes, modern navies, efficient guns and rockets, as well as electronic surveillance, that fight should be much easier, even though the seas are still huge. As it is, we don’t really fight them, even though the West sometimes gets into the occasional little fight and some of them are killed or captured.

I think they survive because of leniency from the West. As long as they don’t expand their business too much, and don’t really do too much damage to international shipping, and especially the oil trade, they are more or less ignored – at least in the sense that the West is unwilling to use the level of force necessary to remove the problem completely. Also, who is to pay for it? The pirates to some extent get away with it because the patrols and military actions required to take them out is a collective good nobody at present is willing to pay for.

So, modern piracy is bad, but I think it is bad because we permit it to happen.

The US believes itself to be a – or perhaps even the most – technologically advanced country in the world. This is a myth, blatantly false. Internet usage, Internet speed, mobile telephone use, Internet phone speeds, and so on, are all among the many areas where the US is increasingly lagging behind the most advanced countries in the world. So is banking and financial services.

I am astonished by the lack of efficiency and the poor customer service of American banks. Here are some real life stories that really shock me, from banks that are all among the top 5 US banks. Here are the cases:

1. Electronic transfer between two customers in the same bank

A friend transferred 1200 dollar to my account. In Scandinavia, the money would have been on my account instantly, as it is a within-bank transaction. Here the bank took 24 to take the money out of my friends’ account, then printed a check and mailed it to me. So, 3 days instead of instantaneously. And unnecessary paper and mail service and postage, all of which, I am sure, customers pay for.

2. Electronic transfer between banks

I paid for something using Paypal. And there wasn’t enough money in my Paypal account, so Paypal withdrew money from my banking account, as they should. However, it took 4 days for this to be processed by the bank. Again, I guess, a check. In Scandinavia this would have taken 1-4 hours, as it is an interbank transfer.

3. Deposit lost by the bank

A friend of mine deposited 800 dollars in her bank. She got a receipt. After a few days she noticed the money weren’t there. She calls the bank. They could not find the deposit, but would investigate. Six weeks 5 long calls, talking usually to two or more people each time, she finally gets the 800 into her account. Now she finds that in two separate cases the bank had given her overdraft fees of 35 dollars that she would not have gotten had the money been where they should. Again she calls. Two calls later the fees are dropped. During this ordeal, the bank never contacted her – she always had to initiate contact.

Now – how it is possible to lose a deposit? How is it possible to not honor a customer’s receipt immediately? Why didn’t be bank get back to her quickly and fix it all? Who made the mistake here – the bank or the customer? It is simply the worst customer service I have ever heard about!

These tales, and others, are so shocking that I wonder how US banks can get away with it? Are American banking customers totally undemanding? Or are they ignorant – don’t know how things are done outside the US and what they should rightfully demand from a modern bank? Do regulatory agencies and consumer organizations not care? Are American businesses unconcerned with banking efficiency? And especially about the banks – do they not care about efficiency? Do they not care about customer service?

It’s easy to fix! Send some guys on a plane to study how it’s done overseas. Buy the software. Do the changes. Get with it! You are lagging by at least a decade!

Or do you just not give a shit?

The little, otherwise relatively liberal country of Denmark, known perhaps especially for its liberal attitudes towards pornography,  may well be one of the most control-oriented states  in the world as far as the Internet is concerned.

Since 2005, the Danish state has monitored everything everybody has been doing on the Internet. The Danish newspaper Politiken writes:

According to metroxpress, the state is monitoring everyone’s behaviour on the internet as a result of legislation that requires all user names and passwords to be lodged with the State and University Library and the Royal Library. The libraries file everything from children’s scribblings on Arto.dk to love letters and profile pictures on Dating.dk.
The technology is known as Internet Harvesting and the Net Archive currently harvests all Danish sites four times per year.
However, some news, dating and other social network sites are harvested daily, according to Eva Fønns-Jørgensen of the Net Archive at the State and University Library in Århus.

Code release
“Danish sites have a legal duty to provide access codes and we have been harvesting text, pictures and audio since 2005,” she says.
At the moment, researchers are the only ones allowed to see the extensive personal material grabbed through Internet Harvesting. But 70 years after the death of, for example, a person with a dating profile, all information comes into the public domain.

The thinking behind this is that people themselves have chosen to place materials on the Internet, and that once it is one the net it is publicly available.

So there we go. Public nudity and liberal rules about pornography. But Big Brother is watching. And letting others watch as well!

1984 has come and gone.

See also: Inventor of the Internet warns against ‘Big Brother’ systems that track the sites you visit

The international credit crisis is bad news, of course. And bad for a lot of people. Still, there are some amusing things taking place as well. Like the story about the HUGE bank robbery that took place on Monday in the US, in Washington DC. Quite possibly the biggest bank robbery ever!!

When I first read the story of exactly how the US injected 250 billion dollars into the biggest American banks, I was stunned. Then, when I reread the story I started to laugh. I found it hilarious! What a move by the government. From one perspective a much needed infusion of capital, yet from another a highway robbery!

So here is the story, simply to good not to be distributed, courtesy of The New York Times:

Drama Behind a $250 Billion Banking Deal

The chief executives of the nine largest banks in the United States trooped into a gilded conference room at the Treasury Department at 3 p.m. Monday. To their astonishment, they were each handed a one-page document that said they agreed to sell shares to the government, then Treasury Secretary Henry M. Paulson Jr. said they must sign it before they left.

The chairman of JPMorgan Chase, Jamie Dimon, was receptive, saying he thought the deal looked pretty good once he ran the numbers through his head. The chairman of Wells Fargo, Richard M. Kovacevich, protested strongly that, unlike his New York rivals, his bank was not in trouble because of investments in exotic mortgages, and did not need a bailout, according to people briefed on the meeting.

But by 6:30, all nine chief executives had signed — setting in motion the largest government intervention in the American banking system since the Depression and retreating from the rescue plan Mr. Paulson had fought so hard to get through Congress only two weeks earlier.

What happened during those three and a half hours is a story of high drama and brief conflict, followed by acquiescence by the bankers, who felt they had little choice but to go along with the Treasury plan to inject $250 billion of capital into thousands of banks — starting with theirs.

What a story! Has anything like this ever happened before? This must be the biggest tale in the modern history of banking!

I have written earlier, in What’s wrong with American banks about the lack of efficiency, the continued use of checks and their outrageous fees. However, it seems I was much too kind. Some American banks seem to do much worse than even that. Now, according to New York Times,

Wachovia has agreed to pay as much as $144 million to end an investigation that accuses the bank of allowing telemarketers to use its accounts to steal millions of dollars.

So instead of trying to build customer confidence, sharpening up the service, improving efficiency, and building business by producing customer satisfaction, a huge American bank gets involved in a rather petty scam against its own customers for a few million dollars in profit! Elderly customers, at that! Wild! What a great way to destroy a brand name! What a great way to destroy customer confidence – just when they need it the most!

The bank’s actions were “part of a pattern of misconduct” that resulted in Wachovia’s collecting millions of dollars in fees, regulators wrote.

Wachovia has agreed to pay a $10 million fine, contribute $8.9 million to consumer education programs and make restitution to victims that could top $125 million. In a statement, the bank said this “situation was unacceptable and we regret it happened.”

How silly is it possible to behave? When is the American banking industry going to stop treating its customers as uneducated, stupid fools, and instead try to focus on building trust, satisfaction and loyalty by means of excellent service? Or building highly efficient transaction systems using the best available technology and software? In a country that, technologically speaking, is ahead of the rest of the world, but that nevertheless, from an implementation point of view – especially as far as the banking sector is concerned – is 10 years behind Scandinavian and German banks in the use of modern technology? They should improve transaction efficiency and lower costs – not run scams!

And if the high paid executives of the huge American bank are unwilling to or unable to improve their banks and customer service, then why hasn’t there been any regulatory action to just force them to increase efficiency and performance? Do American regulators not know how bad American banking is? Do they not go abroad and study how it’s done elsewhere? Do they think America is still in the forefront – and don’t want to be confused with facts?

Every week I receive several offers for American credit cards. And the offers are basically so wild they are completely silly. Mostly I am pre-approved, whatever that means. Now, I am lucky – since I am not an American I don’t have to use any of them. And I don’t.

All of them, of course, have zero interest on something or other and/or have no annual fee. So far all is well. But then the craziness starts.

Wild terms

Stuff like cash-APR 20.9%-26.9%. What? And 3% of the US dollar amount on transactions that are made abroad. Why? Are they nuts? I buy for 2000, they want 60 bucks for doing exactly what?

And then, of course, a so called “finance charge”, up and above the interest rate charged, of 3-5% – depending on the offer – for cash advances. WHAT? So, I take out 1000 dollars in cash, and the buggers want 50 for doing exactly what? Having a machine count bills? Come on!

What to do?

So, on one level my conclusion is: American credit cards are all scams – don’t use them! On another level – for Christ’s sake don’t use them abroad – use cash or travelers cheques!

Efficiency in the credit industry

But then – and this is far more serious: How can the US and Americans tolerate this? An efficient banking and credit industry reduces transaction costs across the board – improves the efficiency for every sector in the economy!

My thinking is that electronic payments are much more efficient than other types. So America must want 99.99% of payments to be electronic. But how can you persuade people to go electronic when the banks and the credit card industry make a scam out it? Well, I don’t think you can.

But other countries have achieved that. And those countries are competitors of the US in the world market. So as long as the US doesn’t sharpen it’s act and get efficient, the competitors have a competitive edge.

Regulation needed

And as far as making consumers and businesses go electronic is concerned: It’s easy to achieve! Just takes some federal regulation. Since the costs of electronic payments, ATM cash advances, and so on, are very close to 0, all the regulators need to do it to impose some low maximum rates.

Say 1 US $ max for cash advances, 2 max if abroad, max interest rate 10% above the Fed’s rate, no charges for over-limit (they can be almost eliminated with modern online technology), but instead allow credit providers to terminate the contract in cases of over the limit. All transfers to the credit card account to be debited within 12 hours.

Does this sound outlandish? Well, it is. I have terms like this on my cards. I can’t thank my bank for it – it’s not because they have chosen to give me terms like this. I have these terms because they have been forced to. But they have no problem complying to them. And they still make excellent money.

See also: Plastic Card Tricks (NYT)
               The World’s Worst Credit Card (it is American, of course!)
               FTC Crack down