american economy Date Line August 17, 2007
Yesterday’s blog is an example of what happens when you gloat too soon – the Fed or someone else, will make a move to make the gloat look wrong.
The Fed is underwriting the stupidity of the Bush Administration, and the dishonesty in the lending markets.
Check credit card offers. My son just got a neat one, $59 to get $500 in credit with a 9.9 percent rate. Ripoff! ... Can you say Ripoff? Average debitor would hold balance of $250 over course of year; the cost, with interest of $25 +/- plus $59 fee, would be $84 per year; or 33+/- percent.
Subtract cost from the borrowed funds to get real loan value, and they expect people to pay $84 to borrow $166. STUPID! But you know there are thousands of people who will rush to sign-up.
They will max out the card and so pay only 22 percent interest; or they will pay $109 to borrow $301 they don’t otherwise have. Having maxed out their credit line, they will then pay another $109 on the same money; and another; and another.
After four years, the original amount borrowed has been paid in fees. When the debitor fails to pay, or is late with a payment, they will pay another $35, or more.
Why is the sub-prime market failing? Why is the market doomed to collapse? Why will I eventually gloat ... and gloat again when the Dow hits 9,000?
The answer is basic: Because there is no control on the credit markets and because America as a nation is playing the same credit game its citizens are playing. America is borrowing, the debit from citizens is being sold on the world market, and the world market is lending Bush the money to cover his deficits.
Doom ... Doom ... all is economic doom. Where are the candidates? What are their positions on our deficit survival and the waste of funds making enemies in the Middle East? Have fun, political momentum favors my economic viewpoint.
______________________________________________________ The Fed is underwriting the stupidity of the Bush Administration, and the dishonesty in the lending markets.
Check credit card offers. My son just got a neat one, $59 to get $500 in credit with a 9.9 percent rate. Ripoff! ... Can you say Ripoff? Average debitor would hold balance of $250 over course of year; the cost, with interest of $25 +/- plus $59 fee, would be $84 per year; or 33+/- percent.
Subtract cost from the borrowed funds to get real loan value, and they expect people to pay $84 to borrow $166. STUPID! But you know there are thousands of people who will rush to sign-up.
They will max out the card and so pay only 22 percent interest; or they will pay $109 to borrow $301 they don’t otherwise have. Having maxed out their credit line, they will then pay another $109 on the same money; and another; and another.
After four years, the original amount borrowed has been paid in fees. When the debitor fails to pay, or is late with a payment, they will pay another $35, or more.
Why is the sub-prime market failing? Why is the market doomed to collapse? Why will I eventually gloat ... and gloat again when the Dow hits 9,000?
The answer is basic: Because there is no control on the credit markets and because America as a nation is playing the same credit game its citizens are playing. America is borrowing, the debit from citizens is being sold on the world market, and the world market is lending Bush the money to cover his deficits.
Doom ... Doom ... all is economic doom. Where are the candidates? What are their positions on our deficit survival and the waste of funds making enemies in the Middle East? Have fun, political momentum favors my economic viewpoint.
