Latest baseball scores, trades, talk, ideas, opinions, and standings

Archive for the ‘interest’ Category

>How Bernanke FAiled America and Will Continue To Get It Wrong

>

Ben Bernanke’s Rude Awakening
From:
Uncommon Wisdom   

Add to Contacts

To: dusanotes@yahoo.com

Facebook   Twitter  
Find us on Facebook Follow us on Twitter
 
This is a critical trend. Don’t miss it. — Larry
Uncommon Wisdom
Weekend Edition | Sunday, December 12, 2010
Ben Bernanke‘s
Rude Awakening 

by Martin D. Weiss, Ph.D.
Dear Don,
Martin D. Weiss, Ph.D.

We’ve just posted a brand new presentation with ourforecasts for 2011. With interest rates suddenly surging, the timing couldn’t be better.
Look: Fed Chief Ben Bernanke thought HE had the power to manipulate interest rates. So when he announced he was creating another $600 billion dollars out of thin air and using them to buy Treasuries bonds, he assumed he would push bond prices up and force their yields down.
That was the entire goal of “quantitative easing #2.”
But something funny happened on the way to QE2: It turns out that the REAL masters of the Treasury and bond markets — investors — had only been letting Bernankethink he was the one in charge.
Ben Bernanke's rude awakening: In the end, investors control yields — NOT the Fed!
Ben Bernanke’s rude awakening: In the end, investors control yields — NOT the Fed!
Almost immediately after the Fed chief’s announcement, investors popped the bubble in bond prices that had been growing since late 2008.
It must have been a rude awakening for Bernanke: Instead of falling as he’d expected, bond yieldssuddenly began rising!
So far, in the three months since Bernanke revealed his newest dollar-printing scheme, 30-year Treasury bondshave lost 9 percent of their value; and the popular iShares Barclays 20+ Year Treasury Bond ETF has declined 15 percent in value.
Worse, because many of the interest rates we pay are tied to these yields, we’re now staring down the barrel of rising rates — like poison to an economy as troubled as ours is.
So why have the Treasury and bond markets confounded the Fed?
Simple: Investors are not dumb. They know that the Fed’s out-of-control money printing can only gut the value of every dollar they invest in U.S. bonds markets — and also every dollar they earn in yield.
Adding insult to injury, the Obama Administration and Congressional Republicans have cut a deal to make the budget deficit FAR bigger, requiring even MORE money printing by Mr. Bernanke.
THIS is the key reason the Treasury market is crashing and yields are surging. And it’s also why we’ve seen enormous volatility in the U.S. dollar and in gold over the past three months:
Gold has spiked three times in the last 90 days, taking us to a new all-time high of $1,432.50. And after each of those spikes, it has corrected sharply.
The same is true for the U.S. dollar: It plummeted 8.8 percent between early September and early November … recovered some of its losses before diving again in late November.
This is precisely what we’ve been warning you about for many months: EXTREME volatility in all the markets. An explosion of profit opportunities; and with them, greater short-term risk.
And this is also why we just posted our 8 Alarming Forecasts for 2011 online:
At a time like this — with volatility rising — 
everything depends on getting 
the answers to these critical questions RIGHT:
  • Stocks are within a few points of setting new highs for the year: Can this rally continue? Or is it destined to suddenly reverse? Which sectors are in greatest danger now? Which seem to be the safest and most promising for 2011 and beyond?
  • Treasury yields continue to rise: Is this just a fluke? Or is it the beginning of what could be the most serious bond market catastrophe in decades?
  • The U.S. dollar is scraping bottom, flirting with its LOWEST levels of the year: Is this the beginning of the greatest dollar disaster America has ever seen? Or is it merely another blip in the market? (Hint: China holds the key!)
  • Gold is on a tear again, hitting one new all-time high after another: Will this bull market last? Or is gold overbought and overdue for a correction? How high will the yellow metal ultimately climb? When should prudent investors double down on gold bullion and mining shares? When should they take their profits and run?
  • Food prices are on a rampage: Will agricultural commodities continue to skyrocket in 2011? If so, which ones?
  • Oil prices continue to edge higher: Will we see new all-time highs in black gold in the year ahead? Or will economic woes in Europe and the U.S. send oil prices careening lower?
  • Economies and stock markets in China and other emerging markets are still exploding: Is now the time to buy emerging market stocks and ETFs? Or are these countries overdue for corrections that create major buying opportunities for you in 2011? Which ones are likely to perform the best?
In the year ahead, each of these forecasts — and the investment recommendations that come with them — could make you a bundle if you heed them … or cost you a bundle if you don’t.
8 Alarming Forecasts for 2011 has answers you need to protect and grow your wealth in the year ahead. It is online now.
Click this link and it will begin playing immediately.
Good luck and God bless!
Martin
Advertisements

>Consumers Face Off Against Credit Card Companies

>http://googleads.g.doubleclick.net/pagead/ads?client=ca-nytimes_display_block&dt=1242750980014&hints=Credit%2Band%2BMoney%2BCards%2CLaw%2Band%2BLegislation%2CFines%2B%28Penalties%29%2CInterest%2BRates&adsafe=high&oe=utf8&lmt=1242750977&alternate_ad_url=http%3A%2F%2Fwww.nytimes.com%2Fads%2Fremnant%2Fnetworkredirect-leaderboard.html&targeting=site&format=728x90_pas_abgc&output=html&correlator=1242750980014&channel=leaderboard&url=http%3A%2F%2Fwww.nytimes.com%2F2009%2F05%2F19%2Fbusiness%2F19credit.html%3Fth%26emc%3Dth&ad_type=image,flash&ref=http%3A%2F%2Fus.mc513.mail.yahoo.com%2Fmc%2Fwelcome%3F.gx%3D1%26.rand%3D4hqd9leg0ajhi&frm=0&ga_vid=1641157978.1240861030&ga_sid=1242750980&ga_hid=176554767&ga_fc=true&flash=10.0.22&w=728&h=90&u_h=768&u_w=1024&u_ah=768&u_aw=1024&u_cd=32&u_tz=-240&u_his=1&u_java=true&u_nplug=14&u_nmime=61&dtd=35&w=728&h=90&xpc=wsSYcCWdEF&p=http%3A//www.nytimes.com

Credit Card Industry Aims to Profit From Sterling Payers

unction getSharePasskey() { return ‘ex=1400472000&en=f07477a960500ace&ei=5124’;} function getShareURL() { return encodeURIComponent(‘http://www.nytimes.com/2009/05/19/business/19credit.html’);}function getShareHeadline() { return encodeURIComponent(‘Credit Card Industry Aims to Profit From Sterling Payers’);}function getShareDescription() { return encodeURIComponent(‘With Congress on the verge of limiting penalties on delinquent borrowers, credit card companies are expected to turn to their best customers to make up the difference.’);}function getShareKeywords() { return encodeURIComponent(‘Credit and Money Cards,Fines (Penalties),Law and Legislation,Interest Rates,Credit’);}function getShareSection() { return encodeURIComponent(‘business’);}function getShareSectionDisplay() { return encodeURIComponent(‘Business’);}function getShareSubSection() { return encodeURIComponent(”);}function getShareByline() { return encodeURIComponent(‘By ANDREW MARTIN’);}function getSharePubdate() { return encodeURIComponent(‘May 19, 2009’);}

Published: May 18, 2009

Credit cards have long been a very good deal for people who pay their bills on time and in full. Even as card companies imposed punitive fees and penalties on those late with their payments, the best customers racked up cash-back rewards, frequent-flier miles and other perks in recent years.

Skip to next paragraph

Related

Credit Card Wars: A Penalty for Thrift?

Room for DebateShould responsible card users be penalized for paying off their monthly balance?

Join the Discussion »

Now Congress is moving to limit the penalties on riskier borrowers, who have become a prime source of billions of dollars in fee revenue for the industry. And to make up for lost income, the card companies are going after those people with sterling credit.
Banks are expected to look at reviving annual fees, curtailing cash-back and other rewards programs and charging interest immediately on a purchase instead of allowing a grace period of weeks, according to bank officials and trade groups.
“It will be a different business,” said Edward L. Yingling, the chief executive of the American Bankers Association, which has been lobbying Congress for more lenient legislation on behalf of the nation’s biggest banks. “Those that manage their credit well will in some degree subsidize those that have credit problems.”
As they thin their ranks of risky cardholders to deal with an economic downturn, major banks including American Express, Citigroup, Bank of America and a long list of others have already begun to raise interest rates, and some have set their sights on consumers who pay their bills on time. The legislation scheduled for a Senate vote on Tuesday does not cap interest rates, so banks can continue to lift them, albeit at a slower pace and with greater disclosure.
“There will be one-size-fits-all pricing, and as a result, you’ll see the industry will be more egalitarian in terms of its revenue base,” said David Robertson, publisher of the Nilson Report, which tracks the credit card business.
People who routinely pay off their credit card balances have been enjoying the equivalent of a free ride, he said, because many have not had to pay an annual fee even as they collect points for air travel and other perks.
“Despite all the terrible things that have been said, you’re making out like a bandit,” he said. “That’s a third of credit card customers, 50 million people who have gotten a great deal.”
Robert Hammer, an industry consultant, said the legislation might have the broad effect of encouraging card issuers to become ever more reliant on fees from marginal customers as well as creditworthy cardholders — “deadbeats” in industry parlance, because they generate scant fee revenue.
“They aren’t charities. They have shareholders to report to,” he said, referring to banks and credit card companies. “Whatever is left in the model to work from, they will start to maneuver.”
Banks used to give credit cards only to the best consumers and charge them a flat interest rate of about 20 percent and an annual fee. But with the relaxing of usury laws in some states, and the ready availability of credit scores in the late 1980s, banks began offering cards with a variety of different interest rates and fees, tying the pricing to the credit risk of the cardholder.
That helped push interest rates down for many consumers, but they soared for riskier cardholders, who became a significant source of revenue for the industry. The recent economic downturn challenged that formula, and banks started dumping the riskiest customers and lowering their credit limits in earnest as the recession accelerated. Now, consumers who pay their bills off every month are issuing a rising chorus of complaints about shortened grace periods, new hidden fees and higher interest rates.
The industry says that the proposals will force banks to issue fewer credit cards at greater cost to the current cardholders.
Citigroup and Capital One referred comments to the A.B.A. Discover and American Express declined to comment. Bank of America intends to “provide credit to the largest number of creditworthy customers possible, while also remaining prudent in our lending practices,” said Betty Riess, a spokeswoman. Together with JPMorgan Chase, which has said the changes will force it to limit credit availability and raise fees, these banks account for 80 percent of the credit card industry.
Banks are not required to publicly reveal how much money they make from penalty interest rates and fees, though government officials and industry consultants estimate they constitute a growing portion of revenue.
For instance, Mr. Hammer said the amount of money generated by penalty fees like late charges and exceeding credit limits had increased by about $1 billion annually in recent years, and should top $20 billion this year.
Regulations passed by the Federal Reserve in December to curb unexpected interest charges would cost issuers about $12 billion a year in lost fees and income, according to industry calculations. The legislation before Congress would build on the Fed rules and would further squeeze banks’ revenue when they are being hit with a high rate of credit card charge-offs. The government’s stress tests showed that the nation’s 19 biggest banks will take on $82 billion in credit card losses in the next two years.
A 2005 report by the Government Accountability Office estimated that 70 percent of card issuers’ revenue came from interest charges, and the portion from penalty rates appeared to be growing. The remainder came from fees on cardholders as well as retailers for processing transactions. Many retailers are angry at the high fees and plan to pass them on to shoppers once the Congressional legislation takes effect.
Consumer advocates say they have little sympathy for credit card issuers, arguing that they have made billions in recent years with unfair and sometimes deceptive practices.
“The business model will change because the business model doesn’t work for the public,” said Gail Hillebrand, a senior lawyer at Consumers Union.
“In order to do business under the new rules, they’ll actually have to tell you how much it’s going to cost,” she said.
With many consumers mired in debt and angry at what they consider gouging by credit card companies, the issue of credit card reform has broad populist appeal. Members of Congress and the Obama administration have seized on the discontent to push reforms that the industry succeeded in tamping down when the economy was flying high.
Austan Goolsbee, an economic adviser to President Obama, said that while the credit card industry had the right to make a reasonable profit as long as its contracts were in plain language and rule-breakers were held accountable, its current practices were akin to “a series of carjackings.”
“The card industry is giving the argument that if you didn’t want to be carjacked, why weren’t you locking your doors or taking a different road?” Mr. Goolsbee said.

Ron Lieber contributed reporting.
var gaJsHost = ((“https:” == document.location.protocol) ? “https://ssl.” : “http://www.”);document.write(unescape(“%3Cscript src='” + gaJsHost + “google-analytics.com/ga.js’ type=’text/javascript’%3E%3C/script%3E”));
try {var pageTracker = _gat._getTracker(“UA-8927058-1”);pageTracker._trackPageview();} catch(err) {}

>The Real Cost of the $819 Billion Bailout

>One of the ways rich people discriminate against the poor is in charging exorbatant interest rates. Try 42 percent, for example.

But that’s against the law, you protest. What about laws on the books prohibiting gouging or usury? You’re right, consumers are not supposed to pay rates in many jurisdictions higher than 18 percent.

The word usury means the charging of unreasonable or relatively high rates of interest. As such, the term is largely derived from Abrahamic religious principles; Riba is the corresponding Islamic term. The primary focus in this article is on the Christian tradition. The pivotal change in the English-speaking world seems to have come with the permission to charge interest on lent money: particularly the Act ‘In restraint of usury’ of Henry VIII in England in 1545. Every state has usury laws on the books.

But we’re talking about government usury. Not ours, but probably China’s. A country like the USA borrows all its money and then pays back at an effective rate of about 42 percent. Sounds awful, doesn’t it. It is!

How could we have gotten ourselves into this bind — having to pay the communists almost half of our bailout money? We’re dumb, and they’re smart. They also have savings accounts, while most Americans use a credit or debit card and spend every last dollar coming in.

When the wall came down in East Germany we thought we had won the cold war. We did. But now we’re losing it, and it’s an economic war not a political war. The more we bail out companies, banks, and governments the smaller our U.S. dollar becomes — and the less it buys at the grocery store. American people are becoming poorer, not better off because of these bailouts and many Americans are convinced the bailout stimulus package is not a good idea at all. In essence, America is becoming a socialist country and with each passing day and an increasly larger planned economy and less capitalism, we are resembling Communist China — at least socialist Germany.

Taxpayers will pay much more for the fiscal stimulus than previously revealed – over $1.17 trillion according to the Congressional Budget Office (CBO).

Most sources have assessed the cost of the stimulus package at approximately $825 billion. But the CBO reports those estimates do not include the cost of the money that must be borrowed to pay for the plan. [Editor’s Note: To view the CBO letter reporting on the total cost of the stimulus plan, go here now.]

Rep. Paul Ryan, R-Wisc., asked the CBO – the research arm of Congress – to calculate the “money cost” of borrowing the funds needed to fulfill the stimulus projects being sought by congressional Democrats and President Obama. Like every other borrower, the government must pay back borrowed principal plus the interest on its debt.

The CBO responded with a Jan. 27 letter from CBO Director Douglas W. Elmendorf estimating the cost of borrowing the money would be $347.1 billion – or about 42 percent of the cost of the projects. That would push the total cost of the stimulus package to over $1.17 trillion.