Charge Cards and Recessions

Here is Action which suits my Taste. The multiplicity of Credit Card charges remains the great abomination of the financial world. Card companies use the complexity of fees, all of varying rate levels and unknown rate-fixing policy, to impose whatever Card Costs they require to remove any Risk from themselves. Central Banks or Government Regulation should have forestalled this practice long before, it being a constraint of Trade and elimination of Competition. Annual fees should be forbidden, to cut discriminatory charges for non-use of the Card; a $50 annual fee requires an average of 14 Credit transactions with any Card to prevent Violations of most usury laws still on the Books of some States (Debit transactions, and Credit charges paid within 30 Days of Billing, will run into usury violation unless monthly balances average about $700 per month for over four months). Exchange Costs are business costs which should be integral to the adaptability of the Cards, and are the responsibility of the Card companies themselves; not mechanical Costs to be borne by the Card-Holders. Card companies should be legally bound to charge a unitary Charge of a percentage rate of the Amounts utilized, based upon the length of time which the funds are used, and the largesse of the outstanding balance.

A Translation of such Credit Card practice would be a 0.5% charge on the first $1,000 for the first month, 0.75% charge on the next $3,000 borrowed in the first month, and 1% for amounts over $4,000 for the first month. Delay of Payment past the first month should raise all Charges to 1% per month for the remaining balance. No other financial charges should legally be allowed, with Card companies allowed the sole venue of setting Credit limits to reduce Risk. The real heart of any such legislation or policy would be prevention of Charge Rate increases above 12% per year, unless Central Banks funds rate raise to within 5% of the allowed Rate limit–above 7% per year. Such a policy would establish sound banking practice for the Credit Card industry, and prevent the distortion of Consumer information which is currently existent.

This Piece from Larry Summers, coming by venue of Mark Thoma, outlines the fight I need make against the current trend of Economic Thought, from both Liberal and Conservative sides. A Tax Cut of the amount proposed, $50-75 billion, would be swallowed by the Economy considering its current size, and would do nothing to alleviate the root causes for the malaise. It would simply be throwing Good Money after Bad. Reality states that the Economy has to bleed out all the inflated evaluations generated by bad Fed policy in the Past, and harried Homeowners must accept about a 30% depreciation in Home values. Banks will be forced to engage in renegotiation of Mortgages at lower Rates, or face the loss of value incurred in Foreclosures. It is actually a relatively good time for a Recession, with most business and industry incapable of Layoffs or Downsizing, without loss of sustainable productive labor. We have seen all types of Recessions, this may be Our first No-Layoff Recession. lgl