If you can’t pay off the principal on your credit card and it is way beyond being absurd; why not add more on to it, until they cut you off? It’s not like you have to work for what you’re buying. Be happy and consume. If you are broke, max out the card. Get what you can while you can. Plus if you are over 65 you get a bonus, you don’t need to file for bankruptcy. What wages can they garnish if you don’t work? Give your kids everything they’ve always wanted.
Somehow I don’t think that this concept of maxing out credit cards, has been appreciated for what it is, by the credit card companies. Unsecured debt is free money. Tarp funds are letting a very large credit card bubble grow even bigger. If the banks all got together and sorted accounts by address. They would realize that 15 different cards at one location, doesn’t indicate the residence is an apartment complex. It might indicate things are a not quite as they appear.
Unemployed? Start your own business. Buy a color Xerox laser printer and some linen paper and print up a couple of thousand 20 dollar bills. Let’s lend a hand, and help our government get this money printed. If we could get the unemployed set up to print dollars, we could be out of this mess by Christmas(Employment suggestions are for entertainment purposes only, talk to your probation officer for employment advice).
Poor old Barney Madoff has been put in jail for using creative Congressional financing practices. Congress is mad as hell. He spent a lot of that “rich people” money that they were going to tax. They are going to put him away for 150 years. That seems a little steep for impersonating a Congressman. There is a difference though, when Barney ran out of money, he went to jail. In our case Congress still has a check book, so we can’t be broke.
Here are some pictures from the past.
It's kind of a Grimm Fairy Tale with a bad ending for everyone.
20 comments:
In a lot of ways the FED is sort of like congress' credit card. See my post on your last post.
AACC
Hi Concerned Citizen
Thanks for the links. I'll look through them.
Actually, from my humble understanding, a more accurate statement would be that the Treasury working in tandem with the FED are congress' 'credit card company'.
The Dept of the Treasury has the ability to take a blank piece of paper and turn it into a Treasury Note and the FED has the ability to take a blank piece of paper and turn it into a Federal Reserve Check. A Federal Reserve Check can purchase just about any asset that you can think of and a Federal Reserve check when spent increases bank reserves. Uncle Sam's banks are the 12 regional FRBs. He keeps his checking accounts in these banks. Once his bank balance is positive Uncle Sam can then pay for whatever congress can dream up by simply writing government checks against his checking accounts in the FRBs. These are then dispersed to regular people and corporations where they invariably become bank deposits in some bank. Naturally, Uncle SAM and the FED prefer that someone else is generous enough to step up and purchase the Treasury Note from the Treasury. Of course, the ability to sell down gold reserves and the ability to print Federal Reserve Notes are in the background as well. Natrally a Federal Reserve Note is exacly what it says - Federal Reserve Note - an IOU.
AACC
"Plus if you are over 65 you get a bonus, you don’t need to file for bankruptcy"
Jim - could you add more color to this?
Dan Mac
Hi Concerned Citizen
The Treasury borrows money from from investors by issuing notes. If the government is spending more than they receive in taxes, this is where they get it. The Treasury is kind of like that relative that is always borrowing money and never paying it back. He just pays the interest.
Picture the Federal Reserve as the Italian Mafia (as far as a bank is concerned). Miss one payment and get you legs broken. Miss two and you get a bullet to the head. The Fed is not in the business to give out free money. Each bank is suppose to have reserves with the Fed. Borrow and pay it back. What the Fed is allowing the banks to call reserves, is kind of a breach of fiduciary responsibility(CDO's are not fungible). The banks insolvent and the Fed isn't giving them the Coupe De Grace.
Closing 3,000 banks would put a strain on FDIC, which is an understatement. It is not geared to pay off on a failure of this magnitude. Even the Mafia isn't going to go out and head shoot 3,000 customers, it's bad for business.
Uncle Sam doesn't keep money in our banks. He doesn't have any. The 401K tax break was created by Congress so people would save more which in turn Congress could borrow more of.
The mental picture of Ben Bernanke throwing money out of a helicopter is good for a laugh. You can't force people to borrow money. And those that want to, probably can't pay it back. So his easy money policy is like pushing on a string.
The problem we have right now, is that many people sold there homes for a good price. The banks loaned out good money for these new homeowners to take possession. Now they don't want the homes and the bank can't get its money back. The Federal Deposit Insurance, has to cover the bad loans. In essence, all Congress is doing is taking the bad loans and adding them to the national debt.
You won't read that in the paper, but that's what it boils down to.
Hi Dan Mac
My Dad lost everything in the 1987 crash. Needless to say he had debts and obligations that he could no longer pay. He didn't file for bankruptcy since he was retired. In California they can go after your wages, but there is a statue of limitations. I think after 5 or 10 years with no payment made, the debt has to be written off and drops off of your credit rating.
The thing that boggled my mind was that fact that my dad was able to secure new credit cards at the age of 75. When he passed away, I mailed out death certificates to 10 credit card companies who were owed over $50,000. I guess it refutes the common assumption, that you can't take it with you, he did and then some.
What I do not understand is how come Bernie gets to live until he's 220?
With regard to consumer debt - don't forget the fact that what you buy for $1 on the credit card is going to cost you $2 in wages to pay back at the end of the month, $3 if you string it out on minimum payments. Even sophisticated borrowers don't "get" the difference between a taxable wage dollar and an untaxed debt dollar, which is why it's so damned easy to get into trouble with debt.
Jim, I think what you mean about retirees is that retirement income can't be seized to satisfy consumer debts. I'm not a lawyer and I'm not retired, so don't quote me - but I don't think you can lose social security, IRAs, pensions, or 401ks to creditors or folks suing you (they probably can't even seize Bernie Madoff's retirement). Which is why young people need to max out their 401k's - when they "can afford" to fund the 401k, they'll hit the income limits. What I put in my 401k today, I can withdraw (with penalties) anytime I want, but damned near nobody can make me take it out to pay them back what I owe them.
Hi Anon 2:39
Your right, I missed the most obvious point retirement bennies are exempt. O. J. Simpson is a good example.
Obviously we've been on shakey ground and developing all sorts of systemic diseases for over a century due to operating with a central banking system controlled by The Fed, following Lord Keynes theories; income tax, going off the gold standard, totally utilizing a fiat currency, allowing politicians, lobbyists and the military industrial complex to dismantle our economy.
Yet, as far as causality goes for this recent episode, here is my understanding and take on it:
It started with the Carter administration and the Community Reinvestment Act ("everybody should have a home and we'll lend you the money to buy it"). Clinton and Bush expanded it in their administrations.
Then we had the tech or dotcom crash, a recession and the 9/11 terrorist attack. So, Greenspan lowered interest rates for a very long term. He created very cheap money.
Lenders started coming up with all sorts of mortgage structures to facilitate home sales (ARMs, option ARMs, interest only loans, stated income only loans, etc.) They dropped all protective guidelines and standards because they were able to transfer the risk... they packaged and sold them to Wall St.
Wall St. with their new flock of financial engineers securitized these mortgages (as well as credit card, auto and student debt) in the form of CDOs, MBS's, SIVs, etc. and sold them off to every far corner of the world. They also transferred the risk to pensions, mutual funds, money market, hedge funds, etc.
The credit agencies gave them falsely high ratings.
Congress passed or rescinded laws in order to increase leverage, allow banks to become investment banks, create derivatives. The SEC allowed some to leverage at 40 to 1.
Then the bubble floated into a pin and popped. Beginning the financial collapse and cascade of trouble that we are now enjoying.
Continuous and erroneous policies have been implemented as the solution (TARP, TALF, TLGP, TSLF, SLF, PDCF, HAM, ETC. ETC. ETC. ETC.) and they are being continued in the Obama administration.
The fallout is historic: foreclosures, bankruptcies, commercial RE, debt destruction, unemployment, etc. etc.
There is a worldwide attempt to deleverage, restructure, and recapitalize. The International New World Economy boys see their chance to move things in their direction now, and will attempt to do so (under the "capitalism doesn't work" guise).
Our current administration has no focus or certainty. They go from one emergency or fire to the next. This is traumatizing the markets. We have a tsunami of trouble: zombie banks, zombie homeowners, key drivers of the economy are crashed, energy and food problems in the near future, etc. etc. And our government is basically running in the wrong direction with every solution they implement. They have no idea what other complications or collateral damage they are causing in our near and distant economic future.
The guys that caused this or allowed it to happen (Bernanke, Geithner, Summers) are now in charge of fixing it?!
Many many more explosions are yet to come.
Due to this, there is really no way to predict where things are going and what will happen.
We've been forced into a situation of instability and inability to predict. We have to live week to week, month to month and can't rationally plan beyond these short time frames.
The government is PUBLIC ENEMY #2. We are PUBLIC ENEMY #1 for allowing our government to grow into what it is and our politicians and corporate leaders to run astray.
More basic to this all is human nature. Once the government, wittingly or unwittingly, removed a significant amount of restraints the people went hog wild.
Greed, something for nothing mentality, the party mentality, debt mentality, etc. all flourished and blossomed within the Capital building, the White House, Wall St., the halls of corporate America, the banks, the lenders, the shadow banking system, Main St. and in our own homes.
Hell, we are all to blame.
Now we need rationality more than ever. Where is that going to come from?
Hi Inquiring Mind
It's nice to see an explanation I agree completely with that doesn't blame this on either political party.
I think the 160 million AIG bonus package fiasco might change some political thinking up on the Hill. I sure hope so. I guess we will wait and see.
Thank you for your comments.
Kudos to AIM. That is a pretty accurate time line of events, and it more than explains how we got where we are today.
I beg to differ on one point:
we CAN predict where we are headed to the degree of accuracy required in order to weather the coming storm as individuals. Granted, a paradigm shift, and much work will be required for one to become properly prepared for the future (to protect the majority of what one owns, and to continue to move forward with some semblance of personal growth, and maintain a degree of "prosperity"— and, the truly financially literate and intelligent ones will prosper well from this period of decline).
We CAN predict, if we "keep it simple" view this unfolding situation from the foundation or vantage point of the true laws of economics.
This depression and spreading financial crisis is the beginning of the unwinding of about three decades of financial leverage and spending excesses. It will take a long time to complete. Consumers will now transition into "save mode" for the next decade and beyond... global financial institutions will continue to delever... commodity prices will stay weak... government regulation will intensify... protectionism will be invisible and creep in.
Sluggish economic growth and deflation are the likely results.
THIS is what we need to prepare for. No matter how much money is printed, it will take a long period of time before it can inflate an environment that is rife with trillions in debt destruction and has lending institutions that are terrified and frozen.
Government policy and intervention will not prevent one from predicting if one sticks to basic economics and doesn't get thrown off by government rhetoric, complexities, fear, etc.
We have a 1-2 year period of deflation coming (and it could be longer) and then inflation will set it--either gradiently or with a bang.
That is my general prediction and I am implementing strategies on this basis.
AIM,
Dead on. If inclined, submit an application for Deputy Assistant Treasury Secretary... Once in place, push Guitner and his Lucky Charms out the window so we can get some intelligence and integrity in the position.
Anon ona CM,
Don't forget about the GovFactor. Jim has brought up many times before that these folks are relentless rule changers. I wouldn't leave this variable out when implementing your strategy.
ATP
If you didn't max out your 401k you might have been able to pay back your creditors.
It amazes me how crooked our society has become.
http://tinyurl.com/chdanv
It is too incredible to believe, but it is REALLY REALLY true...
The inmates are running the mental asylum!
Hi Anon 2:53
Not to start an argument, but I think that the inmates of an insane asylum could do a better job running our government. At least we would have a logical explanation from our own observations that would help us understand why they are doing, what they are doing ;>)
As regards insanity, here are the newest cases in point...
1.
The lead economist for Citigroup, you know... the bank that is falling apart and basically a zombie bank... has just been appointed to the Treasury Department to assist Geithner with his programs. Before this guy was with Citi he was with the Federal Reserve.
Let's bring a guy in from a failing bank who is also deeply imbedded in the system and programmed in the Keynesian way of thought (Fed Reserve). Wow! can it get any crazier?
(No need to answer. That was a rhetorical question.)
2.
Government discovers that AIG just spent 165M of its bailout money on bonuses to present and past executives and sales people. They've also set aside millions for exit packages for future layoffs. So, how does the Treas Dept handle this display of fiduciary irresponsibility, lack of ethics, and poor financial management? Geithner, as "punishment", is going to deduct the 165M from the next 30B bailout amount that he is giving them. Wow! can it get any crazier?
(No need to answer. That was a rhetorical question.)
The American citizen/taxpayer and their children, grandchildren, great grandchildren, great great grandchildren on being put into debt so that bank executives can be given huge bonuses (for poor performance) and drive back and forth, in their Bentley's, between all the homes they own.
Didn't the French separate people from their heads for this sort of behavior?
Will a large enough percentage of Americans ever be cognizant as to what is happening right under their noses in order to do something about this greatest transfer and theft of wealth?
Keep in mind, Anon, debt spending is not really a burden on the future. It is really robbing the present by debasing the currency today. It is a hidden tax.
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