For anyone who still believes we won't eventually have a different system of banking/currency:
http://www.nytimes.com/2008/12/17/bu...gewanted=print
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For anyone who still believes we won't eventually have a different system of banking/currency:
http://www.nytimes.com/2008/12/17/bu...gewanted=print
Ah yea man. They can charge 19% interest on credit cards while borrowing the money at 0.25%. They can claim they are not responsible for the rates they charge for mortgages as a different mechanism takes care of that. And nobody is credit worthy!
welcome to Japan - America ... the lands of zero interest rates. This FED action actually caught most of the analysts by surprise. On the good side, the US markets got a decent 'pop'. On the bad side ...
- the FED has nowhere left to go in regard to cutting interest rates
- savers / bond investors are essentially receiving zero rates of return
- financial institutions are operating at interest rate spread profit margins that have never been higher on percentage terms (as a stealth bailout mechanism to offset loan losses)
- the FED has 'shown its hand' to the rest of the world ... i.e. that further 'easing' will take the form of monetization of debt (with associated tanking of the US dollar exchange rate)
(snip)"The Fed goes to Defcon 1"(snip)
(snip)"Now that traditional monetary policy as we know it has been exhausted, the Fed will take ever-more creative steps to boost growth. In simple terms, the Fed will flood the financial system and economy with as much money as it has to.
How does it do that? The Fed will buy debt and mortgage-backed securities issued by Fannie Mae and Freddie Mac. It's considering buying longer-term Treasurys, including notes and bonds. It will also implement a new lending program to support credit for households and small businesses.
And the Fed said it wouldn't stop there. "The Federal Reserve will continue to consider ways of using its balance sheet to further support credit markets and economic activity," the committee said.
Critics will say Helicopter Ben has taken off and is now prepared to drop billions of dollars across the landscape, destroying the economy with a hyperinflationary spiral. But cooler heads will counter: What choice does he have? "(snip)
from
I've hated banks for a long time; one reason is the promotion of credit cards, even secured ones. If/when I need a loan (which is rarely), I take a secured one. Credit cards are a huge, usurous, stinking RACKET; they should be criminalized for the frauds the perpetrate. Maybe some day they will be.
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The Reagan administration, in its desire to please big businesses in a typical Republican way (allowing it to better exploit the public), de-regulated the banking industry to allow it to slip in all these usurous rates and miscellaneous stupid charges. Next step we will see even sillier, more exploitative things like an excess bill pages charge and a postage adjustment charge. Rates should more closely reflect a person's credit score, with the best rates a lot closer to collateralized loan rates. Yeah, like that is gonna happen any day now.
In the seventies and even early eighties, I didn't feel this way about the industry and gave them more business. I even invested a few thousand in two of them. Then they started pissing me off. All of 'em.
^^^ well, the 'racket' of credit cards will soon be getting somewhat worse (for folks like us anyhow) due to the release of expected new regulations. Banks will be prevented from hammering on delinquent 'subprime' credit card borrowers quite so badly i.e. universal default, double cycle billing, penalty charges etc. However, with the credit card lenders becoming less able to recover their losses from 'subprime' credit card borrowers, they will make up for this by increasing interest rates on 'prime' credit card accounts ! Additionally, credit card lenders will be forced to lower their future risk exposure to 'subprime' credit card losses ... which will be accomplished by setting lower credit limits for both 'subprime' and 'prime' credit card borrowers, and by tighter evaluation standards being applied to new credit card applicants. This will mean that people whose incomes are difficult to prove / verify i.e. most self-employed dancers will be thrown in with the 'subprime' group regardless of their personal credit rating ( meaning higher interest rates, lower credit limits etc.)
They can increase the rate on this prime credit card holder. I don't care since I pay it off every month.
The reason why I am prime is because I can hold off on purchasing something until I HAVE THE MONEY FOR IT.
A discipline it seems a lot of Americans don't have these days.
^^ Exactly. I have the patience needed for minimal borrowing. I don't buy what I don't really need (the minimalist idea). I don't have a mortgage, and I even own 2 residences and some other property.
Markets reacted somewhat to the news, but the effective rate has been that low for a while. Will be interesting to see what happens next. It's not unprecedented (Japan...) but there are lots of interesting external factors in the US' case too, like other countrys' reserves, oil in USD etc.
If that's Fed's only weapon, they've just run out of ammunition.
^^^ they've exhausted their ammunition for ONE weapon, but still have other weapons in the closet. The 'tin foil hat' crowd will tell you that the 'new' financial weapon (new for America anyhow) will be monetization ... i.e. issuing new US gov't bonds to fund some $850 billion in new gov't make-work program spending as proposed by Obama, and simply paying for those new bonds with newly printed US dollars.
You know, that is not really all a bad thing if it's real work that needed to be done and will provide benefits (translated into financial terms) for many years. Depending on the interest we pay on our existing debts (China etc) which will now be paid back over a longer term, if ever.
^^^ it's only a bad thing if you think that you will need to purchase world market commodities like food, gasoline, utilities, appliances and cars made from steel / copper / plastic etc. in the future. If you do, the further that the US dollar exchange rate is driven down the higher the US dollar denominated prices for these items will rise ... the less of these items your US dollar denominated retirement savings will buy etc.
Of course, if you owe a shitload of money to credit card companies, to mortgage bankers etc., then the devaluation of the US dollar, the associated rising prices of US dollar denominated goods, and associated demanded increases in wages, will make it easier to pay off those existing debts. It also makes it easier to pay higher income tax rates too !
see the 'Ship of Fools' thread for further info ...
^^ It's self-leveling; the US needs to buy less from foreign companies. We only bought more because of the relative value of the dollar, lack of domestic savings, inflated labor costs, excessive consumption, and costs of foreign near-slave labor. Hey, I have an idea...why don't we start up a steel industry and grow our own food? We could save a bundle on transport costs.
I don't see what you're talking about in para #2. If one owes money and one's credit limits are squeezing one out of sleep at night, how does that help any of those things? And further with inflation knocking at the door too, well that just gets even harder to handle since inflated prices rise faster than wages, just about always.
^^^ it helps by raising the US dollar denominated median home price to $300,000 ... and by increasing the dollar denominated median new car price to $30,000 and by raising the US dollar denominated median income to $50,000 ... at which point paying off a pre-existing $200k mortgage or a pre-existing $20k car loan balance becomes extremely easy. Naturally, this US dollar change also makes it more difficult for Americans to make FUTURE home and car purchases ... but that's a whole 'nuther story that apparently doesn't need to be worried about today !
Unless one gets a proportionate and timely raise, which one never does, that won't help, seems to me. Even then, unless one sells the house and car, it won't because replacements will have escalated too. I suppose one could die and leave one's estate to relatives who may benefit. If estate taxes don't kill that.
^^^ that is exactly my point, that when 'real world' factors are applied this approach doesn't help anyone in the future. It only arguably helps those in the present who have chosen to be financially irresponsible ... at the expense of their neighbors, their children etc.
Same goes for the WPA like 'make work' programs. In the short term, these programs will help union contractors, union public service employees, investors and workers at gov't approved green industries etc. by funding new or continuing paychecks. And in some sense, the bridges / schools / research will provide some form of benefit to society in general. However, the question that nobody is asking is whether or not the total cost to US taxpayers comes close to representing a reasonable 'price' paid versus benefits received. More precisely, will the total cost that is passed on to future taxpayers (including our children) in order to fund such WPA like 'make work' programs with borrowed money or devalued dollars represent a reasonable 'price' paid ?
The 'inconvenient truth' here is that the New Orleans levees did not fail because of a lack of gov't money being appropriated for their maintenance. Those levees failed because the taxpayer money spent didn't actually get used to maintain the levees. Same principle applies to the huge amount of money being collected in gasoline taxes, interstate highway tolls etc. that is supposed to be targeted towards bridge maintenance. Same principle applies to the huge amount of money collected in school taxes, property taxes etc. that is supposed to be targeted towards educating our children. In every case, there has arguably been MORE than enough money collected from taxpayers to achieve the intended purpose, but for some strange reason that money never seems to trickle all the way down to actually accomplishing that purpose. And the WPA style 'make work' programs will arguably end up achieving the same sort of inadequate result. Of course, along the way, a large portion of that money will be used to fund unionized gov't worker paychecks, unionized gov't contractor paychecks, and of course tax advantaged profits for investors in gov't approved green companies ... which is arguably the true purpose of the WPA style 'make work' programs after all !!!
It's like kick-starting a bike. A lot of fuel goes into the engine at first for the zero mileage attained. But if you can get it started, then you can use that fuel for getting someplace. Of course if you have trouble starting it and can't find out the real problem, you can pour just about all your fuel down the carb, and if you do finally get it started, it soon dies again. FDR did it with the WPA (limited returns there) and with the war. That's it, we could have another war. Oh, shoot, we already have two going!
the 'tin foil hat' crowd would say that you're finally catching on !!! But wars only work well as an economic stimulus if A. they consume a very large percentage of GDP to pay for domestically produced weapons / aircraft / tanks & trucks (which the current Afghan / Iraq wars fall far short of), and B. if the war winds up 'permanently eliminating' a couple of million unskilled / unemployed citizens from gov't funded social welfare and 'make work' programs (which the current Afghan / Iraq wars don't accomplish at all).Quote:
FDR did it with the WPA (limited returns there) and with the war. That's it, we could have another war. Oh, shoot, we already have two going!
^^^ are you proposing another American Civil War ... with the bankrupt 'Northern' states destroying the profitable (but foreign owned) industries and economies of 'Southern' states ?
Red state vs Blue state maybe. Of course I'm being facetious about the war thing.
But if Obama's worker program does useful projects (for less than a union contractor could do them) and trains people for useful work after the program ends (as frequently opposed to the military), then it is not a giveaway effort.