Infectious Greed is a blog so good it might be illegal. Paul Kedrosky, the blogger, knows finance, where the bodies were supposed to be buried before they were moved, the lay of the land before it was zoned for condos, and should be a must read twice a week......
Then there is "The Cement Life Raft" a description of our economy and we the people that is a must glance over at The Big Money. Written about the Queen of Tarp who says, "We can't have a modern economy without solvent banks, but we can't have solvent banks or a functioning economy without solvent families." That such a notion remains controversial is almost mind-numbing. Mind numbing is Obama, the so called cabinet, and "our" Congress.
4/28/2009
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3 comments:
Howard setting aside the irresponsible and impulsive that use easy credit to live beyond their means what is always overlooked is the eight hundred pound gorilla of taxes and social engineering.
Take your state of California; how many middle class families can afford to live there without credit cards and easy credit? Gross income is a fiction, net income is a hard reality. Its the taxation level that forces people in the middle and upper middle class to depend on credit cards. The tip off is the ever larger percentage of those people's charge cards that cover items like gas, groceries, utilities and normal living expenses. Net incomes don't cover what they used to due to rising taxes and the costs of social engineering. The families have no choice but to charge the items. I'm not saying the banks and credit card issuers are saints, but always the real culprit is never acknowledged: out of control government.
The banks got the message: no lending to those who can't pay it back. The credit card issuers are cutting back and raising the jack for the same reason except they need the cushion for the expected losses. If you can pay your charges in full every month, your credit lines have not been cut and you still get the 0% interest cash advances. If not, no easy terms for you. Soon enough the public is going to get the message that what keeps them indebted is the amount of taxes they are paying that those funds could instead be paying their living expenses and debts. Cops, fire and rescue, roads, bridges and public infrastructure and schools along with national defense can be paid for with half or even a bit less of the combined federal, state and local tax burden. So what are they paying for besides that if not subsidizing the parasite class? Do the math add up the load the average middle and upper middle class family pays and cut the figure in half and see if that amount saved would not cover a substantial amount of their living expenses, expenses that are being carried on credit cards and doesn't enable them to do much saving.
The next year or two the economy will be contracting and bottoming out. That will keep inflation in check and the dollar fairly strong but will be disastrous for the governments tax receipts.
The government's ability to borrow will sometime in the next year or so peak before investors get scared off. Especially the foreign investors. Nationalizing GM and Chrysler was a very bad move, it reeks of Argentina. That will eventually affect treasury sales. And the states like California, how dumb do you have to be to keep buying their paper?
The upshot is the the middle class is badly wounded, deflation will mean lower wages and lower net wealth but higher taxes to subsidize the parasite class of welfare recipients, unions and government employees and the class of people vested with those groups.. Throw in the coming green taxes such the carbon tax and we will be on an express train to Latin America.
Money will be quietly leaving the country once safe havens are found. No one is going to keep serious money in nationalized banks or in equities or bonds of companies that can be nationalized on a whim. The recovery will be very weak with high unemployment. Only when the dollar finally drops as foreigners finally loose faith in the new American Communist Party and no longer lend to Comrade Sam will inflation really start. Figure in 2012 when Comrade Obama and new Politburo start their new terms.
I haven't used a credit card in twenty years. I've used debit cards and disciplined myself to the concept that if I can't pay for it now I won't buy it. Exceptions? Three emergencies in which I had to charge several hundreds of dollars which I paid back through the sale of assets. Trust me, the freedom of no cc debt cannot be described, and the savings to my bottom line has been substantial as I was a cc abuser, or close to it.
I had my brush with debt about the same numbers of years ago as you. I use mine as a charge card and pay them in full every month. I use them for the points as opposed to writing a check or using a debit card. My ass is large and first class seats are outrageous in cost. So its cheaper to charge (for me) than to pay in cash. Unfortunately in this country you are almost forced to have credit cards to acquire a good credit score. Without the good score things like auto insurance get more expensive even if your driving record is spotless.
You are the exception, not the rule. But for younger people who are married with young kids and college loans the tax load is what is doing them in. They need the credit cards to cover the gap between fantasy pay and reality pay. Funny most of the hardest places to live for the middle class is the areas controlled by Democrats. Its not a coincidence.
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