It is not really debatable that credit card issuers make very little money off of the wealthy.
For people with ample resources who pay their balance monthly, the only way a credit card company is making money is from an annual fee (which is a drop in the bucket to the wealthy) and merchant fees for purchases, usually 3%. There’s no reason to give a rich person a credit card beyond the hope that they will buy a lot of expensive things and rack up fees at the point of sale – fees that are paid by retailers and are invisible to consumers.
No, rich people with $250,000 credit limits aren’t of much use. Giving a bunch of poor people a $2,000 limit and then assholing them with late fees and 28% APRs is where it’s at.
This is common knowledge.
What is not as widely recognized is the redistributive effect.
Exorbitant interest rates on high-risk borrowers effectively subsidize the interest rates paid by the more affluent.
Archive for November 2009
The thing we’re all left to worry about and somehow solve: The main economy has not started working yet.
It’s still stuck. The central banks’ monetary strategies may have been brilliant in reining national economies back from a too-well-imagined abyss. But, the continued erosion of the jobs universe directly correlated to the continued erosion of home values and residential real estate assets tell us the real [non-stimulus] economy is clogged up, still broken.
As we’ve written here, we think that Federal and state policy have done about all they’re going to be effective at doing. Recovery is really in the hands of those who survive and resurrect from the ashes.
Unity will get home builders farther right now than competing head to head with each other for the few home buyers out there. Foreclosure sales are the No. 1 competition for new home builders, not other new home builders.
A semi-related thought occurs to us on the 174th anniversary of the birth of Samuel Clemens, and it is this. He lost his job as a steamship pilot, which he was very good at and paid good money to learn to do. If he didn’t lose that job–because of the onset of the Civil War–we would not know the work of Mark Twain.
Thankfully, we can still hope that good can come of very troublesome times.
Incentive-based carbon policy,
- … would change people’s behavior (a lot),
- … is cheaper than command-and-control,
- … revenues don’t much matter,
- … would lower overall economic activity (a little),
- … also creates benefits.
Unusually frank interview with Howie Mandel:
Were you afraid of being being labeled crazy?
Yeah. In Middle America and corporate America, if in the course of a day you said, “I need Thursday afternoon off to go to the dentist,” nobody would even flinch. But if you said, “You know what, I need an hour off because I’m going to run to the psychiatrist,” your coworkers may not flinch outwardly, but you might see some ramifications later on. And even with nothing seemingly wrong, you go twice a year to your dentist to see if everything’s OK and get a cleaning, but God forbid you should just go and speak to somebody and say, “Is this normal that I’m reacting this way or I feel this kind of pressure or anxiety, or my relationship is a little tough right now, or I feel this kind of pressure at work?” just to make sure that you have the coping skills. And that’s whether you’ve got a label or you don’t have a label, whether it be OCD, depression, or you’re just anxious about something, or a family member has been diagnosed with something, or you lose somebody, or you’re feeling pressure at work.
I’m guessing this will be on the table soon enough:
Excessive leverage is highly destabilizing to the financial system.
Companies borrow, in part, because they believe that debt capital is cheaper than equity capital. That is certainly the case under the U.S. corporate tax system because interest is a deductible business expense in calculating income subject to tax whereas dividends are not deductible.
Next year, 90 percent of interest would be deductible; the following year, 80 percent would be deductible, and so forth, until interest would no longer be deductible at all.
With this simple change, the federal government would encourage businesses and households to become less leveraged.
We have learned that leverage makes not only individual companies more vulnerable to failure but also the economy less stable.
We use tax laws all the time to promote socially desirable behavior; eliminating the deductibility of interest would reduce the risk of failure of large companies—especially, large firms—and thereby reduce the collateral damage inflicted by such failures.
The Obama administration’s fiscal boost program has also significantly helped the economy: aid to impacted states has been a big win, the jury is still out on the effect of the tax cuts in the stimulus, and the flow of government spending on a whole variety of relatively useful causes is in train and is boosting production and employment in the same way that everyone’s boost to spending boosts production and employment.
And the cost of carrying the extra debt incurred is extraordinarily low: $12 billion a year of extra taxes would be enough to finance the fiscal boost program at current interest rates, and for that cost American taxpayers will get an extra $1 trillion of produced goods and services and employment will be higher by about ten million job-years.
For two and a half centuries economists have believed that the flow of spending in an economy goes up whenever groups of people decide to spend more.
- Sometimes and to some degree these increases show up as increases in prices
- and sometimes and to some degree as increases in production and employment.
- Sometimes these increases come because there is more spendable cash in the economy
- and sometimes because changes in opportunity cost make people want to spend the cash they have more rapidly.
But always it has been that spending goes up whenever groups decide to spend more–and the government’s decisions to spend more are as good as anybody else’s, as good as the decisions of the mortgage companies and new homebuyers to spend more buying new houses during the housing bubble of the mid-2000s or of the princes of Silicon Valley to spend more building new companies during the dot-com bubble of the late-1990s.
Chicago economists’ arguments that fiscal stimulus can’t work are at best incoherent and usually simply wrong.
Republican politicians’ arguments that fiscal stimulus isn’t working are simply ripped out of the Newt Gingrich playbook: lie all the time.
In 1981, 84% of China’s population was below the poverty line of $1.25 a day; in 2005 the share was just 16%. [ ! ]
Brazil’s share of those in poverty fell by half from 17% to 8%, an annual reduction of 3.2%.
India’s share below the poverty line fell from 60% to 42% between 1981 and 2005.
Warhol’s 15 minutes of fame is a thing of the distant past, simply because it’s so boringly long. – Ilargi
When only 15% of the primary care physicians polled say they feel comfortable treating a condition that affects 10-20% of the entire population (not just those over fifty), there’s a psycho-social problem layered onto an enormously debilitating health issue: PAIN.
Coming up to Copenhagen:
“The Copenhagen Diagnosis: Updating the World on the Latest Climate Science” is not an official IPCC report; it’s a summary of the hundreds of peer-reviewed research papers that have been published since the IPCC’s last assessment.
It was released now to fill the long gap in between official IPCC reports—the last was released in 2007, but the drafting text is more than three years old, and the next isn’t scheduled until 2013. It was also timed to the Copenhagen climate talks, of course.
The essence of the new report is that things are grimmer than the IPCC has reported. And it’s not like the panel has been painting a rosy picture—its 2007 report concluded that the warming-induced melting of the Greenland ice sheet could create significant sea-level rise in this century. IPCC chairman had said at the time, “If there’s no action before 2012, that’s too late. What we do in the next two to three years will determine our future. This is the defining moment.”
Stuns me the funds spent on jawboning, as if cousins and relatives of some sort. While we claw at the great requirement to put efforts on the ground, many seem to have endless secrets about how they pay their rent.
We failed to watch and gave far too much leeway.
In this crash, zeal had many followers, a base of millions trumpeting around the world that governments are no good and the finance market should be left alone. A ‘casino’ hid behind popular but untested belief, anti-oversight, that key players were both funding and promoting.
I finally found a bright and honest account of some of this gamble’s roots.
For ourselves through all time, not predisposed to be a friend is a cause of action.
The child comes to love life and the people in it, the capacity for interdependency blooms.
The children who don’t make it—the child who lives in an adult body but never grows up… elasticity stops, and a life of what are, fundamentally, tantrums, is all that follows.
This is what they wanted, evident, by age eight, the people perpetrating on me attack my body, and it hurts but I can ignore that since what they’re after is my mind, my soul, my freedom, pleasure, my sense of ease and security, my pride, my delight. I’ll tell you how I knew this: My actions had no impact on them. Their treatment of me was inner directed, random, their demands of me non-specific or inconsistent, they didn’t want me to do anything better, didn’t want me to be good, to improve, to behave … It wasn’t about that. I’m still learning, it wasn’t about me. Their only goal was the complete breaking down of personality. They needed me to think and feel and become something else, something ugly, corrosive and corrupt, a mirror. They wanted to watch this version of me take form, they wanted to be the ones who caused the transformation and wanted to be known by me as the ones who caused it.
In my experience in the hall of mirrors that is life with the narcissistically-arrested, what they wanted was the destruction of oneself, because the other had no place in their intrapsychic world. I don’t know, maybe I was lucky, the destruction took more the form of stamping out. Stamping out any little sign that your child, your wife (cringe) was that most intolerable of things, a separate person. Showing pleasure, having a thought, these were dangerous things—I did them anyway.
It’s damn hard to understand these people. You have to get a feel for the oceanic greed of the human child before the age of three, perhaps before two and a half, which is when the bloody warfare breaks out between the child who wants to remain, have and be All, that oneness with mommy—and the second, developing awareness that not only are there huge rewards for breaking down and sharing, you simply have no choice. In most cases, life impinges and the child gives up its primary, narcissistic ego in favor of the world in pieces, and begins to assemble those pieces into a pleasing, good-enough emotional and mental whole. One in which other people are not resented for their very existence, but are instead wanted and desired for all the richness they bring. The child comes to love life and the people in it, the capacity for interdependency blooms.
The children who don’t make it—the child who lives in an adult body but never grows up—I think is predisposed to this failure. Genetic or other influences upon the body leave these children with minds that can only go so far. The elasticity stops, and a life of what are, fundamentally, tantrums, is all that follows. Imagine having no tools to make your way among people, save what you can guess at, or are perhaps clever enough to mimic. Life would be above all, an intense frustration, and, frankly, there would be no point to love, to that which gives and acts for the betterment of another for its own sake. The task goes unperceived.
My thoughts today run along the lines of trauma and trust. We depend upon shared perceptions, yet at every turn, there are people with all sorts of power over us who don’t think the same way at all. One trusts them at one’s peril; when you are small, of course, you’ve no other choice.
Hell, isn’t a great deal of culture—books, art, films—about the fact that we as individuals have, at bottom, very few choices, and how to live with that. Here, in the present, is where we find the echoes of childhood. The mirror.
image: beppe k via flickr