I found this Post among Mark Thoma’s improbable spread; I simply do not know How he finds the time. I am like The Economist article cited and believe in the ‘new normal’,though I expect for a much different reason. There is a group of capital accumulators, which I call the Plungers, who believe that Wealth resides in the construction of the better mousetrap. They are traditionally dedicated to finding and funding new ideas, as they rightfully believe they can make a fortune with the ideas which are successful. They operate on the real concept that a small initial amount of capital will generate a Sale price much greater. The real element behind this concept lies in expected capital construction. This is not to say that they have no ordinary investments, yet these investments are likely managed by trusts or other such style groupings, where the Investor has little input though it generates a high Income. The end-result is that these Investors always search for new capital opportunity, and therefore, never return to investments where the capital formation has already been achieved. They simply continually search for a source of capital themselves, which is not managed. They will never return after a Recession to the area, simply because of the accomplished capital formation, even though their own base of capitalization has not been significantly damaged.
What I noticed in this article must be the lack of disincentives placed in the road of Credit-Card holders. There is something definitively wrong about Credit extenders who make money by extending Credit to poor Risk requests. Everyone knows that they make money from this extension, even with the rate of failure associated, and that these failures are not connected with their own performance for which they receive Bonus awards. The new law is supposed to affect the bad effects upon Credit-Card holders, but no one will do anything which will have any impact at the Retail counter. Here is where Change has to be made, and traditional bull about the insecurity of youthful financial decisions has nothing to do with it.
I have been asked by a couple of people to myself outline a sufficient law to regulate Credit Cards. Here is what I would do:
1) Credit Cards could not be utilized for purchases less than $100 of total accumulation of Products. Only Debit Cards or Cash can be utilized for less than the above total amount.
2) Credit Cards must electronically notify the Card holder of his balance before he can make a further purchase.
3) Credit expansions on any Card can only be made with prior record of 12 successful payments on the previous balance. Credit limits are to establish at $1000, $10,000, and $20,000; no accumulations larger than that amount.
4) All Credit Card Issuers must bill through one Agency, who must notify Card Issuers of any excess over the previous Credit limits. Additional agencies must at least coordinate their financial information.
5) An administrative Bankruptcy procedure must be created specifically for Credit Cards, based solely on filed Paperwork, where binding payment is enforced upon both Card Holder and Issuer, and further Credit cannot be extended until a required Payment level is paid in entirety. This is to be an automatic procedure which must be undergone with failure of Six payments of sufficient payment.