It Is More Important to Shop than to Pay Off Credit Cards!!!
78Update: The Meltdown is Occurring in Slow Motion.
Much of what I said below has not come to pass. Inventories are low, and retail stores have cut to the bone. The bankruptcies predicted have not come to pass, yet. However, the driver of the economy, the American consumer, is facing big headwinds, like unemployment and alt a, option arm, credit card meltdowns. I have advocated that people walk away from their bad loans at dontpaycreditcards.com and apparently many have or are going to as they get madder and madder at the crony bailouts of the too big to fail banks.
So, perhaps consumers will have a little bit to spend. I am not advocating that people spend all their cash. Save some, at home if necessary to prevent garnishment, and spend prudently. Certainly some spending will help the economy. I am not advocating that we go live in a cave, but watch the bottom line folks!
When you realize that the housing ponzi scheme that has hurt your 401k, house price, credit card rates, etc. was planned, you can get even by walking away. You have the right to extricate yourself from a ponzi scheme! And even if it is government sanctioned, it still is, a simple but massive, ponzi scheme to defraud the last guys who bought at the top of the real estate bubble!
How Is It More Important to Shop than Pay Your Debt You Say?
Wow, this doesn't sound like one of those live-frugal-debt-advice websites that frankly, wants me to gag on a spoon. Just kidding, I ain't no stinkin' Valley Girl. But I digress.
Just think about it. Remember when the supplemental checks went out in 2008, and much of those was used to pay down credit cards and much was saved? Well, that took another supplemental check right out of your hands.
The federal government wants you to shop and spend. They are not interested in you paying your credit cards and their behavior is proof. This is the deal, they want to put humpty dumpty together again. If you are slave to your credit cards they cannot put the egg back together. That is just obvious. They were ready to give you a second stimulus check until you used the first one to pay down debt.
So, be patriotic here. Forget the credit cards, Business inventories are sky high. Business will die on the vine if they cannot move the inventory. They have to pay interest on the inventory. To the government, real businesses are more important to main street than banks and finance companies because mass bankrupcy will kill the banks anyway. And those banks can always be nationalized! Now do you understand? It doesn't matter what the government says that counts, but rather what it does!!!
It is interesting to note that on all this debt banks have credit default swaps, or CDS, which make default on debt even more dangerous. I am sure one of the leaders of CDS contracts, JP Morgan, will lose on CC debt, but I would bet that they would lose far more on the commercial real estate meltdown. JPM had at one time 15 TRILLION dollars of CDS debt, which was 1/3rd the total. I think they must have had a hard time getting rid of most of it. Look for a potential disaster with JPM.
The Death of Big Retail Will Cause a Depression!
Actually if big retail tanks, the banks are in greater danger than if their credit card business tanks. They would lose both the inventory interest payments and the commercial real estate payments. And commercial real estate tanking is a downward spiral of blight.
I hope you all realize that these are the companies in danger of declaring bankrupcy with possible commercial real estate busts in 2009: Nordstrom, Neiman Marcus, Tiffany, Zales, Saks, JC Penny, Sears. Now do you see why it is imperative that we shop and spend?
Commercial real estate can spiral downward with defaults. The government is scared sh**less of this possibility because commercial real estate price destruction will put the banks under and probably cause a worldwide depression
I am not saying that you run up any more credit cards. Just shop with cash, but with the money that you would have used to pay the cards. (See my disclaimer below.) You have to know that they may garnish you. But since you probably owe more on the cards per month than what they will take out in garnishment, then just take the plunge, and tune out like a Beatnik, well, except for the patriotic spending that you will want to do. But I am also advocating that people save (but not in a bank account that can be garnished), in case things deflate more.
Some experts say for those of you who pay less per month than a garnishment would exact, you can still let the payments go, let the credit card debt be sold to a collection agency, then bargain with that agency for a cramdown of principle.
Most credit card companies will just charge the cards off, but not all. Check out the net for the rules in your particular states. If everyone gives up on their credit cards all at once you will overwhelm the companies, and they can't go after everybody. Generally they just sell the debt to collection agencies. Just change and unlist your phone number and you will have peace and quiet.
Is It Immoral To Not Pay Your Credit Cards?
You say to me, well, isn't it immoral to stop paying on your credit cards? I would have said, yes, at other times in history, but most world religions warn against usury. If 15 to 35 percent interest when these banks can borrow for 1/2 percent is not usury, then folks, I don't know what usury is!!! The immorality of the banks sends up a stench to the heavens.
One reader has likened credit card companies to lowly, illegal loan sharks, with offices and the backing of the legal system. But a pig is a pig, a poke is a poke, a Palin is a Palin. You know, all of the above is the moral bankrupcy of the credit card banks.
If you thought you were getting Suze Orman, oh well!!
Disclaimer. I am not a tax advisor or a lawyer. Each person's situation is different and I am not offering professional advice here. I like Valley Girls and I don't think that I have been ever gagged by a spoon!
Sensible Advice If You Want to Preserve Your FICO Score.
The Government Wants You To Buy, Buy, Buy. Be Patriotic.
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- Why Goldman Sachs Is Committing Treason
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The banks have decided to raise interest rates rather than pass their inexpensive borrowing from the government along to the burdoned credit card holders. They have become loan sharks. - Class Warfare
Update, the cramdown plan of the Obama administration will help some homeowners, but the effect of preventing investors from suing will be higher interest rates in the future. That means it is not a good idea... - Foreclosures Are The Solution
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Nice article explaining priorities. - Change Alley: George Soros: Bottomless Market
Sobering article about the danger of our credit crisis compared to the Great Depression of the 1930's.
My Comments on Seeking Alpha
- Is the U.S. Headed Down the Same Path as Japan?
Mad Hedge, that sounds like the US to me. Where did all the illegals go who were building our homes? They can't make it here so they left. People are putting off family formation here, and we have some parallels to Japan. A jobless recovery is in your dreams Mad Hedge, because other people want our exports less than we wanted Japanese exports. This is what is wrong with bankrupt America. The ponzi housing scheme allowed by the Fed wiped out the US consumer. Now the government policy is to ignore the US consumer. No bailout for him. And the government thinks our economic salvation is in foreign buyers of our goods, yet the golden goose of world prosperity has been the US consumer.Larry Summers is behind all this and he is a total moron. Deleverage yourselves: dontpaycreditcards.com On Nov 13 10:39 PM Mad Hedge Fund Trader wrote:> there's no comparison. Look at the world’s worst population pyramid,> that for Japan. These graphs show that a nearly perfect pyramid drove> a miracle stock market during the fifties and sixties which I remember> well, when Japan had your model high growth emerging market economy.> That changed dramatically when the population started to age rapidly> during the nineties. The 2007 graph is shouting at you not to go> near the Land of the Rising Sun, and the 2050 projection tells you> why. By then, a small young population of consumers with a very low> birth rate will be supporting the backbreaking burden of a huge population> of old age pensioners. Every two wage earners will be supporting> one retiree. Think low GDP growth, huge government borrowing, deflation,> and a terrible stock and housing markets. Dodge the bullet. - 3 hours ago
- Productivity Surge Boosts U.S. Growth Outlook for 2010
The Republicans played the same game. Paulson took the taxpayer pie and gave it to the banks. Bush was a corporate socialist, ie fascist. Bush made war so that oil companies could increase their reserves in Iraq. It came out of the taxpayer pie. It is always from the taxpayer if big fascist business wants a bailout of some sort. It mainly accrues to banks and oil companies and military companies. Until these are brought under control we will have a weaker and weaker consumer who will have to pay more tax.On Nov 14 01:09 PM The Geoffster wrote:> "The truth is, in order to get things like universal health care> and a revamped education system, then someone is going to have to> give up a piece of their pie so that someone else can have more."> > Michelle Obama> This idiotic statement sums up the problem with socialists. They> think the size of the pie is fixed. They have no clue how to grow> the economy because they think the market system is unfair. - 3 hours ago
- Productivity Surge Boosts U.S. Growth Outlook for 2010
Hey snail, that is a ridiculus comment. Pump and run. Must be your MO. There are no recoveries without wage increases or more bubbles. There are two ways to get wage increases. One is to pay people more. The second is to defend the dollar so that gas isn't overpriced by a massive amount.Even the article says job declines must stop. So obviously they would like to have a productivity and jobless recovery, but they don't really believe it or they wouldn't have said it. On Nov 13 06:45 PM TheSnail wrote:> Hey Gary.. there are apples... and there are oranges....sorry this> is getting too complicated for you.....nevermind. - 21 hours ago
- When Will We Have Had Enough
State workers are on furlough and this may increase as states continue to suffer declines in revenue. But think about it, as good paying manufacturing jobs leave the only good paying jobs left will be with the government. Until regular workers get raises through the protection of the value of the dollar, these government workers will remain the lifeblood of many communities. I am not supporting that fact, just pointing out that that is the way it is. - 22 hours ago
- Productivity Surge Boosts U.S. Growth Outlook for 2010
I have a problem with all this happy talk. My problem is that the US consumer is dead in the water, and the numbers from the government regarding spending levels do not reflect it. While we have local tax receipts tanking, while we have home price depreciation, while we have state governments in massive trouble, spending stays flat according to the voodoo figures reported by the federal government. Someone is lying. Tax receipts don't lie. The resilience of profits has nothing to do with the truth, that our economy is nothing without stimulus, and without wage increases our economy cannot grow on its own. This author is indeed a follower of the new voodoo economics!Don't forget folks, that this country has had flat wages and only bubbles to replace those flat wages. Now it looks like there will be flat wages as far as the eye can see because of these productivity gains. That won't be helpful to a recovery. - 23 hours ago
- Two More Myths About Business in China
The Chinese are consuming 30 percent of their GDP. That won't help the US out of this recession for years. - 23 hours ago
You Cannot Trust Credit Card Companies with Your Information!!
Credit Card Default. Some Banks Want to Help You. Too Late!!
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Credit Crisis Timeline
- Three more FDIC bank seizures
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- Links: 2009-11-13
Finance and Economy Wall Street Makes It Hard to Earn Legal Living: Alice Schroeder – Bloomberg.com FT Alphaville – FDIC saves securitisation BBC NEWS – Russian economy growing strongly Henry Kaufman: The Real Threat to Fed Independence – WSJ.com Origins of the Federal Reserve – Murray N. Rothbard – Mises Institute (controversial but interesting) Richard Russell: Six reasons to [...] - 28 hours ago
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Comments
Spending got us into this problem to begin with. Leave it up to the government to encourage us to spend our way out of it. That's the most rediculous thing I've ever heard.
TMG you're the bomb. I couldn't agree more. Loan sharks with offices, that's all they are. I will shed no tears for them.
Yeah Moneyguy, some banks are trying to offer a helping hand. That is a little late after they have poisoned the consumer golden goose thinking that the consumer had infinite resources to withstand their greed. What a bunch of morons. Banker morons. They were emboldened by George Worst Bush to greed and immorality, and now they will pay a heavy price.
And people who are up to their gills in credit card debt aren't going to be buying overpriced houses anytime soon:)
The truth is Garnishment won't happen, anyone with any amount of Savvy, can make the process so expensive, no credit card company will attempt it. If they do and you string them out moving court dates and appearances, and they do get a garnishment. File Bankruptcy and they are finished, they know they don't stand a chance in Bankruptcy since their debt is 100% unsecured.
So, no right minded Manager would waste a bunch of money on lawyers just to get hosed when you file bankruptcy, they use game theory to make the decision, and they have to assume that is the path you will take. So from a financial standpoint, since they can't risk it, it is to easy to write it off, Sell the debt to a third party collector and let them pester the hell out of you, and wait until you want to buy a house again and then let the new mortgage lender lay the pressure on, until you come to the table and settle. That is far more profitable to them as it costs them zero out of pocket and they typically collect more money this way.
Since most people freak out then the Mortgage company says they can’t make the loan unless you clear your charge off’s, BS, they are just helping themselves out since, the debts most likely go to their parent company.
Remember credit card companies didn’t pay what they say you paid, the merchant has to take a 5 to 10 percent hit on the price of the merchandise in order to accept credit cards, then they company charges you the full amount as a debt and then charges interest on that higher amount
It is best to tank this industry and burn it down.
TMG
PGrundy, I just couldn't contain myself:)
The underside of American capitalism is greed. Nowhere has greed manifested itself more obviously than in credit card policy by the banks. People are just disgusted. People hate banks because the credit card has become the face of the banks, and has been a PR disaster for the banks. Apparently they thought they could slap the consumer around with credit cards. Turns out that the consumer is spanking the banks with a very harsh whip.
Wow. Well, bgamall, I think you just said out loud what households across America are already thinking and doing without saying so. Frankly, I don't see how Citi can survive at this point. They have to be experiencing a tidal wave of unsecured credit defaults (credit cards) and commercial defaults right now. I notice that Citi, BOA, and two other big CC issuers (I forget which ones) have a warm and fuzzy ad running on TV about how credit card companies really care about you and if you are having trouble paying your monthly bill, call them because they will work with you, they love you, they care.
Yeah right.
They care because they are experiencing so many defaults right now they can't see straight. When people are forced to choose between paying their credit cards and buying food and covering the mortgage, of COURSE they are going to choose to buy food and pay the mortgage, not send more money to the greedy CC companies. Many people are already paying 29% or up to 33% interest plus penalties for making a single late payment. This does NOT build trust and love, you know? The credit card companies have been acting in bad faith for years and exploiting and terrorizing their customers, and now that things are bad they want people to imagine they will work with them? People aren't that stupid.
Plus, you have to wonder how they can be in such trouble after charging people these usurious rates for years and years.
I don't think we can stop this freight train at this point, I really don't. People will default on the cards because 1) they can't pay them anyway, and 2) they hate those companies with a passion and feel they deserve to fall. They will spend their money on food and survival. At some point, the money will become nearly worthless and even that won't be possible.
Cheery, I know. That's how it looks to me though.
If you only have one credit card, Tony, I would agree. I am talking about people over the top in debt. If your credit situation exceeds the garnishment dollar amount then this can be considered, don't you think? If the garnishment is potentially more, then there isn't much you can do is there?
i dont buy this 100% I would advise to keep your credit good buy paying the min only. Example you owe 700 bucks on your card and your min is 15 bucks. Yep you are getting hosed with interest, but say you pay off the card, now your 700 bucks in the hole. If your CC company goes under or re-evaluates you and decides you are not worthy, you could be out your cash on hand. When things get better, and they will...someday... your credit is good and then you can pay off your card.
bgamall says:
9 months ago
Exactly, and where is the credit going to come from? The golden egg of world prosperity, the middle class of the United States, has been abused and tapped out. The only way they can spend is to quit paying their credit cards. And save too!