More on “Professional” Credit Cards

John Ulzheimer, President of Credit.com, provides a few more details about the surge in credit card company mailings for “Professional Cards” that are exempt from new regulations imposed by the Card Act (see the previous post for some context).

I’m probably the exception to the rule here, but, it seems to me that unless you have an excellent excuse (e.g., medical bills or some other emergency), if you’re over the age of 30 or 35 and you’re paying credit card companies any money in interest or fees, you’re going about your finances all wrong and you deserve to be their debt serf.

Tagged with:  

The Economist reports on the rising rate of personal bankruptcy filings since sweeping new laws were enacted back in 2005, right around the time the housing bubble was fully inflated.

One could argue that this is yet another case of U.S. government policy “pulling demand forward”, that is, demand on the part of U.S. consumers to more easily wiggle out of debts that they owe. At The Economist they note, “The data suggest that an older trend is reasserting itself. This could be more bad news for America—or it could just mean that creative destruction is alive and well.” Bet on the former, not the latter.

Tagged with:  

It’s not clear whether overeating and obesity are the perfect allegory for a consumption based economy that has finally run aground (e.g., where are the rising and falling asset prices?), but Michael Pento nonetheless transforms many of today’s economic problems into something that anybody can understand in this commentary at Real Clear Markets.

A morbidly obese gentleman labored into Dr. Hayek’s office suffering from severe chest pain. The patient also complained that he was unable to consume his usual 10,000 calorie-per-day diet; in fact, he was feeling so sick that he could barely scarf down 9,000 calories. He noted that his love for food remained as strong as ever, but his body just wasn’t keeping up with his demands.

After having a thorough look at the patient, the good doctor could not find anything wrong outside of the patient’s extreme portliness. After a moment of reflection, he delivered to his patient a troubling diagnosis. He explained that the chest pain stemmed from the strain the patient’s 500lb body was putting on his heart, and that the lack of appetite was his body’s attempt to protect itself from this imbalance. Dr. Hayek’s prescription was simple: the patient had to dramatically reduce his consumption while undertaking a moderate exercise program, with the goal of losing 250lbs as quickly and safely as possible. Dr. Hayek was aware that it would be a physically painful and emotionally difficult process for the man, but it was the only way to avert a life of suffering – or even a heart attack.

Of course, it should come as no surprise that Dr. Keynes across the street has a completely different prescription for  this gentleman’s “temporary lack of hunger”. This is well worth reading in its entirety and its simplicity goes a long way in explaining why the American public now seems to favor the treatment of Dr. Hayek over Dr. Keynes.

More Furloughs and IOUs in California

The Sacramento Bee reports that California’s furlough program, a measure aimed at helping to shrink a state budget shortfall now estimated at $19 billion, survived its latest court challenge and, for the next few weeks or so, government offices will be quiet on Fridays.

State workers endured the latest tortuous turn in an off-again-on-again furlough saga that has left roughly 144,000 of them uncertain from week to week of their work schedules.

But the California Supreme Court’s decision Wednesday to side with Gov. Arnold Schwarzenegger and allow furloughs to start again Friday should be the last twist – at least until next month.

“The result of the California Supreme Court ruling today means that the furloughs will continue until the court says otherwise,” Schwarzenegger spokesman Aaron McLear said, adding that furloughs also will stop if the state budget is approved.

Otherwise, he said, “furloughs will continue as planned Friday the 20th, the 27th, and one additional floating furlough between now and the end of the month.”

Schwarzenegger ended a similar policy in June, but with state lawmakers at an impasse over how to close a $19 billion budget deficit, the Republican governor issued an executive order July 28 restarting the policy as a way to save $136.7 million per month in payroll costs, about $75.5 million for the general fund.

In related news, State Controller John Chiang said that the government will begin issuing IOUs in two to four weeks unless the legislature approves a budget. The state previously issued IOUs in 1983, 1992, and 2009, the back-to-back issuance this year further evidence that the state is nearly impossible to govern during recessions.

Tagged with:  

The Uber-Keynesians at Pimco

It’s not too hard to understand why, if you happen to run the biggest bond fund on the planet and you find yourself in the middle of the biggest bond bubble the world has ever seen, you’d do whatever you could to keep bond prices from falling for as long as possible.

That’s why it shouldn’t have come as too big of a surprise yesterday at the Treasury Department’s Conference on the Future of Housing Finance to hear Pimco chief Bill Gross say that, not only should the nation’s mortgage market be nationalized (formalizing what everyone already understands to be true about U.S. mortgage debt – that the U.S. government is on the hook for a large portion of it), but that it might give the economy a little boost if billions more in taxpayer money were to be used to refinance all mortgages across this great land into low rate government loans.

While Bill was in Washington, Pimco’s Managing Director Paul McCulley was busy putting the finishing touches on his monthly commentary back in tony Newport Beach in which he argues that the central bank should take the governor off their printing press and let ‘er rip.

* When the economy suffers from Post Bubble Disorder, characterized by private sector deleveraging and a fat-tail risk of deflation, conventional monetary policy is not enough.

* In such circumstances, the central bank has a profound duty to act unconventionally, ballooning its balance sheet by monetizing assets, either government or private, or both.

* The central bank has a profound duty to meld itself with the fiscal authority, until the fat risk of deflation is eliminated.

There you have it. The unholy melding of mortgage finance, the central bank’s printing press, and the big spenders up on Capitol Hill in order to ward off deflation in a post-bubble world, all of which should keep the bond bubble fully inflated for some time.

(more…)

No Boom, Just Gloom and Doom for Bonds

Marc Faber, purveyor of the Gloom, Boom, and Doom Report, thinks that just two of those three characteristics will apply to long-dated U.S. government debt in the period ahead.

Not surprisingly, Faber thinks precious metals are a good place to put your money and he’s bullish on India stocks but not for Chinese shares. On China’s gold problem (i.e., wanting to buy more without driving the price substantially higher), Faber notes the following:

They have the intention to accumulate gold and silver, but, because the Reserve Bank of India bought gold at $1,050, it would be a loss of face to pay more for gold than the Indians paid. So, I think they kind of missed the bull market because they want to increase their gold holdings, but they just don’t know about or aren’t sure about the timing.

Tagged with:  
Page 1 of 131234510...Last »

IMAGE

© 2010 The Mess That Greenspan Made