* In Debt We Trust *

[LargoWinch]

"...in order to save The Master, we have to get rid of MasterCard."

Whatever does the trick I guess to teach you that borrowing at 18%+ for consumer goods cannot be good for you.

http://www.youtube.com/watch?v=ROYo8...eature=related

[metalman]

Re: * In Debt We Trust *

"...in order to save The Master, we have to get rid of MasterCard."

Whatever does the trick I guess to teach you that borrowing at 18%+ for consumer goods cannot be good for you.

http://www.youtube.com/watch?v=ROYo8...eature=related

posted to videos forum mar 2008

[don]

Re: * In Debt We Trust *

Excerpts from the NY Times Sunday front page feature on debt.

“Today the focus for lenders is not so much on consumer loans being repaid, but on the loan as a perpetual earning asset.”
The FIRE Economy in a nut shell.


Do Joe and Jill SixPack do a lot of stupid things? Sure. Do they have a lot of help from enablers....


Behind the big increase in consumer debt is a major shift in the way lenders approach their business. In earlier years, actually being repaid by borrowers was crucial to lenders. Now, because so much consumer debt is packaged into securities and sold to investors, repayment of the loans takes on less importance to those lenders than the fees and charges generated when loans are made.



Lenders have found new ways to squeeze more profit from borrowers. Though prevailing interest rates have fallen to the low single digits in recent years, for example, the rates that credit card issuers routinely charge even borrowers with good credit records have risen, to 19.1 percent last year from 17.7 percent in 2005 — a difference that adds billions of dollars in interest charges annually to credit card bills.



Lenders have been eager to expand their reach. They have honed sophisticated marketing tactics, gathering personal financial data to tailor their pitches. They have spent hundreds of millions of dollars on advertising campaigns that make debt sound desirable and risk-free. The ads are aimed at people who urgently need loans to pay for health care and other necessities.



It is not just financial conglomerates that are profiting on consumer debt loads. Some manufacturers and retailers can generate more income from internal financing arms that lend to their customers than from their primary businesses.

When the going gets tough, the tough go shopping:


Every age group up to the elderly was the target of sophisticated ad campaigns and direct mail programs. “Live Richly” was a Citibank message. “Life Takes Visa,” proclaims the nation’s largest credit card issuer.



Eliminating negative feelings about indebtedness was the idea behind MasterCard’s “Priceless” campaign, the work of McCann-Erickson Worldwide Advertising, which came out in 1997.


“One of the tricks in the credit card business is that people have an inherent guilt with spending,” Jonathan B. Cranin, executive vice president and deputy creative director at the agency, said when the commercials began. “What you want is to have people feel good about their purchases.”



Billions are spent annually, utilizing the most sophisticated psychological tools available, to encourage indebted spending.


Mortgage lenders took to cold-calling homeowners to persuade them to refinance. Done to reduce borrowers’ monthly payments, serial refinancing allowed lenders to charge thousands of dollars in loan processing fees, including appraisals, credit checks, title searches and document preparation fees.



Not surprisingly, such practices generated dazzling profits for the nation’s financial companies. And since 2005, when the bankruptcy law was changed, the credit card industry has increased its earnings 25 percent, according to a new study by Michael Simkovic, a former James M. Olin fellow in Law and Economics at Harvard Law School.


Among the most profitable companies were this article’s example, Ms. McLeod’s creditors.


For Capital One, which charges her 28 percent interest on her credit card, net interest income, after provisions for loan losses, has risen a compounded 25 percent a year since 2002.



GE Money Bank, which levied a 27 percent rate on Ms. McLeod’s debt and is part of the GE Capital Corporation, generated profits of $4.3 billion in 2007, more than double the $2.1 billion it earned in 2003.



Because many of these large institutions pool the loans they make and sell them to investors, they are not as vulnerable when the borrowers default. At the end of 2007, for example, one-third of Capital One’s $151 billion in managed loans had been sold as securities.



Officials at General Electric declined to comment. Capital One did not return phone calls.

Just two generations ago, America was a nation of mostly thrifty people living within their means, even setting money aside for unforeseen expenses.



Today, Americans carry $2.56 trillion in consumer debt, up 22 percent since 2000 alone, according to the Federal Reserve Board. The average household’s credit card debt is $8,565, up almost 15 percent from 2000.



College debt has more than doubled since 1995. The average student emerges from college carrying $20,000 in educational debt.


Household debt, including mortgages and credit cards, represents 19 percent of household assets, according to the Fed, compared with 13 percent in 1980.:p>:p>
Incomes stagnated for many Americans. As a result, the percentage of disposable income that consumers must set aside to service their debt — a figure that includes monthly credit card payments, car loans, mortgage interest and principal — has risen to 14.5 percent from 11 percent just 15 years ago.


By contrast, the nation’s savings rate, which exceeded 8 percent of disposable income in 1968, stood at 0.4 percent at the end of the first quarter of this year, according to the Bureau of Economic Analysis.


Have things changed?


A “pre-qualified” Salute Visa Gold card issued by Urban Bank Trust says in bold type, “We think you deserve more credit!”



A spokeswoman at Urban Bank said the Salute Visa is part of a program “designed to provide access to credit for folks who would not otherwise qualify for credit.”



The Salute Visa offeres a $300 credit line. But a closer look at the fine print showed that $150 of that would go, as annual fees, to Urban Bank.

[Slimprofits]

Re: * In Debt We Trust *

Excerpts from the NY Times Sunday front page feature on debt.

“Today the focus for lenders is not so much on consumer loans being repaid, but on the loan as a perpetual earning asset.”
The FIRE Economy in a nut shell.


Do Joe and Jill SixPack do a lot of stupid things? Sure. Do they have a lot of help from enablers....


Behind the big increase in consumer debt is a major shift in the way lenders approach their business. In earlier years, actually being repaid by borrowers was crucial to lenders. Now, because so much consumer debt is packaged into securities and sold to investors, repayment of the loans takes on less importance to those lenders than the fees and charges generated when loans are made.

Stop there. Hopefully that part sinks in (not talking about here, but the other couple of million that might read it). The New York Times was one of the driving media forces behind all of this 'economic transformation' and if the article was an honest one there would be an entire paragraph about that.

[metalman]

Re: * In Debt We Trust *

Stop there. Hopefully that part sinks in (not talking about here, but the other couple of million that might read it). The New York Times was one of the driving media forces behind all of this 'economic transformation' and if the article was an honest one there would be an entire paragraph about that.

they are to be applauded for the article.

OWE, v. To have (and to hold) a debt. The word formerly signified not indebtedness, but possession; it meant "own," and in the minds of debtors there is still a good deal of confusion between assets and liabilities.
Ambrose Bierce (1842 - 1914), The Devil's Dictionary

DEBT, n. An ingenious substitute for the chain and whip of the slave-driver.
Ambrose Bierce (1842 - 1914), The Devil's Dictionary

as hudson says, neo-feudalism.

[LargoWinch]

Re: * In Debt We Trust *

Oups. I did not know that this vid. has been posted before. I will do a search before posting in the future.

But if an admin. would like to delete this one in order to keep things clean on iTulip, please feel free.