Recovery. I do not think that word means what you think it means.

i did not get and i agree a "jobless" recovery makes about as much sense as a "connsummerless"
recovery

Recovery. I do not think that word means what you think it means.

Rob Dawg,

Help me out here. Where is Afghanistan again?

YouTube - Strategy Concern for the War in Afghanistan

outsider
they can make it happen

Or, put differently, can someone identify what a jobless recovery might look like?

They cannot make it happen - they can feed the tumor of the financial economy and declare a 'recovery' - but the real economy will determine the fate of the country in the end...as it always has.

On the last thread, there was a great read on the Chinese hoarding of commodities. Farmers killing their pigs so they can store tons and tons of copper and aluminum, all with borrowed gov't coin. This will end well.

alchemist move over- Bernanke and Co. don't need you guys anymore. Grow and economy while putting more people out of work. Lead to gold anybody?

dr munch wrote:

This will end well.

If you work in a copper mine, the Chinese borrowing money to pay your salary is already working out pretty well, while it lasts.

Lead to gold anybody?

crazyv,

How about trash to cash. That seems like more of a miracle than lead to gold, no?

we, the multi national corporations of america, the true citizens and owners of america

dont need no stinkin merican workers

we got undocument immigrants who will work at our beck and call , without expectations of benefits or minimum wages

and illegals will be hired back first before you , if we should need workers anytime soon

screw your workers rights

we can import anything into this country tariff free

and we will drain you of what ever purchasing power your meager savings and investments may yet hold

until you are reduced to begging pleading children

desperate for work and accepting of our terms

as you were 75 and 100 years ago

and if mexican or chinese or indian labor gets uppity

we we are on the verge of a robotic work force

so screw all of you

and its too late for you to do anything about it

you cant organize

we read your emails, open letters and sneek-and-peek search your homes without your knowledge

to protect you from terrists

so f all you merican workers

and that includes the upper ranks of the middle class...we are coming for your jobs next

sincerely...the management

Hey, let's not be hasty. This time has been different in so many ways maybe we can recover on the back of one time charge led quarterly earning claims of profitability. Faced with a financial meltdown we've manned up and successfully reformed our banking and credit systems, gotten our fiscal houses in order; personal, municipal, State and Federal. Not only won't we repeat past mistakes we've made sure that even new problems won't arise by virtue of vastly expanded regulator powers. I mean it isn't like we haven't reformed all that was wrong in 2006 so who's to say this time won't be different?

It seems we have a lot of superfluous persons in the American economy, for whom there are no jobs and there will never be jobs?

This is not you grandfather's recession, and this is not going to be your grandfather's recovery. Instead, it is going to be a precisely targeted recovery, a surgical recovery, with the precious few recovering at the expense of expendable others

crazyv
i do try to stay away from them.

The economy seems to have a lot of headwinds: unemployment, contracting consumer credit, and the reversal of all the government stimulus (including everything from the home-buying credit to quantitative easing), and likely higher credit costs throughout the economy (government, corporate, and consumer). In this context, it's difficult for me to understand why so many rule out a "double dip" recession. It seems to me that to avoid a contraction in the midst of all these headwinds, you'd need the underlying economy (excluding the government) to be doing a "V" just to keep growth positive through 2010.

I think everybody should take a pledge to vote for a candidate not associated with one of the two major parties or endorsed by any major political figure. As to third party candidates being unqualified could they be any more unqualified than what is served up. In a single stroke We the People will be able to destroy all the special interests.

actually these guys are way behind the times. In India they have been coating food with very thin silver foil for thousands of years- and those who could afford it gold.

Anyone here read Player Piano by Vonnegut? Less jobs are the future--first we'll return to "a women's job is in the home" then move on to earlier retirement--then return to the earth and ask BRIC for welfare.

mel
i sort of agree with you only the womans place is in the home" will become "one paycheck home" and i think that we can forget about roe and wade. we need all the population we can get.

i got gold delivered to my door.and 2 (two) century 21 ads, am i lucky or what?

Recovery. I do not think that word means what you think it means.

Exactly.

If the govt. isn't careful, people are going to think things like GDP are being manipulated and bear little relation to the actual health of the economy.

Cheers,
prat

yeah i know but we got to pay those bills.thats how it has always been ( shruggs)

I agree with comments earlier.... this is a massive structural readjustment. Since NAFTA (and earlier), we've believed in the myth of the 'post industrial' economy... in other words, nobody actually needs a job actually producing something.
Zenith sold their TV business to Taiwan, many other factories have been purchased (and moved) by China, etc. All we were supposed to be doing is working in the FIRE economy, flipping houses to each other, programming computers ... being information clerks, in other words.
Almost every idiot 'futurist' book of the last ten years has that same theme.
Ok not James Kunstler, and not the 'Raptured' crowd.... the mainstream knotheads.

As long as the government keeps funding food stamps and unemployment, things will keep grinding along.

If this starts to become hard to finance, and the government makes a 'one-time' grab on peoples' savings, then start to expect some fireworks.

I'm sure it won't be exactly like Argentina, but it seems that might be a reasonable pattern.

rob dawg
i think with all of the money that has been"made" out of this there will a new middle class. those making from 1m to 10m will become the new lower middle class,from 11m to100 the new middle middle class
and 101 m to 999m the new upper middle class. thats my new middle class.

i like it the recoveryless recovery. it has a good beat and you can dance to it. i give it a ten

what we have is the problem of the commons on a global scale. We have to consider whether we have flawed economic models on a global scale. 15 years ago at a conference in DC I made the observation that Free trade was a profoundly racist concepts. Most people didn't understand what I was getting at- which was simply the point that the advocates then were arguing (rIcardo) that we could export all the low paying jobs and move our work force to high paying jobs. My observation then was what makes you think that these 3rd world countries would be content with just the low paying jobs and they wouldn't have the capacity to come after the high paying jobs? Plus it ignore the reality that we as a percentage have just as many people with IQ's that don't permit them to move to high paying jobs. Low paying/ low skilled jobs are a vital part of the social safety net that can't be covered up with transfer payments.

Back to the problem of the commons- a lot of countries / companies have done the easy thing take advantage of arbitrage between the US cost structure and the lower cost structure of the less developed countries. In doing so they are in real danger of destroying the "common" i.e the developed economies.

I nominate: Potemkin Recovery

Think about it. It works on many levels.

Another adjustment will be extended family domiciles. Prepare for mom, dad, and your grown children to be under your roof. Divorce rates will fall--not because of marital bliss--because one spouse will "walk away."

the biggest adjustment i see is that people will find out that they are not entitled to anything! not one thing.

mock turtle- I fully agree with you that there are a few truth tellers but unfortunately truth is in the eyes of the beholder. I happen to like my Senator but once you go down that road you are back in the two party trap. If we took the pledge hopefully the truth tellers would decide to get out of the established parties. Lets face it for years we thought that the two party system gave us stability that the more disorganized parliamentary systems didn't have. But as with anything over time your strength becomes your weakness. We will never recapture the democracy unless we break the two party system. Multiple parties rotating in and out of Congress will make it much harder for the special interests to identify and buy the key decision makers.

Instead of having the word Jobless or Job Loss in quotes shouldn't we be putting the word recovery in quotes instead.

-Vert

Population density per continent: Asia > Europe > South America > North America > Africa > Australia > Antartica
If we embark on a less free trade world, we'll have less field for financial virtual wealth, and prosperity will be more tied to manufacturing production. So we'll see populations depend more on their national natural endowments. It's coastal south and east Asia, and Europe that face the biggest adjustments in expectations of future prosperity

Not Irving Fisher wrote:

Has anyone read Mish's post on Citi? Now I understand why they raised my card rate to 29.99%

I have a different interpretation than Mish. I agree Citi is in trouble. However, I think Citi's problem is rolling the financing it uses to lend money to cardholders. If Citi was very concerned about its own access to short term credit, they would start cutting off (or running off) people who might increase their borrowings.

A few years ago, it was easy to use credit card receivables for asset backed commercial paper. Now, especially for Citi, I have a feeling it's much harder.

If my guess is right, Citi will be looking everywhere for lines and letters of credit it can shut down. Funny thing is, this seems stupid to me. It seems that large numbers of accounts could be sold instead of shut down. If I'm right, the performing credit card accounts could simply have been sold to another finance company.

Anyone with a different opinion? Feel free to tell me why you think I'm wrong.

readjustment?

long road to recovery?

mis-allocation of capital?

ha ha ha

get it straight

between cheap labor and robotics...we...dont...need...you...any...more.... period.

this is the last economic downturn 49% of you, or there about, will ever know

because many of you are not coming back up

we have calculated that the small majority , say, 51 percent

is all we need to employ and placate for now to solidify our strangle hold

they wont speak up for the 49% out of fear for their own necks

of course we will divide and conquer the 51% in the future depending upon our needs

they and their children will lick our boots for the privilege of working for the corporation

which will control thru patents and licenses everything you need to survive independent of us

from land to seeds to water

btw this whole internet blog thing is becoming a problem for us

you will be regulated soon

Rajesh wrote:

longwaver wrote:
more debt isn't the answer to too much debt
Total debt is falling. Private debt is falling faster than government debt is rising. The government is just slowing (temporarily) the pace that debt falls. Debt will keep falling until income stabilizes and the debt to income ratio becomes 20% below the historical average. This is called 'deflation'.

Debt is coming down? You've got to be kidding me.

Medicare is exploding.. Pensions are ramping up across the country. Social security is empty and ramping up benefits while tax income falls off a cliff. Tax receipts are WAY down for every local, state and the federal government. Borrowed $1.4T in the last 12 months just to break even?!?! And what's on the agenda.. Cap & Trade & Universal health care with a VAT to "pay for it"...

Reminds me of a "Faces of Death" video.

Mel wrote:

Divorce rates will fall--not because of marital bliss--because one spouse will "walk away."

It will be interesting to see how it goes. It is usually illegal to remarry while still legally married, but prosecution of such acts is almost non-existent in my jurisdiction. However, some groups of people--and usually most women--heavily frown upon marrying people who are still legally bound to their spouse. They are looked upon with shades of doubt and uncertainty.
.
In smaller, more conservative areas, you may see a decrease of divorce, and in larger, more urban areas, you may see an increase in live-in partners who are not married. What may make things interesting are states with common law marriage which makes walking away from those live-in partners more dicey.
.
The "family" has been self-destructing and redefining itself for half a century or more, and this increase in economic disparity may only complicated it more and lead to more redefinitions of what it means to be "married". IMHO, it should return to the historical norms of raising children and estate planning, but romantics don't like to think about it that way.

Mr Slippery (profile) wrote on Sun, 10/25/2009 - 11:12 am

Economists are puzzled, hoocoodanode? Maybe their neo-classical models are wrong?

Economists are going to get more and more puzzled, because people in the aggregate tend to behave in predictable terms of economic rationality only in conditions of plenty and high confidence in the future. Take away those assumptions and you'll see a lot of irrational "primitive" behavior, both good (herding, social support, sense of community) and bad (violence, domestic abuse, and criminal behavior).

Jobless Recoveries Need Soma!

"All the advantages of Christianity and alcohol; none of their defects."

Soma in Aldous Huxley's Brave New World (1932)

some investor guy wrote:

A few years ago, it was easy to use credit card receivables for asset backed commercial paper. Now, especially for Citi, I have a feeling it's much harder.

FR FAQ:

Over what time period will the SPV operate?
The SPV began purchasing commercial paper on October 27, 2008, and will cease purchasing commercial paper on February 1, 2010, unless the Board of Governors of the Federal Reserve System extends the CPFF. The New York Fed will continue to fund the SPV after such date until the SPV’s underlying assets mature.

That, the CARD act, the FASB 166, 167. Also getting it done before the seasonal bump in personal bankruptcies. Would help to have a bright spot like declining CC delinquency rates when recognizing a jump in mortgage writedowns.

Divorce rates will fall--not because of marital bliss--because one spouse will "walk away."

I know of a young family getting divorced. For now they are just using separate bedrooms. Can't afford to have one of them move out and figuring this is the best thing for the kids.

Investor guy,

Regardless of reasoning this story is sure to end badly. What impact will this have on consumer sentiment and the market? Could Citi be the trigger for the next leg down??? I think its at the very least possible.

Given the small size of these portfolios, I do not think it is a big deal.

Either the portfolios are not very profitable and Citi is cleaning them up, or Citi is just getting reading for FAS 166, 167 and is trimming marginal portfolios in order to improve its capital position.

Citi cannot really sell well performing accounts. They can only sell their best performing co-branded portfolios, like AAdvantage. Of course, selling crown jewels is usually the last thing a company would do.

some investor guy wrote:

...much of the "wealth" of the "wealthy" is just an illusion...

correct

wealth is a concept, just like money is a concept

which is why an economy with no use for money is also possible, probable in fact for some places

Not Irving Fisher
It's not just Citi, all banks are culling their undesirable CC clients/cards. It will be much harder to do after next January when the new CC rules come into effect

so what happen? mass hysteria? lonelyness afraid they would be left out of whatever was going on? greed? entitlement?
but they picked the right thing to make whatever it was work,the housing market perfect

volker the viking wrote:

which is why an economy with no use for money is also possible, probable in fact for some places

So channeling those hardy Russians, filling my basement with toilet paper might not be such a bad idea after all?

gabyjan- I disagree. We have a culture in which we accept failure. It is in fact one of our great strengths and sources of entrepreneurial spirit. Banks have been failing in the United States at far higher rates than the rest of the world for years.

volker the viking wrote:

wealth is a concept, just like money is a concept

I think of wealth as a suit. There are ones that fall apart fast, and ones that get passed down across generations. Some wear it well, some don't. It needs to be taken care of, or it will end up in ruin. Some people act different while wearing suits, some don't. Women are generally attracted to men who wear a suit well.

re-covery: To cover over again, We pulled the sheet back over the corpse and called it a complete recovery.

How hard is that to understand?

Crazyv

whats to stop a candidate from "false flag" operations

you have to choose candidates individually

party affiliation should be made irrelevant (see constitution regarding house of representatives rules of operation)

there are only 5 issues

we should let nothing else devide us

accept campaign money only from registered voters in your district

uphold the constitution

vote the will of the people in your district

abolish the federal reserve

pass a balanced budget amendment

(as for difference we may have on energy, abortion, war, transportation etc...see number 3 above...represent the will of the people (voters citizens individual persons...in your district))

"Not Irving Fisher
It's not just Citi, all banks are culling their undesirable CC clients/cards. It will be much harder to do after next January when the new CC rules come into effect"

I rarely carry a balance and always pay on time.... Why raise my rate to 29.99%

crazyv
you are right about us accepting failure,we learn at an early age that it is all right to fail.but we dont learn anything from our failures,make same over and over.
is that our motto.Iatf it allright to fail.

*Why raise my rate to 29.99% *

Any one else thinking: Because we can?

Very funny... but true

Not Irving Fisher wrote:

I rarely carry a balance and always pay on time.... Why raise my rate to 29.99%

What kind of card do you have?

dr munch wrote:

Is this any different than throwing out the fattest applicants?

Legally? Nope.

From the article:

Economists are puzzled as to why job growth has slowed, citing everything from higher health care costs, to higher productivity, to Chinese currency manipulation.
"The answer is, we don't know," said Tim Bartik, a liberal economist with the Upjohn Institute for Employment Research in Michigan who is proposing a tax credit for employers who hire new workers.
At a cost of $21,000 per job created, he said, a tax credit is far cheaper than the average $112,000 cost of each job created by the stimulus, as calculated by the administration.

Again, it comes back to the enormous number of people that appeared in the foreign labor force starting in the mid-90's.

If you abstract out absolute levels of wages, people will take jobs when the following conditions are true:

• the job is available in an appropriate location
• earnings cover basic living expenses necessary appropriate to stage of life
• the job provides structure and supports the self-image of the person
• benefits such as healthcare or pension contributions are available

I guess the real problem is that there aren't many production or knowledge worker jobs that can't be off-shored at significant short-term savings.

How can we compete with smart able-bodied Asian and Indian graduates who are themselves desperate for jobs?

I think gabyjan and Resistance is on to something but perhaps the core of our cancer is how success in this nation is measured, obtained and flaunted. It is in this way the 'American Dream' was hijacked and twisted into something it wasn't. It was also upon the ideals of education, hard work, diligence, prudence that were systematically removed from those wishing to achieve to become fodder and unrepresentative of those ideals now.

AAdvantage

Less population will be coming to a planet near you...whether you think along those lines or not...

EvilHenryPaulson wrote:

How can we compete with smart able-bodied Asian and Indian graduates who are themselves desperate for jobs?
Wipe out their central bank reserves, block their imports... lots of ways

Give their struggling billions hope of a middle class lifestyle and then dash those hopes...

EvilHenryPaulson wrote:

It wasn't until the 80s that the Federal usury rate was dropped and CCs could regulator shop, so the good ol days would have been a very brief period in the 80s (and if I'm wrong on the facts, trust anything Terry says as a correction)

2 parts:

• I would have sworn that I had family with CCs that had a rate north of 20%, and they had good FICO scores, and I have yet to find any "historical CC rate" data that extends past 2003. IOW, I could be totally wrong, or thinking that the problems of the early 80s lasted longer than it did.
• I agree with EHP. If Terry says I'm completely out of the ballpark, then please rely on Terry's comment as a correction.

Not Irving Fisher,
I take it that is an American Airlines branded card. I will guess that AA got a cut of the revenues, and had increased their margins by devaluing the air miles which would have done less to bring Citi money. If you still want a CC, they'll make sure it's profitable through them or let you sign up for a new card. If you sign up for a new card, you'll either end up at a card with Citi that is more profitable or you'll be replaced by a customer coming from a Citi competitor which is doing the same thing. They're doing it now, because they won't be allowed to raise the interest rate in the same ways under the new rules beginning in February

This post is just wrong in so many ways, as is the fool at UCLA. Guys, look to history: sure, this is a slow recovery in terms of jobs, but it's not that much out of line with other long post-WW2 recoveries. I love this blog, but it's been crying wolf on this (and related) issues for far too long, and its credibility is starting to crumble. Just sayin'.

peterhaynes wrote:

sure, this is a slow recovery in terms of jobs, but it's not that much out of line with other long post-WW2 recoveries.

...
...?
.
Have you been following all of CR's charts that compare recessions from 1945 forward? Have I been visiting the wrong CR blog?
.
Edit: peterhaynes: Member for 5 min 59 sec

Yea, a job-loss recovery may be in the cards but GDP is up on increased banking bonuses!
YIKES!

No net jobs created in the last 10 years.

That's pretty out of line.

snap with the Dawg

some investor guy wrote:

If my guess is right, Citi will be looking everywhere for lines and letters of credit it can shut down. Funny thing is, this seems stupid to me. It seems that large numbers of accounts could be sold instead of shut down. If I'm right, the performing credit card accounts could simply have been sold to another finance company.
Anyone with a different opinion? Feel free to tell me why you think I'm wrong.

No one is a buyer right now, they all have their own capital and credit quality issues. Plus, with the deliquencies and the CARD Act adversely impacting portfolio profitability, no one is willing to pay a good price. Many of the gas co-branded portfolios are not stellar performers, the cardholders only use them to buy the gas for the cash rebate, which is expensive. I used to work on a few dozen portfolio sales a year - so far in 2009, none.

so wait, let me see if I get this right. Even with the massive injections of liquidity into the system, the fed taking on 'illiquid assets' to free up balance sheets for the entire reason to encourage credit support, instead the opposite is happening because.......????

Credit card use is down and going lower.
Credit card defaults are increasing.
Merchants are now pissed about credit card fees, giving discounts for cash. I have seen signs in convienance stores asking customers to sign a petition to demand lower fees to merchants ( thus customers).

The Credit card business is changing. The higher interest, higher fees, lower limits, bad PR, huge bonuses - J6P has had enough.

Happy B-Day Rob Dawg!

What does 50 Dawg years translate to in people years?

Not Irving Fisher - there is much hysteria about this a la Denninger. It is not well-founded.

Here's the deal. If you don't normally run a balance on your credit card, you are a much higher risk in this environment if you suddenly start to pack on money. The high probability is that you have experienced sudden financial difficulties, meaning that you may well default because most people aren't recovering from sudden financial difficulties in this environment.

Now add to that reality the fact that Citi will not be able to raise rates after the new CC law becomes effective when Citi perceives more risk - that is, until the cardholder defaults, at which time the hope of recovery is quite minimal. So even though the person may have gold credit, the reality remains that if abruptly a 5K balance shows up on that card, the principal may well have to be written off in a couple of years.

So you have an account that is generating very little revenue now, and is likely to go to default if the carrying balance abruptly rises. This is nothing but a whole fat lot of risk, and Citi would be stupid not to raise rates or cancel all such accounts. You can compensate for risk by getting rid of it or by reserving for it, and what Citi is doing is notifying the cardholder that they intend to reserve for risk as of day one that the cardholder starts running a balance, and they will be doing so by reserving from the interest that this cardholder pays.

And I'm sorry to tell you this, but I expect CC holders who don't run balances to either be paying pretty large annual fees or be paying very high rates for some time. It is unsecured credit, and when companies are experiencing over 9% annualized defaults quarter after quarter, CC rates have to be high.

Rates for all credit of accommodation without extremely strong security are going up across the board, from corporate credit to consumer credit.

RD is 50?

still in his prime!

or at least altA

happy birthday

*Not Irving Fisher wrote:

Has anyone read Mish's post on Citi? Now I understand why they raised my card rate to 29.99% (I have a zero balance). This could be the canary in the coal mine.*

I've had a Citi card for 30 years... but this is the end of the line. I think their action is a symptom of something serious enough to mean they won't be around much longer.

EvilHenryPaulson wrote:

So 30 years of easy money, led to high interest rates to save bank shareholders after all else failed, which led to 3 decades of regulatory retreat multiplying progressively easier money policy in order to keep the ball rolling.

If the parental lore is to be believed, financing items such as appliances and cars was relatively unheard of before the 70s and didn't catch on full tilt until the 80s. No one either had the option or chose not to finance purchases they couldn't afford. It was only have the stagflation of the 70s and loss of manufacturing jobs that credit found a place to root and grow.
.
Having said that, 30 years of "easy money" is all the history in which we have to research, right? If finance rates for cars were 8-16% depending on the buyer, that kind of information is relevant because people didn't finance cars (certainly didn't for 48-60 months like some people do now) before this 30 year period, yes?

EHP wrote:

If you want to be fair, give every person on earth an equal share of the planet's resources.

Dmitry Orlov covers that angle right here...

ClubOrlov: Definancialisation, Deglobalisation, Relocalisation

This is an awesome. but very scary read. Obviously, things will level out, if we can't keep Asia in check. There's obviously a big difference between Africa and China...

*MaxedOutMama wrote:

Not Irving Fisher - there is much hysteria about this a la Denninger. It is not well-founded.*

I disagree... I don't run a balance, but every now and then there is a glitch - like a payment strangely taking 15 days in the mail. The penalty for that has now become intolerable. I'm going elsewhere. Done deal.

What we have had for the last 20 years is an arbitrage economy. Countries/corporations benefiting from the cost differential. It is the easy trade and if you can do it why bother with the hard stuff like reforming your domestic economy so you can grow based on your own demand rather than that of the United States. As I said earlier it is problem of the commons- if you can graze your sheep for free on other peoples land why bother improving your own.

I started in the Swap market in the early 80's and it was almost entirely and arbitrage game and very profitable,. As more people got into it the spreads came down and the arbitrage narrowed and ultimately went away. To keep the level of profits up the new generation of participants developed faux arbitrages - things that were presented as arbitrage but were in fact not- the entire ABS scam. Global economies are pretty much following the same path.

"If you want to be fair, give every person on earth an equal share of the planet's resources."

......and then what do you do with the again poor people who drink and gamble it away? How about the ones who then also refuse to work?

some investor guy wrote:

Do you have a data source for that claim?

Rajesh,
Don't forget that defaults and foreclosures are a decrease of private debt. If government debt creation could outstrip that, then Bernanke was an idiot to bail out the banks... it would have been cheaper to buy off all the defaults... thus also saving the banks, but more cheaply.

Black Star Ranch wrote:

......and then what do you do with the again poor people who drink and gamble it away? How about the ones who then also refuse to work?

round them up and cut them down in a hail of gunfire?

"If you want to be fair, give every person on earth an equal share of the planet's resources."

How is that fair? When you're born you have an equal share of the planet's resources, and then some people exploit theirs faster. And then use yours, giving you promises in return, or just taking it. It would only be fair if you also say, make everyone start from the top of Kilimanjaro when they're born.

Not Irving Fisher wrote:

Could Citi be the trigger for the next leg down???

Yes. Citi has been undead for a couple of years now.

volker the viking wrote:

round them up and cut them down in a hail of gunfire?

Have countries tried decimating their civilian population for productivity reasons? Has it every worked?

yagij
I was talking about easy money at the overnight interest rate level.
As for financing being unheard of pre-1980s, exactly. People wrote cheques.
1980s on, bank balance sheets were cleaned, many key regulations were undone (the advent of securitization being the most important in my mind) credit creation accelerated, and interest rates were on a downtrend.
We don't know what is cheap and what is expensive for credit cards yet. One would have to think that whatever a fair price is, that a direct crediting of your bank account would be significantly cheaper because it bears no risk other than fraud, and few expenses.
We hardly know what a cheap stock is, after all it hasn't been sine 1958 that the dividend yield on stocks was higher than bonds as compensation for increased risk position in the capital structure.

Jonathan wrote:

This is an awesome. but very scary read. Obviously, things will level out, if we can't keep Asia in check. There's obviously a big difference between Africa and China...

Are you sure you want to tie population to share of natural resources? If I have 10 kids, my family will have twice as much 'free wealth' as if I just had 4?

LOL! yagij-I have ONE (after having about 5 but only used 2 of them). Remember the never ending offers? Those of us who pay off our bills every single month were known by the industry as 'deadbeats'-they hate us. Its a world turned upside down and inside out.

There was a huge spate of CCs which were canceled early on in this big fat mess as CC companies got ashed complexions when thinking about inactive CCs being activated as an extension by laid off workers, etc.

I'm so 'old school' about money and credit, everyone looked at us like we were nuts not all that long ago.

yagij
Perhaps what I meant is that the profusion of credit cards at all is a sign of their cheapness and profligacy
I mean it's become a virtually unlimited line of 30 day credit that pays you a rebate. Its success has been a proxy for consumption growth outpacing GDP, otherwise businesses wouldn't concede so much money to accept them

Just as an aside, a cooperative hair salon just got rid of the credit card acceptance-saying it was too expensive to maintain. I'm sure they lost a few customers but I surely didn't mind (because without my hairstylist-I'd be thrown into some sort of camp for unacceptable looking people).

Mel wrote:

Hopefully, the inheritance covers the next generation--wishful thinking, probably. At the very least, boomer folks left real assets and a sense of obligation--but his/her declining 401k and underwater McMansion might mean we will have American Calcuttas.

In the Family Law world, "inheritances" are already getting spent. Grandparents are spending money on their children's divorces, on their grandchildren's education, and on their personal needs which mostly include health care and nursing. Once the elders actually pass on and the assets move down the line, there isn't as much left or what is left is torn apart like jackals on a slain wildebeest. There will most likely be a return to the ways of the pre/post GD past in that there was nothing to pass on. Shared family resources and shared family expenditures just like in the other parts of the world.
.
Again, marriage as a tool for estate planning works if you aren't doing it for strictly religious reasons--and I'd argue that it is somewhat similar even then.

One of my banks just upped the interest rate on my savings account from 0.9% to 1.5% on the condition that I would use my debit card for at least four purchases per month. So I'm transferring a bunch of cash into that bank, and I'll be using my credit cards less frequently as I use my debit card more.. Since I only use credit cards as purchasing devices anyway, this seems like a pretty good deal.

I wonder if this is becoming a trend?

t r orwell wrote:

statement that private debt is falling faster than government debt is rising means nothing more than South American style economics.

Absolutely agree. The line, if not altogether gone, is certainly very blurry when 27.3 trillion in public money backstops the (supposedly) private financial system.

sm_landlord wrote:

I wonder if this is becoming a trend?

It's what I do. Am I a part of a trend?

*Which can cause you to incure overdraft fees if you deposit and spend in the same day. *

Doesn't anybody else have overdraft protection linked to their savings account? Or just don't have savings?

and I'll be using my credit cards less frequently as I use my debit card more..

sm LL, yes it does seem to be a trend people using debit cards more and cc less, the banks have that voered with their overdraft fees and the protical of paying on the biggest checks first, so it is easy for peole to run up 7 or 8 $35 overdraft fees in a given day, even if the total overdaraft is only $10 or $20 bucks

This trend is changing.

In addition I have seen the banks put holds on more checks that I deposit from the Trust account to client accounts. This has happened over the last 4 to 5 months.

josap wrote:

This trend is changing.

Not sure if I should be or

One bank fee, introduced about a year ago, was a "fee" charged to merchants depositing cash.

Honest to G, they wanted to charge a fee to count money. The fee increased by the amount of cash deposited. I screamed bloody murder. Allot of people screamed and the fee went away.

sm_landord

Do they chage a fee to transfer the funds from savings to checking if you do overdraw?
Isn't that the same as an overdraft fee?

EvilHenryPaulson wrote:

every other piece of content is reposting of other articles (by contributors or otherwise)

When she want to blog aggregating mode, I stopped visiting. I still swing by there occasionally, but I rarely find a reason to come back.

yagij
Back then, CCs were processed with carbon paper receipts and just as vulnerable. There is no reason why a debit card shouldn't give you the same fast feedback, and there is no good reason why debit fees should be as high as they are. As for the order of processing transactions, apparently BofA and Wells are notorious for sorting transactions by size and then processing the biggest credits first to encourage overdrafts

re: Usury Americans for Fairness in Lending - The History of Usury
interesting chronology

EvilHenryPaulson wrote:

There is no reason why a debit card shouldn't give you the same fast feedback

The best reason is because clients can spend money they don't have. It is more of a OPM aspect than a regulation or technical one. Some divorces are CC only because the family won't financially support the person in their divorce because the family knows who is really responsible for the trouble. CCs help when clients are in the "you made that bed..." situation.
.

EvilHenryPaulson wrote:

...apparently BofA and Wells are notorious for sorting transactions by size and then processing the biggest credits first to encourage overdrafts

Another reason that I should be thankful that I closed out and moved to a local CU. My credit union has its own issues, but my grievances aren't nearly as high when compared to dealing with BoA.

crazyv wrote:

I guess the opt out makes all the difference.

It does. Asking me if i will pay for a convienance if fine.

Charging me without my consent, leaving me to only see the charge when i get my statement is theft. Taking my time to call and get the charge removed is also theft.

Then the banks wonder why people are so angry and distrustfull.

Nanoo - they aren't really hoarding cash. They are either dumping it in reserves, offsetting chargeoffs with it or paying the government back so they can get a paycheck. Some of them, of course, had to raise cash for capital.

The reason why deposit interest rates are mostly low is that the safe way is to buy government-guaranteed debt, which is carrying extremely low yields. Banks' Net Interest Margins (see NIM at Fred) are still running extremely low. Otherwise, interest rates are low on good debt, but risks are disproportionately high. It's not a good lending environment for banks, so they can't make money off of a lot of types of lending in which they would normally engage. They can get fees for writing crappy mortgages they can sell to the govmt. They are totally undercut on good quality car loans. They can write decent non-conforming jumbo mortgages, because the government isn't buying those up. It used to be that the big banks could write any old crap and dump it by securitizing it to be sold to the Greater Fools, but the GFs are currently in short supply. So there is not a lot of activity because there is lower loan demand and in some segments in which there is demand, the banks are being undercut.

See H.8. The first section, Assets, are loans (or securities held) and the section section, Liabilities, includes deposits and other borrowings. Check out movements from Sept-March.

Borrowings from others have dropped 300 billion. Quite a bit of that must be TARP. Deposits from others have risen nearly 300 billion. These two are largely offsets.

As for Assets, total Bank Credit dropped about 200 billion. Loans and Leases dropped about 335 billion, but holdings of securities rose about 135 billion.

Total assets, including cash, have dropped over the period by about 285.

Banks do have higher cash needs - for example, their FDIC assessments keep getting more and more special! And some badly need capital and are bolstering reserves. But overall they are just taking deposits at very low rates and buying guaranteed stuff at slightly higher rates, plus sending money back to the government.

CR is one of few exceptions among blogs that are more than 3 years old.

hey, these new icons bring plenty of drama!

these new icons bring plenty of drama!

CR himself does not use them very frequently
He is one well-balanced dude

Charging me without my consent, leaving me to only see the charge when i get my statement is theft. Taking my time to call and get the charge removed is also theft.

Elizabeth Warren on Credit Card 'Tricks and Traps' . NOW on PBS

EW: Let me put it this way. In 1980, according to the Wall Street Journal, the typical credit card contract was about a page and a half long. It told you about the interest rate, about being late and that was pretty much it. Today, the typical credit card contract according to the Wall Street Journal is about 31 pages long. So, tricks and traps? It's that other 29 and a half pages.

OH! Thanks for the replies both MaxedOutMama and EHP.

Whats outrageous is that we are effectively discouraged from savings (yet chastised publicly for not saving enough). Like I stated before, I'm a real simpleton about money, debt, etc. KISS my motto and economics 101 which I think maybe resurrected from the dead and buried by a lot of folks today.

I have played the CC rewards game and do the same with some auto-pay features of routine billing and one time big ticket stuff like buying our heating fuel for the winter. (I hate writing checks at home too-teehee) I take issue however with trying to make everyone a freaking day trader to keep up with that invisible inflation, if you aren't then you have that big L branded on your forehead. Well, maybe I am one of those in the end. We'll see in a few years I guess.

fyi: keep in mind, debit card transactions don't have the same consumer protection laws.

josap
I learned from another poster here that merchants in the US are allowed to offer a "cash discount"

Basel Too wrote:

debit card transactions don't have the same consumer protection laws.

W...T...F...
.
Future reference: If Wal^Street creates a new financial "innovation", avoid it like the plague. Only harm can come from it--unless one knows where all the traps are.

Nanoo-Nanoo (profile) wrote on Sun, 10/25/2009 - 1:12 pm

Whats outrageous is that we are effectively discouraged from savings (yet chastised publicly for not saving enough).
Double-binds are a well-recognized and researched technique of behavioral control.

rb wrote:

Today, the typical credit card contract according to the Wall Street Journal is about 31 pages long. So, tricks and traps? It's that other 29 and a half pages.

Blame legislation/regulation/litigation for more than half of the increase in bulk, for example the disclosure requirements of the Truth in Lending Act, the Equal Credit Opportunity Act, the Fair Credit Reporting Act, the FACT Act, the Servicemembers Civil Relief Act and the Fair Debt Collection Practices Act and state laws on top.

EDIT: Left off the Gramm Leach Bliley Act and its multiple page privacy notice requirements

FOMC is coming up. Will they be able to pretend that things are going smoothly or do they order up another round of greenbacks (like the BOE is expected to.)

Terry wrote:

Blame legislation/regulation/litigation for more than half of the increase in bulk

Would you need the the bulk increase if banks weren't being squirrelly? Congress passed laws for no other reason that as pork spending to the paper printing industry?

Resistance: Banking is a SERVICE industry...somewhere along the lines this was forgotten. Its a UTILITY of everyday living. Instead they all wanted to be rock stars with the incumbent lifestyles. This is why Glass-Steagall is so f'ing obvious in fixing what ails us in allowing that UTILITY to return, some prudence in lending standards, some rewards for savings, etc. Its not OLD, its a model that worked and worked well for 60+ years after GDI and served to PROTECT depositors from just the kind of shenanigans today.

I find it instructive that these so called guru's know so little HISTORY.

+100

I only blame lawyers' instincts to create more work for other lawyers'
politicans = lawyers, judges = lawyers, lawyers = lawyers. If it weren't for bankers, the legal profession would be the public's target

ps; the first person to invent an "there,they're,their" spell checker will retire handsomely

Why would credit cards be here to stay? At least in the massive volumes used today?

Most people remember days past living with no credit cards, or just one that was rarely used. I agree that internet purchases have changed that dramaticly, but you can use your debit card for on line payment & purchases.

We changed when CC became "the thing" to use. Remember the commercial of women in a resturant? One woman paid for everyones lunch with a credit card. All the other women were envious and reacted as if the CC woman had "made it".

We can change back. Remember when paying in cash, with a hundred dollar bill was concidered flaunting sucess? Then again, I am old.

EvilHenryPaulson wrote:

I only blame lawyers' instincts to create more work for other lawyers'

What's the problem with that EHP

Remember: behind every scummy lawyer is a scummy client.

with a second lawyer whispering in his ear
~splat

"He rejects completely any idea that bankers are at all responsible for the trillions of dollars spent to rectify the banker's misdeeds. "It's the fault of borrowers, caveat emptor" ."

An example of natural selection in the social sphere.

Try finding a policeman who believes in anarchy, or a fireman who wants to set the town on fire.

or a fireman who wants to set the town on fire.

I believe there are documented cases of fireman actually starting fires quite deliberately
~splat

"I believe there are documented cases of fireman actually starting fires quite deliberately"

And bankers with an uncontrollable desire to give money away.

Basel Too wrote:

merchants in the US are allowed to offer a "cash discount"

Correct - all card brands permit a cash discount, but not a surcharge for using a card.

Comrade Rally Monkey
How many credit card networks are there? Who are their owners? What are the barriers to entry?

The no banker left behind recovery continues.

He rejects completely any idea that bankers are at all responsible for the trillions of dollars spent to rectify the banker's misdeeds. "It's the fault of borrowers, caveat emptor" .

You might want to check with your neighbor if he also rejects the idea of tight regulation by the FAA or FDA. After all, if people see one airline having more crashes than others, they won't buy its tickets; or if people see others die from a drug, they will not be buying themselves. Same caveat emptor logic still applies, no?

Moreover, why wouldn't the government give money to that airline that keeps crashing so that it can fix its maintenance, start charging higher fares, pay back the money and then be left alone?

rb wrote:

I read recently of a bank practice that would sort a day's charges from the largest amount regardless of chronology.

In fairness to the banks, their argument is that your most important charges are likely the largest ones (rent, etc.), which is not completely without sense.

This isn't only about what's legal,Rajesh. It's legal to have a swimming pool and it's legal to not build a fence arould it. But if someone trespasses on your property and drowns in your pool, I believe, you are liable. Obviously I'm not an lawyer...

Terry wrote:

Blame legislation/regulation/litigation for more than half of the increase in bulk, for example the disclosure requirements of the Truth in Lending Act, the Equal Credit Opportunity Act, the Fair Credit Reporting Act, the FACT Act, the Servicemembers Civil Relief Act and the Fair Debt Collection Practices Act and state laws on top.

But also blame deliberate obfuscation by the banks -- for example, how many of us have gotten letters saying "There have been changes in the credit card contract" -- and then receive the entire changed contract, with no hint as to what the changes were? This is a deliberate attempt to obscure -- they could use boldface, strikeout text, or abstract the key features of the changes if they wanted.

I wrote a steamed letter to AmEx about this practice on their part, and received back a form letter thanking me for commenting on a completely different topic. Keyboard operator must've not had a canned response ready, and just pushed the nearest button.

Comrade Rally Monkey wrote:

the first person to invent an "there,they're,their" spell checker will retire handsomely

I'm sure they're more than one her who might want to try there luck on something like that their.

"The word stimulus has such a bad connotation that the term has been banished from new efforts to goose the economy"

This new administration just doesn't have the PR team of the last. Bring on the prosperity injections!

Terry wrote:

I used to work on a few dozen portfolio sales a year - so far in 2009, none.

Fair enough. It's not that surprising that they are hard to sell in the current market. However, I'm a little surprised there isn't a Federal program for this.

Terry, good post.
from a nielsen report last summer
Visa = 41% market share
Mastercard = 31%
AmEx = 22%
Discover = 5%
DoJ's standard for anti-trust is any one player with 40% market share. However, there is a long history of price fixing of industries with more fragmented marketshare. The merchant fees are absurd compared to the system costs, and another indication of a free market is what happens to profit margins over time. I guess you could attribute it to an expanding market since its start really in the last 30 years, but we'll see what happens in the next 10. My guess is that merchant fees don't drop as would be expected in a contracting market that is competitive

edit: I think the basic problem is the barriers to entry from network effects. Applies to power, landlines, water, roads, rail, natural gas, etc.
My answer is to rethink the approach to markets, and in this case separate infrastructure (payment network), from operator (CC card). Close to what we have now, except that CC networks should be paid by the operators (the CC card backers) instead of individual merchants.

It's legal to have a swimming pool and it's legal to not build a fence arould it.
Obviously I'm not an lawyer...

Ahhh, Chicago, is it not? Obviously not California. You must have a fence around a pool here, even in your backyard. Actually, I'd bet you've got some kind of "attractive nuisance" laws in a similar vein.

There are jobs going begging now, just as there were in the lesser depression of the '30s. It's just that wages are sticky downwards, as are other worker expectations. During the last depression, my MIL had a live-in maid and a live-in cook, all on a mailman's salary. Granted, they weren't paid much more than room and board, but it was once a common middle class phenomenon. Much of this money is now spent in restaurants. So, even though I'm of modest means, I could now support some good domestic help... at the right wage. So could a lot of you, I'll bet.

EvilHenryPaulson wrote:

AmEx = 22%

American Express used to be very rare; only touristy places took it. AmEx cut their merchant fees below Visa and they are accepted in a lot more places now. You are also seeing more credit cards with cash back programs (which are partial rebates of merchant fees.) I do not think the market is very competitive but it is moving in the right direction. Now that Visa and MasterCard are public companies, they will probably scrimp on the investment in payment networks that got them the big market share.

Summary and more ...

associated press

updated 3:50 p.m. PT, Tues., Oct . 28, 2008

"WASHINGTON - An impatient White House prodded banks and other financial companies Tuesday to quit hoarding billions of dollars flowing into their vaults from Washington and start making more loans."

'Economists and econometricians have long been studying the issue of causality and causal laws, i.e., the issue of identifying a causal relation between an outcome and a set of factors that may have determined this outcome.'
http://www.core.ucl.ac.be/econometrics/Bauwens/papers/Introduction-ec2.pdf

The smart ones have figured out whether they are better off with all cash or paying for credit card fees. I have coffee store that I frequent that only takes cash or check. I know that and their product is worth the hassle of not having the convenience of charging. I am sure that they have missed sales from people who didn't have a cash or check on hand ( I am one those) but once again if your product is good people will come back.

there would be simple fair resolution so don't expect it. Have a maximum daily overdraft charge.

I'm guessing a couple more years. When the unemployed '09 college graduates are living at home and their parents have been out of work for a year and the foreclosure is finally going through we'll see the unrest.

I have coffee store that I frequent that only takes cash or check.
You mean you cannot pay for your coffee without a CC or a check? What about brewing a pot at home and putting it in a travel cup?