Blog Topic

CREDIT CARD DEBT WHOSE FAULT IS IT
Posted by: Darrell Castle
February 25, 2010

We've heard a lot about credit cards lately especially with the new rules for card companies going into effect in the last few days. The new rules assume that there is something at least suspicious about credit card debt and the way that debt is collected. I see credit card debt everyday in my office and I know that it can and often does get out of hand and cause damage to people. Why then has it become so pervasive in our society? Why is it a rare individual who does not have any credit card debt from which he is recovering? We have an article from Todd M. Schoenberger of Tiapan Publishing Group's Tipping Point to enlighten us.

"For those stuck in the quicksand of debt, then you know that it is literally impossible to ever get ahead in your financial life if all you're doing is paying back creditors." Wow, that is a great stand alone statement and very true but Mr. Schoenberger has more. "You've always heard stories about the amount of debt carried by Americans, but the epidemic really came into focus as the housing bubble burst and the U.S. economic system crumbled. Peopled seemed more than willing to remove equity from their homes to pay off credit cards and ignore every cautious sign about the risks they were taking." What cautious signs Mr. Schoenberger? I don't remember the stop sign ever being given, instead it was always go. He continues his analysis. "Once that equity started evaporating, credit card holders saddled with piles of debt, realized they were in trouble and had little chance of recovering. So, realizing this, consumers either filed for bankruptcy or decided to do what seems to be socially acceptable these days in the U.S.: Complain to their local congressional leader and say they are being "ripped off."

Credit card holders realized they were in trouble and had little chance of recovering. Well then, what should they do continue as debt slaves for the rest of their lives? I've counseled thousands of clients about debt and I've yet to have one complain to a congressional representative. How dare they become as impudent as to attempt to cast off their chains? If that were all from Mr. Schoenberger it would be plenty, but there's more. "Now, before I go any further, I have to say that I agree the credit card game is a losing proposition for the consumer. There is no doubt that charging loan-shark like rates to borrowers with little care about how it impacts their lives, is just as damaging to the overall economy as it is to the individual. However, the problems consumers face with credit card companies are completely self made. The banks did not tell the card holders that they needed to take the card, all they did was offer creative marketing with promises of "points, lavish vacations, and a lifestyle that was sure to make your sibling and neighbor super jealous. And the consumer fell for it."

That statement is so untrue, absurd, and ridiculous that it begs a response. He admits that card companies are loan sharks, and they have slick marketing to "market" their cards, and he further admits that their unbridled greed damaged both the individual card holders and the overall economy. He then goes on to lay the whole sordid mess at the foot of the "consumers" because they "fell for it." If an ordinary con man did to individuals what card companies do, it would probably constitute a crime. What then is at the root of all this debt?

In August of 1971, in an attempt to pay for the war on poverty welfare programs and the Vietnam War at the same time, President Nixon took the dollar off the gold standard and let it float without any anchor of value. He did that to inflate the currency and pay debts with cheaper money thus robbing bond holders or at least imposing an unseen tax on them. Since August of 1971, the standard of living of American working people has steadily declined relative to inflation. Each year wages do not increase enough to cover inflation and that dictates a lower and lower standard of living. The government has the same problem of course, and it solves that problem with debt. The government is our example and we follow it quite well. Credit allows us to not only keep the same lifestyle but to expand it. That is until the final day of reckoning comes and there is no more credit. No more home equity as collateral and no more refinancing resulted from the housing crash of September 2008. The large robber banks were bailed out using the labor of their victims, and then the victims were told that it was their entire fault.

Don't fall for it anymore. Make a commitment to stop using credit and live within your means no matter what that is. Hard times are here and will get worse so make preparations for stormy weather. Get out of debt right now by the best means you have available, and live a free life.

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CREDIT CARD RULES CHANGE
Posted by: Darrell Castle
February 24, 2010

The following is a brief summary of credit card rules changes as modified by the new law taking effect immediately, and as reported by the Memphis Commercial Appeal: 1. Interest rates can't be raised in the first year unless an introductory rate has come to an end. After that, cardholders must be notified 45 days in advance of any rate change. 2. For existing balances, rates can't be raised unless the account is at least 60 days past due. 3. Agreements will be clarified so cardholders can see how long it will take to pay off a balance if only minimum payments are made. 4. Service fees, such as activation and annual fees will be capped at 25 percent of the credit limit during the first year of use. After that, there is no cap. 5. Statements must be sent out 21 days before the payment due date. 6. Due dates will remain constant. 7. Credit cards may no longer be issued to anyone under age 21, unless the applicant has a co-signer or can show independent means to pay the debt.

Credit card companies had nine months to prepare for the new law and took steps to protect themselves. They raised interest rates, created new fees, cut credit lines, and closed millions of accounts. The new law does protect credit card holders in the ways previously mentioned, but it also impacts people in ways some may consider negative. It has helped make it more difficult for millions of people to get credit and has made credit more expensive. About 40% of banks cut credit lines on existing accounts which eliminated about $1 trillion of existing unused credit according to Tower Group Consultants. Credit lines were most frequently cut in places most severely affected by high unemployment and declining housing values. The law makes credit less profitable so some less than prime credit risks may not be able to get credit at all for a few years. Card marketing on college campuses is strictly limited and students must show independent means to repay. I guess Congress wanted college students indebted only to the U.S. Government for the rest of their lives instead of credit card companies as well.

Hard times are here and times will get worse for many. Make a commitment to live the rest of your life free of debt. Do it right now before it's too late.

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RISING GASOLINE PRICES DRIVE INFLATION
Posted by: Darrell Castle
February 18, 2010

The New York Times, in an article entitled "Energy Costs Push up Producer Prices," reports today on last week's inflation numbers as measured by the Producer Price Index (PPI). I will endeavor now to translate the Times article.

"Producer prices in the United States increased 1.4 percent in January outpacing expectations of a 0.8 percent jump-mostly because of an increase in gasoline prices. Excluding volatile food and energy costs, the increase was 0.3 percent compared with a forecast of 0.1 percent."

Translation: Prices went up in January much higher than expected but if the two things people must have to live, food and fuel, are excluded, the increase was not as high.

"On Thursday, a separate report showed the number of people filing first time unemployment claims last week was much higher than expected-to 473,000, up 31,000 from the previous week. That increase rekindled worries that the labor market would be slow to bounce back, even though it has gradually improved in recent months."

Translation: Unemployment is increasing despite government efforts to inflate it away with printed money and this is an unusual situation that the government economists don't understand because they only know one point of view, i.e. the government point of view. That is the only point of view taught in their Ivy League economics departments.

"Economists were also debating the effect of recent East Coast snowstorms on the weekly jobless report. Some said it probably meant fewer people were able to file unemployment claims because government offices were closed; others said it likely had a limited effect because many people file claims via the internet."

Translation: Some government economists thought the recent bad weather made unemployment higher but some disagreed. Is that all these PHDs in economics from Harvard, Yale, and the London School of Economics have to do? Don't you have to be smart to be a Rhodes Scholar?

Conclusion: Inflation will make everything cost more especially food and fuel. If something isn't done quickly to bring down government debt and slow the increase in printed money we will be fortunate if we don't all starve because we won't be able to afford bread. Get out of debt folks, before it's too late.

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FORECLOSURES STILL RISING
Posted by: Darrell Castle
February 11, 2010

Foreclosure filings rose 15% in January from a year earlier and exceeded 300,000 for the 11^th consecutive month as modification programs failed according to RealtyTrac, Inc. A total of 315,715 properties received a notice of default, auction or bank seizure last month, or one in 409 households.

Comment: Unemployment and negative equity, where home owners owe more than their properties are worth, are adding to the total, said the chief economist at Zillow.com. More than a fifth of U.S. home owners had negative equity in the 4^th quarter of 2009. Translation: If you are out of work and have less than no equity, you can't make your house payments when due. Comment: About 8.4 million jobs have been lost since the recession began in December 2007, with more than 4 million cut since Obama took office in January 2009. Translation: Work has gone straight to hell in a hand basket and has gotten worse since Obama's modification programs started. Comment: Nevada had the highest foreclosure rate for the 37^th straight month, with one in 95 households receiving a filing in January. Translation: Nevada, once a glamour spot, is now the worst hellhole in the country. Comment: Las Vegas had the highest foreclosure rate for cities with a population of more than 200,000 with one in 82 households getting a filing. Translation: Las Vegas is the worst hellhole of any city in the country.

Things are bad and getting worse. Get out of debt as soon as possible.

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PAIN REMAINS AFTER UNEMPLOYMENT
Posted by: Darrell Castle
February 08, 2010

This startling news can be found in a front page article in the New York Times Saturday February 6, 2010. I know that you are all as shocked as I was to learn that finding a job after months or even years of unemployment often leaves lingering problems. The consequences of unemployment continue to ripple through the lives of many who have returned to work. Some are forced to declare bankruptcy, many return to lower paying jobs and must find the discipline to live a different lifestyle. Many live with the anxiety of knowing that the rug could be pulled out again at any moment.

Some people are left with a massive amount of past due bills including mortgage payments which they will struggle with for many years. Sometimes the changes are of a positive nature such as a commitment to live a more frugal life or a commitment to quit drinking. Often there is a determination to set money aside for hard times which could come again at any moment. Children who observe their parents' struggles with unemployment after working most of their lives are left with a sense of unease about the future. Many are determined to study harder to get a scholarship because they know their parents might not be able to help them.

Some couples have trouble dealing with the stress and pressure on their marriages and many marriages end in divorce. Especially for those left with custody of small children, the decision to divorce sometimes leads to a life of irreversible poverty. According to the Times articles, attitudes about work are often changed by the experience. ""Mrs. Newby's attitude toward work has shifted, driven in part by her Christian faith. In an all consuming advertising career, she is now less inclined to throw herself completely into it. " I gave so much of my life, so much of my energy and time to serving this company and clients and for what?" she said, "Where did it get me?"

Well sister, it does sound like you finally have it figured out, but weren't you really after money, fame, power, self satisfaction, recognition or whatever? Didn't you find that you received those things from your work until your company was forced to cut back? Perhaps you found that those things are all liars and do not deliver the promises they make to us. Since you have it straight now, get out of debt and live a free person's life.

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JOB SEARCH TACTICS
Posted by: Darrell Castle
February 04, 2010

According to a February 3, 2010 article in the Denver Post, many people are unemployed because they use the wrong tactics in seeking employment. People are unemployed longer than before and therefore they are competing for jobs with yesterday's job search skills the article said. The collapse in the Nation's economy has left so many people unemployed that it is now a buyers' market and the employers are screening much more stringently than before. If a company laid off 500 or 1000 employees, that company will probably hire back only 200-300 and the burden is now on the candidates. What worked before is not working now.

On average women remain unemployed three to five months and 80% of men for at least a year. Some of these people have great backgrounds and are finalists for 6 or 8 jobs. "The successful candidate is the one who builds value, with a strategy on the hiring company. Fewer than 10% of all jobs are gotten via job boards, yet better than 80% of job seekers focus their efforts there, studies show." Translation: Employers do not care about you no matter how grand sounding the propaganda from their Human Resources Departments. Doesn't the term human resources say it all? You are a resource and that's just the way it is in the work world. Employers have to keep an eye on the bottom line if they are to survive and potential employees need to be prepared to let the employer know what value they will add to the company. In other words, you can't afford not to hire me and here's why.

Many people are unaccustomed to selling themselves but in order to find work today, you had better not be one of them. Every person is a business person but few know it. Each worker has a commodity to sell-his or her labor. The employer is a reseller of that commodity. He buys the labor at one price and hopefully resells it for a higher price. The employee, therefore, must know the value of the commodity and become a very good sales person in order to remain or become employed. Show the potential employer why hiring you will be profitable for him. Survival doesn't allow him to run his business based on how badly his employees need work. He must instead hire people who will be profitable for him.

My advice: Become a personal marketer and, by any means necessary, get out of debt.

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WHEN BANKS SAY NO
Posted by: Darrell Castle
February 01, 2010

According to an article in the business section of the New York Times, Sunday January 31, 2010, when small businesses and entrepreneurs lose their source of bank credit, they must go to unconventional lenders or close their doors. A great deal of employment in the U.S. is provided by small business and when financing for day to day operations is not there, many jobs are lost.

Often small businesses need what they refer to as purchase order financing. In the case described in the Times article mentioned above, a small business in New York had a solid order contract for one million dollars of business and needed a one million dollar loan to purchase that inventory. Today, most businesses are purchase order in that they purchase inventory in China or some other country, perhaps do some final assembly, and resell it for a profit. In the case presented, the business, by contract, would purchase one million dollars of inventory and resell it for one and a half million dollars. The business owner went to his old bank, Chase, which had always financed him before, but Chase said no and so did all the other large banks he approached.

Individuals face this same dilemma today. When denied credit to financially survive, what do they do? Often, individuals turn to unconventional sources such as pay day loans and title loans which provide short term financing usually at extremely high rates of interest. This type of financing is impractical for business but there are private lenders who specialize in short term, purchase order financing. The business owner borrows the money to make his purchase and repays it from his profit. If his can't miss product misses, he is stuck and so is the lender. I will add that all his employees are also stuck looking for jobs.

Contained in the new federal budget just out this morning, is a proposal for one hundred billion dollars to aid small business. I wonder what happened to the seven hundred billion dollars already pumped into banks to aid business lending. I wonder, but the Federal Reserve won't tell us because it's a secret. How presumptuous of us to question what happened to our money. Perhaps this time the banks actually will loan the money.

When individuals reach the point of needing pay day or title loans, it is quite often too late to financially recover. The high interest loan simply starts an unstoppable chain of events that leads inevitably to bankruptcy. It is usually better to deal with the problem instead of following the government example of search and avoid the problem. More trouble is on the way so get out of debt as quickly as possible.

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