The Barber Shoppe Gazette: Finance

Showing posts with label Finance. Show all posts

Sunday, January 07, 2007

Ron Paul: Decline Of The U.S. Dollar

COMMENTARY / CONGRESSMAN RON PAUL COMMENTS ON THE DEVALUATION OF THE U.S. DOLLAR

Congressman Ron Paul

Smiley Flag Waver At some point Americans must realize that Congress, and the Federal Reserve system that permits the creation of new money by fiat, are the real culprits in the erosion of your personal savings and buying power. Congress relentlessly spends more than the Treasury collects in taxes each year, which means the U.S. government must either borrow or print money to operate -- both of which cause the value of the dollar to drop. When we borrow a billion dollars every day simply to run the government, and when the Federal Reserve increases the money supply by trillions of dollars in just 15 years, we hardly can expect our dollars to increase in value.

The World's Reserve Currency

January 1, 2007

The financial press reported last week that the euro, the new currency created only five years ago and used by most European nations, has supplanted the U.S. dollar as the most widely used form of cash internationally. There are now more Euros in circulation worldwide than dollars.

This alone is not necessarily troubling, as the dollar remains the world’s most important reserve currency. About 65% of foreign central bank exchange reserves are still held in dollars, versus only about 25% in euros. And the European Central Bank faces the same inflationary pressures that our own Federal Reserve Bank Governors face, including a growing entitlement burden that threatens economic ruin as both societies age. European politicians want to spend money just as badly as American politicians, and undoubtedly will clamor to inflate -- and thus devalue -- the euro to fund their creaky social welfare systems.

Still, the rise of the Euro internationally is another sign that the U.S. dollar is not what it used to be. There is increasing pressure on nations to buy and sell oil in euros, and anecdotal evidence suggests that drug dealers and money launderers now prefer euros to dollars. Historically, the underground cash economy has always sought the most stable and valuable paper currency to conduct business.

More importantly, our greatest benefactors for the last twenty years -- Asian central banks -- have lost their appetite for holding U.S. dollars. China, Japan, and Asia in general have been happy to hold U.S. debt instruments in recent decades, but they will not prop up our spending habits forever. Foreign central banks understand that American leaders do not have the discipline to maintain a stable currency. When the rest of the world finally abandons the dollar as the global reserve currency, both Congress and American consumers will find borrowing money a more expensive proposition.

Remember, America can maintain a large trade deficit only if foreign banks continue to hold large numbers of dollars as their reserve currency. Our entire consumption economy is based on the willingness of foreigners to hold U.S. debt. We face a reordering of the entire world economy if the federal government cannot print, borrow, and spend money at a rate that satisfies its endless appetite for deficit spending.

At some point Americans must realize that Congress, and the Federal Reserve system that permits the creation of new money by fiat, are the real culprits in the erosion of your personal savings and buying power. Congress relentlessly spends more than the Treasury collects in taxes each year, which means the U.S. government must either borrow or print money to operate -- both of which cause the value of the dollar to drop. When we borrow a billion dollars every day simply to run the government, and when the Federal Reserve increases the money supply by trillions of dollars in just 15 years, we hardly can expect our dollars to increase in value.

All logos, trademarks and postings on this site are property of their respective owner(s).

Send A Link For This Article To A Friend

Send an e-mail message with a link to this article to anyone/everyone in your address book. Click on e-mail [envelope] icon, below

Tuesday, December 12, 2006

Holiday Spendthrifts: Credit Card Hangover Coming

ECONOMY - FINANCE - MONEY / CHRISTMAS HOLIDAY BLOWOUT -- PLASTIC MONEY SPENDTHRIFTS BUYING LOADS OF EXPENSIVE ELECTRONIC HOLIDAY GIFTS WITH MONEY THEY DON'T HAVE

ATT Worldnet

ABC News

Irresponsible Spending-On-Credit Sprees Falsely Portray Government Economic Figures As "Robust," Without Regard For Subsequent Individual Financial Consequences and Losses...

Federal Reserve Corporation Bankers Take Advantage of Plastic Money Consumers With Excessive Credit Card Interest, Late Payment Rates, Doubled Minimum-Due Payments And Over-The-Limit Fees ...

Smiley Flag Waver Many budgets are already squeezed by the new minimum payments. The typical monthly minimum doubled -- rising from about 2 percent to 4 percent . That can equate to a hefty increase for someone paying off the average debt of $9,000 -- as much as $400 per month more. So it's important to be conscious of the debt you're incurring to buy gifts for friends and loved ones during the holiday season.

Annual percentage rates on your credit card can, and often will, skyrocket if you make late payments. Rates have been known to jump to as much as 30 to 40 percent, should you make a late payment. On top of this, consumers can get hit with late fees ranging from $25 to $50 and over-the-limit fees ranging from $25 to $39.

If holiday shoppers using plastic money would stop a moment to think about the average 14.55 to 16.34 percent additional interest rates they are paying on the price, sales tax, and/or shipping and handling charges of gifts they are purchasing with money they don't have, in addition to any other late payment and over-the-limit fees they may also accumulate, they would come to the realization that they are not really getting that advertised sale bargain after all.

Business News

Holiday Spenders Beware: Credit Card Hangover Coming

~ December 12, 2006

For many Americans, it's an annual tradition that goes hand-in-hand with eggnog and mistletoe -- millions of people will charge millions of dollars on their credit cards this holiday shopping season. Of course, it's easy to pull out the plastic in the weeks leading up to the holidays, but much more difficult when those bills come due in 2007. More than 115 million Americans carry monthly credit card debt, with the average American debt around $9,000, according to Cardweb.com. And many of those paying off a high balance were surprised when the minimum monthly payment due rose during the past year. The Office of the Comptroller of the Currency, a bureau of the U.S. Treasury Department and a watchdog to protect consumers from abusive and deceptive credit card practices, cracked down with tougher guidelines on interest rates, marketing tactics, and account management practices. The higher rates will help consumers pay off their debt more quickly, but many budgets were squeezed by the new minimum payments. The typical monthly minimum doubled -- rising from about 2 percent to 4 percent . That can equate to a hefty increase for someone paying off the average debt of $9,000 -- as much as $400 per month more. So it's important to be conscious of the debt you're incurring to buy gifts for friends and loved ones during the holiday season.

Find the Lowest Rate, and Pay On Time

For starters, it's best to choose a credit card that has the lowest possible annual percentage rate, or APR. Read the credit card agreement closely to find out what, if any, annual charges you'll have to pay on top of the finance charges. Keep in mind that the annual percentage rate on your credit card can, and often will, skyrocket if you make late payments. Rates have been known to jump to as much as 30 to 40 percent, should you make a late payment. On top of this, consumers can get hit with late fees ranging from $25 to $50 and over-the-limit fees ranging from $25 to $39.

Under current credit card structures, financially strapped consumers making minimum payments each month are not able to get out from under the layer of penalties and interest rates. Federal banking officials are pressuring banks to reduce interest rates, which would be a huge victory for consumers.

What Can You Do Now?

Read the fine print. Your credit card agreement is one document you absolutely must read. All actions the credit card company is entitled to take regarding your credit card will be spelled out in fine print. Pay careful attention to the wording around interest rates, late fees and payment dates. Additionally, if there are sections or clauses you do not understand, highlight them and call your credit card company before using the card and get clarification before falling victim to a very costly misunderstanding.

Pay highest balances and high interest rates first. If you have more than one credit card, pay off the card for which you are closest to your credit limit. Your credit score takes a hit when credit card balances climb high and approach the maximum. Also, pay off the cards with the highest interest rates as every extra dollar can add up quickly.

Keep only one credit card. With so many credit card options, it is important to choose the card that best suits your finances. For example, if you know you are definitely going to carry a balance, select a card with a low interest rate, or if you may be tempted to spend beyond your means, go with a card with a low spending limit. Additionally, keeping only one card makes it much easier to keep track of your card's rules and allows you to avoid the paper chase of multiple cards.

Negotiate a Lower Rate

If you're stuck with a card that has a high interest rate, it might be possible to call your card provider and negotiate a lower rate. The best way to navigate the fee maze and negotiate the best rate and fairest payment terms is by calling your credit card company directly. For example, if you have good credit and a track record of paying on time and you miss one payment for any reason, a call to the card company can usually stave off any finance charges or an interest rate increase for a one-time occurrence. In one study, more than half of the people who tried to negotiate a lower interest rate were successful with just a five-minute phone call. Last year, three "Good Morning America" staffers tried to lower their rates and were successful.

The "GMA" test found that negotiating was more successful when you had a standard credit card without incentives like frequent flier miles or cash back. It also helped to know your credit score, so you know how attractive a customer you are to the credit card company. It also helped to mention the myriad of competing credit card offers you were getting in the mail.

Negotiating a lower interest rate can save you a lot of money. For example, if you have $10,000 worth of debt and you lower the interest rate by 6 percentage points, you can save $600 a year in interest payments.

If a credit card company will not lower its rates, it may be time to consider a new credit card. There are some nonprofit groups that track credit card companies that offer low interest rates. For more information, visit www.federalreserve.gov/pubs/shop/survey.htm or www.cardweb.com/perl/cardlocator/survey/lowrate.

Credit Cards and Travel

If you have holiday travel plans, particularly travel abroad, there are some key tips: For years, the big credit card companies have levied a 1 percent fee on international transactions. And the banks that issue those cards have been known to tack on additional fees of 1 percent to 2 percent. These are often called "currency-conversion fees" or "foreign transaction fees." (You'll also be charged a fee for withdrawing cash using your ATM card, so there's no way to avoid fees completely.)

So, how can a smart traveler avoid -- or at least reduce -- these fees? Here are a few suggestions:

Ask about fees. While fees sometimes are built into the price on your statement, it's increasingly common that they're broken out as line items to help you know what they are paying. Even so, it's smart to make a call before your trip to get the whole story. Carefully quiz your bank or credit card company about what "international" fees come with using your card overseas. Even if your credit card company charged you no fees the last time you went to Europe, there's a good chance it does now. Call and ask before you go.

If you're getting a bad deal, get a new credit card. Some companies offer far lower international fees than others -- and a handful don't charge any fees at all. Capital One has a particularly good reputation for international transactions (www.capitalone.com) -- for now. If you're going on a long trip, do some research and consider taking out a card just for international purchases.

The bottom line. Here's the best formula for saving money as you travel: Pay for as much as possible with cash, using a bank that charges low rates for international ATM transactions.

Some Help May Be on the Way

In the last four months, the Federal Reserve Board has not raised intrest rates, reversing a two-year trend of interest rate hikes to slow inflation. The Fed funds rate affects many consumer credit vehicles, including credit cards. Some economists believe that the Fed could begin lowering rates next year, which could ease the burden of those high interest rates that many consumers are paying on credit card debt. A Wall Street Journal poll of prominent economists shows that, on average, most expect a quarter-point rate cut by June of 2007. That will mean an instant benefit for people carrying a balance on their credit cards. Most card rates are based on the prime rate, which moves up and down when the Fed funds rate changes. It is typically 3 percent above the Fed funds rate, which currently sits at 5.25 percent. CardWeb.com says the national average for variable rate cards is 16.34 percent today (14.55 percent for fixed rate cards). Those averages would likely come down slightly as soon as a Fed rate cut is announced. But of course, the best remedy to all of these post-holiday credit headaches is a simple one: don't overspend. And as always, that's often easier said that done. ABC News personal finance contributor Mellody Hobson contributed to this report.

E-Mail To A Friend Send A Link For This Article To A Friend

Send an e-mail message with a link to this article to anyone/everyone in your address book. Click on e-mail [envelope] icon, below

Housing Market Continues To Collapse

HOUSING - REAL ESTATE / HOUSING MARKET CONTINUES TO COLLAPSE - POSSIBLE FINANCIAL MELTDOWN FORESEEN

The Washington Times

Communist Democrat's Socialist Economics 101 ...

Smiley Flag Waver

Despite the growing dangers, substantial risks to the economy and financial markets from the deepening recession in the housing market, and possible mortgage-finance crisis, Democrat Rep. Barney Frank, incoming chairman of the House Financial Services Committee, welcomes the housing market crisis, indicating that recent large drops in home prices make housing more affordable for young people and minority buyers.

"... If a few speculators get burned, that's just icing on the cake," says Frank.

Risky Mortgages Imperil Market

~ By Patrice Hill
THE WASHINGTON TIMES
December 12, 2006

The risk of a financial crisis is growing as home prices continue to fall and questionable mortgages made in the past two years go into default, finance officials warned yesterday.

Banks and mortgage brokers have been passing along to unwary investors as much as $600 billion a year in risky mortgages they made through untested channels in the junk-bond market. That raises the threat of a financial crisis beyond the ability of the Federal Reserve to remedy, said Lewis Ranieri, the Wall Street guru who is widely credited with creating the multitrillion-dollar market for mortgage-backed securities in the 1980s and 1990s.

Bank regulators told the National Housing Forum here yesterday that they have found major banks punting to investors questionable mortgages they could not legally keep in their own loan portfolios. Mr. Ranieri said brokers on Wall Street have raised the risks by repackaging the mortgages in deceptive and opaque ways so that the small investors and foreigners who buy them are unable to understand the risks.

"No securities market can stand if we do not have true disclosure, and we do not have true disclosure" of the growing risks of exotic mortgages whose payments can double overnight and force buyers into default, said Mr. Ranieri. "This stuff doesn't just get sold to [professional] money managers. It gets sold to the public and to foreign investors who don't have a clue what to look for."

Allen Sinai, chief global economist at Decision Economics; Richard A. Brown, chief economist at the Federal Deposit Insurance Corp.; and several other economists and regulators attending the forum also emphasized the substantial risks to the economy and financial markets from the deepening recession in the housing market and possible mortgage-finance crisis.

Despite the growing dangers, Rep. Barney Frank, incoming chairman of the House Financial Services Committee, indicated he saw no reason for federal legislation to better regulate the mortgage markets to prevent a possible financial meltdown.

He said he welcomes recent large drops in home prices because it makes housing more affordable for young people and minority buyers.

"Housing suffered from irrational exuberance" during the first part of the decade, though it fell short of being a full-blown bubble, the Massachusetts Democrat said. "The end result of a 10 percent drop in many parts of the country will be a more rational housing market. ... If a few speculators get burned, that's just icing on the cake."

Mr. Frank noted that a few years ago, consumers were expected to devote about 25 percent of their income to house payments. Today, however, consumers expect their homes to contribute 25 percent to their income -- through cash-out refinancings and other techniques that have come into vogue, he said. "Let's get back to the normal situation."

A top national bank regulator said many banks are continuing to offer consumers loans they cannot afford when their teaser interest rates expire and payments rise to reflect market conditions. Some banks are selling the questionable loans to investors to avoid keeping them in their portfolios, where they would be unacceptable to regulators, said Kathryn Dick, deputy comptroller at the Office of the Comptroller of the Currency.

Consumers also may be unaware of the risks inherent in these adjustable-payment loans, she said, because they are not getting full disclosure or are getting information too late to prevent them from closing on the loans.

Mr. Ranieri said the riskiest loans were made in the past two years as banks and brokers strived to help consumers qualify for high-priced homes that were beyond their reach. Loan innovations and loose lending standards have continued despite efforts by a group of five federal banking regulators to limit such loans, he said.

"We have a tremendously powerful mortgage-backed securities market. This market is unfettered in its enthusiasm and unchecked by regulation," Mr. Ranieri said. "The interagency task force can't touch it. The capital is coming from international markets."

Mr. Ranieri said that brokers are even bypassing the traditional market for mortgage-backed securities that he helped create. Instead, they are bundling the riskiest mortgages together and offering them as "collateralized debt obligations" on the corporate bond market. The offering documents often do not explain the serious risks involved with the mortgages in a declining housing market, he said.

One recent offering failed to disclose to investors that the homeowners not only were faced with high adjustable payments that they might have difficulty paying, but they had financed 100 percent of their purchase and had no equity in their houses -- something that greatly increases their likelihood of default.

Mr. Ranieri said the quality of loans has fallen so much recently that his firm has stopped buying whole mortgages for repackaging into mortgage-backed securities. He recently rejected some mortgages offered to the firm. He said he asked what the broker would do with the loans, and was told they would be sold to investors in the junk-bond market.

The only federal regulator with jurisdiction over the burgeoning market for such securities is the Securities and Exchange Commission, Mr. Ranieri said. But the SEC seems to be largely unaware of what's going on in the mortgage market, he said.

E-Mail To A Friend Send A Link For This Article To A Friend

Send an e-mail message with a link to this article to anyone/everyone in your address book. Click on e-mail [envelope] icon, below

Friday, October 27, 2006

Home Prices See Largest Tumble In 35 Years

ECONOMY / HOME PRICES SEE LARGEST TUMBLE IN 35 YEARS

Money News

Smiley Flag Waver The median home price dropped to $217,000 in September from $239,300 in August. That was the lowest median price since September 2004. The 9.7 percent plunge was the sharpest year-over-year decline since December 1970.

When homebuilders need to slash prices to lure a somewhat larger percentage of buyers than the month before, it really means they’ll need to slash prices even more next month to get that many more buyers to bite. In other words, when prices start falling, most people wait to see if prices will keep falling before they rush in.

The freefall in home prices is far from over.

Breaking News From MoneyNews.com

Largest Home Price Tumble in 35 Years

The median price of a new home plunged 9.7 percent in September from a year ago, the largest drop in more than 35 years, reports the Commerce Department.

The median home price dropped to $217,000 in September from $239,300 in August. That was the lowest median price since September 2004. The 9.7 percent plunge was the sharpest year-over-year decline since December 1970.

The plunge in new home prices follows a record plunge in existing home prices. As MoneyNews told readers yesterday, the 2.5 percent year-over-year decline in existing home prices was the biggest in the National Association of Realtor’s nearly 40-year record.

Clearly home prices across the board are in the midst of a serious correction, one which our sister publication, Financial Intelligence Report, told readers about months ago. Both Sir John Templeton and Yale professor and real estate expert Robert Shiller told FIR readers that they expected the housing market correction to result in prices plunging downwards of 40 percent. And, unfortunately, it looks like their predictions will be spot on.

Former Federal Reserve Chairman Alan Greenspan doesn’t agree. The chief architect of the housing bubble said Thursday that the housing market isn’t in dire straits.

"Most of the negatives in housing are probably behind us," Greenspan told a conference sponsored by the Commercial Finance Association. "The fourth quarter should be reasonably good, certainly better than the third quarter."

Greenspan retired as Fed chairman in February of this year. He slashed interest rates from 6 percent in January 2001 to 1 percent in June 2003 to avoid a recession following the bursting tech bubble. In that low interest rate environment, the housing sector surged.

"There are early signs of stabilization [in housing]," Greenspan tells his audience. But he did concede that, "It’s [the housing slump] not over."

"The evidence is that we’re beginning to see a flattening in statistics for sales of new homes," he continued. "The rate of construction is well below the rate of purchases."

He added that buyers were "beginning to dig into the inventories of unsold homes."

Greenspan’s remarks run counter to current Fed Chairman Ben Bernanke, who said on Oct. 5 that the housing slump is "one of the major drags causing the economy to slow now." Bernanke estimates that the "substantial correction" in housing will shave 1 percent off the nation’s economic growth in the second half of 2006.

To “dig into” those inventories, homebuilders are slashing prices on homes and boosting incentives such as free pools, wood floors, and other upgrades to attract buyers. And to some extent, buyers did come trickling in this month.

New home sales rose for the second consecutive month in September, increasing 5.3 percent. However, that follows three months of sales declines from May to July. And sales are still down 14.2 percent from a year ago. New homes on the market fell to 557,000 from 568,000 in August. That represents a still higher-than-average 6.4 months worth of inventory at the current sales pace.

Though Alan Greenspan may present the higher sales and shrinking inventories as a sign that the housing slump is stabilizing, the plunge in prices is proof that that’s not the case.

When homebuilders need to slash prices to lure a somewhat larger percentage of buyers than the month before, it really means they’ll need to slash prices even more next month to get that many more buyers to bite. In other words, when prices start falling, most people wait to see if prices will keep falling before they rush in.

The freefall in home prices is far from over.

NewsMax.com
4152 West Blue Heron Blvd, Ste 1114
Riviera Beach, FL, 33404 USA