I Owe, I Owe, It's Off To...
By Number Six
Tuesday, December 06, 2005 at 04:07 AM
Our dear co-conspirator and sister progressive Mixter delivered a killer piece on the recent rise in credit card pieces at her blog.......Of course she's steaming mad pissed. She's far from alone in this, mulitply this mess by a few million, and well, we got some anger afloat.
This doesn't come as a shocker. The credit card goons have been facing their own set of financial problems for some time now. Oh, and what problems, pray tell?
Easy at that one: As more jobs float out the door, as unemployment slides ever upwards, and as firms like Exxon-Mobil, BP-Amoco and others gouge, well, seems those with credit cards are finding it a living bitch to make the payments.
Despite the rants of the smug and inspid neocons and their BS stance, it's a known fact that it doesn't take all that much to burst a financial bubble these days: Medical crisis, job loss, divorce, death, cancer, clinical depression, the list goes ever on.
So, the CC firms went bawling to the government. The "first" step to fixing the problem (sounds of maniacal laughter go here) was to "repair" the bankruptcy laws, by basically eliminating the infamous Chapter 7 filing. 7 was total wipeout, and now, new law in place, it's more, well, you file, and you're going to be making payments past your own expiration date.
Chapter 13 means you're stuck with making some sort of payment plan, like or fuck it. This, of course, many ask, "This is an improvement????"
No, of course not, it's another, ahem, act of desperation.
Now, the next step is in place. Between the grumbling and bumbling Fed, and the OCC, CC firms are now raising their required minimum monthlies to...quoting one "credit repair"'s page full of BS.. "encourage consumers to pay off their debts faster and..."
Is it? No, it's like communism, supply-side economics and Velikovski: More stuff that looks great to the marijuana-inhaling marketing types, but blows up the instant we apply ignition.
Say your monthly on your VISA was already $45 a month. Suddenly, it slides up to $75 a month. It was tough enough payint the old rate, now, please explain to me where the additional money is supposed to come from?
No, the result will not be happy consumers paying off their cards earlier. The result will not really please the CC firms either, as they make more money by you paying off the thing as slowly as possible!
So, what's going on here?
This is the part where we have to pull back the focus array a few clicks to the wider-angle setting: This and other things are all but symptoms of a bigger, meaner, nastier and far more horrifying danger just sitting out on the tarmac, just now lighting fans 2 and 3....
And, too, this also corresponds with Lee's stuff to date on...yeppers....and I am going to so name that monster awaiting takeoff:
The Second Great Depression.
Don't look at me like that. I am correct, you're the one smoking reefer.
The First Great Depression had a myriad of causes, some of which are being replayed right in front of us as I pen this:
-"Easy credit". Many economists who have studied the 1920's to the end of WW2 list this as a prime cause.
-Wealth misbalance. As now, as then, 90 percent of the wealth is in just under 10 percent of the populace's hands.
-Wealth "rises" are misbalanced. Workers ability to buy stuff (purchasing power) is not in line with the same as with management or stockholders. GNP is offset badly. Ever-widening gap between wealthy and the middle and poor classes.
-Administration financial policies favor the rich and the corporations. Similar policies are mirrored hard between those of Das Chimpenfuerher and yes, Calvy Coolidge!
-Foreign lending. Oh, we missed that one? Yes, despite our own needs, we still hand a lot of loot over to "developing nations". Same then, same now.
-Deficit spending. You do not need a PhD in economics to perceive this as, well, sort of as the plutonium sphere of this bomb. As jobs float elsewhere, the tax base falls and where do we get the cash to run Uncle Sammie? Why, we go and borrow from Saudi Arabia, China,...
Compiled from various sources on the Great Depression, we get a big bad clue as to what's just ahead, and I am now quoting Paul Gusmorino III:
This speculation and the resulting stock market crashes acted as a trigger to the already unstable U.S. economy. Due to the maldistribution of wealth, the economy of the 1920's was one very much dependent upon confidence. The market crashes undermined this confidence. The rich stopped spending on luxury items, and slowed investments. The middle-class and poor stopped buying things with installment credit for fear of loosing their jobs, and not being able to pay the interest. As a result industrial production fell by more than 9% between the market crashes in October and December 1929. As a result jobs were lost, and soon people starting defaulting on their interest payment. Radios and cars bought with installment credit had to be returned. All of the sudden warehouses were piling up with inventory. The thriving industries that had been connected with the automobile and radio industries started falling apart. Without a car people did not need fuel or tires; without a radio people had less need for electricity. On the international scene, the rich had practically stopped lending money to foreign countries. With such tremendous profits to be made in the stock market nobody wanted to make low interest loans. To protect the nation's businesses the U.S. imposed higher trade barriers (Hawley-Smoot Tariff of 1930). Foreigners stopped buying American products. More jobs were lost, more stores were closed, more banks went under, and more factories closed. Unemployment grew to five million in 1930, and up to thirteen million in 1932. The country spiraled quickly into catastrophe. The Great Depression had begun.
Anybody want a bourbon-n-coke about now?
Guess what! We're all broke!
Anyone who's bothered to study, or pick up on such "klews" (Einstein's spelling), had, as I have, learned, we consumers are not alone in living hand-to-mouth. Not by a light year.
Companies, too, in fact, too many of them, are not as solvent as they want us to think they are.
Ideally, you always want to have a good cashflow, plenty of stock, workers and all the bills paid by the 1st. It don't work that way, and hasn't worked that way for decades now, and yes, another trigger is in place, and yes, thanks to our own Coolidge...Ronnie Raygun.
If we look, for example, at any failed business these days, we seen a huge bug: They never had any real assets worth mentioning. Meaning? They borrowed, borrowed and borrowed to keep operating, and those criminal firms such as Enron...well, they went past that and into plain theft...to keep the doors open, yes, but to put on the stockholders!
It's all about confidence, when, as a police officer often does, take off the "fidence" part and you have con. Ergo, you'd practically poop at how many companies these days are in debt themselves. The goal? To pretend otherwise.
Meaning? It's a dog-n-pony show. Pick up any copy of WSJ, read the stock prices, and many of those numbers are based entirely on hype. Very, very, very, very, very fucking few of these firms have any real or tangible value to them: It's all hype.
Oh, yes, and the trap is as simple for a firm to slide into as it is for a consumer, in fact, easier, because little things like "LLC" or "INC" after your name make it much easier to con a bank into lending you money. (Ask any accountant or tax consultant this!)
Few remember the Chrysler headache when Lee Iacocca took the helm: They were as broke, thus, why they needed "loan guarantees" from Uncle Sammie. Even now, as I pen this, GM, oh, yes, even General Motors wants the same themselves!
(Okay, according to a news piece, they just don't want it called that.)
Then, if we could, we could open up the books on Delta, USAirways, and many others. Guess what we'd see? Unpaid notes to banks, lending firms, that's what.
Problem is, this "klew" hasn't apparently made it to the MSM, and for good reason: If you don't look that good, your stock won't sell, and let's face it, these days, your stock price is your "real" worth!
Few bother to do this kind of research; I stumbled into this "firms that live paycheck-to-paycheck" modus by sheer accident: A firm I used to work for years ago finally succumbed to Chapter 11, and we learned, as we departed to other jobs, the policies developed during the Raygun Regime allowed them to borrow, borrow and borrow until declining sales, pension payments, and everything else....put them to the curb.
It's still going on, too. One firm I know of is family "owned", and they run a small chain of those "Payday loan" places. Where do they get the cash to hand out? The bank. Not from stockholders, or other investors, nope, just a bank.
Multiply this by every company in this nation, but take away a very small percentage for those very few firms that really do manage their budget, and do manage to "put away for a rainy day". Guess what we're looking at now?
Oh, yes, now you can take that drink:
-Increased credit card payments, along with more supply-side goofballing causes more and more to default on their credit cards.
-Banks, lending firms and others that hold these "notes" record losses in the billions.
Sure, many of them will write it all off, sell your loan to a collection agency, who will deposit a nice nastygram to TRW about you, and pester you to death with phone calls for about a year.
But, if this is big as I think it really is, such losses will pile up faster than anyone wants, causing many of these firms to file Chapter 11. The end result?
Read again Paul's piece. Read the whole thing. See if you see the same conclusion I've come to:
The 2nd Great Depression is now at the hold-short mark, and any day now, yes, I am fully convinced of it, the beginning of the end is here.
But, in all that doom and gloom, I see a new dawn just past: As it was back in the 1930's, sufficient voter anger will toss out the whole of Congress, and yes, Republicrids and DINO's alike, and yes, another New Deal will take place. We won't have a choice but to. Supply-side policies, coupled with easy credit, poor finances, companies running on "wishing" no longer work, and once the "hype" bubble explodes, the truth will become all too evident.