Monday, December 15, 2008

Help me with this.

I'm no economist, so there are a lot of things that don't make sense to me. Consider this:
...with uncertainty about the auto sector, the Fed's policy meeting on Monday and Tuesday will also remain in focus. The central bank is expected to lower its benchmark fed funds rate by a half-percentage point to 0.5 percent.
That's great for people with adjustable-rate mortgages, since their payments will go just about as low as they can. Meanwhile, credit card interest rates are still in the 15 to 22 percent range. Why? What it tells me is that our government is in the back pocket of the credit card companies. If not, then how can you explain the fact that the Fed is lending money out at almost zero percent and Citibank and your local department store are charging 18 percent? I can't be the only one who wonders about stuff like that.
Our government is in a big hurry (supposedly) to help banks and auto makers, but the real catastrophe is going on with people paying 20 percent on their credit cards. It seems to me that a great way to stimulate the economy would be to lower the rates that people are paying on the money they've borrowed. You can't stimulate spending if people are still paying interest on their debt. Those 600-dollar checks that went out earlier this year evaporated in the heat of the interest that consumers were paying. It never had a chance.
I'd think that the best way to help put the economy back on its feet is to get the banks off our backs.
I remember seeing an investment guru on CNBC several years ago, explaining what great investments banks were. When asked why, he said, "What other business do you know that can pay 2 percent interest and charge 20?" That's an instant 18-percent margin for doing nothing but processing paperwork.
There's a lot of teeth-gnashing and hand-wringing going on over companies like Ford and General Motors who can't find their ass with both hands, while consumers are buried in debt that nobody seems willing to help them with. That's bad sentence structure, but it's even worse economics.
But I'm no economist.
Those are the guys who helped get us in this mess.


kimmyk said...

i never thought about that...

way to be on your thinking toes there anthony.

in the past two months we've paid off 6 credit cards and destroyed them. we have 3 more credit cards (please know that the 6 we paid off i was completely and utterly UNaware we had them until one day I found them....mmhmm....needless to say that did not go over well....) but only 1 of those 3 have a balance. once thats paid....snip snip too.

i believe in keeping only 1 for an emergency....big emergency.

Ladyred said...

well I only have two. but one is kind of high for me since i'm not working much yet. i have not missed a payment, and my rate is lower than any of the rates listed here, but i called them to ask for a lower rate. they denied me. i said why if the government has been reducing rates. no reason for me hehe. heck worth a shot.