In 1861, the first $10 bill was issued near the outset of the Civil War.
It featured a portrait of Lincoln and is the only time a sitting president appeared on U.S. currency.
In 1861, a $10 bill could have bought you an entire barrel of flour, a month’s stay in a New York City tenement, or a ride on the Great Eastern steamship from Manhattan to Cape May, New Jersey.
In 1901, the $10 bill depicted explorers Lewis & Clark on the edges with a large American bison in the middle, and bought you ten private ballroom-dancing classes, a housepainter’s labor for eight days or a full eye exam and 10 pairs of glasses.
In 1929, all U.S. currency was changed to its standard size of today. Despite the popular belief, the car on your 1929 standardized $10 bill is not a Model T Ford, but a composite of cars from the day. In 1929, your $10 bill got you a year’s worth of accident and sickness insurance, a waffle iron, or a one-minute phone call from New York City to London.
In 1942, just after the bombing of Pearl Harbor by the Japanese, special $10 bills were printed for Hawaii with the state’s name printed on the front and back and the serial numbers printed in brown ink instead of red. This was done so that if the Japanese invaded Hawaii, the U.S. Treasury would declare these $10 bills worthless.
Keep an eye out for the new $10 bill coming early in 2006. Its design is still mostly green, but now features shades of orange, yellow and red and has renderings of the Statue of Liberty torch and the words, "We The People..."
Thursday, December 1, 2005
Monday, November 14, 2005
Bibendum, The Michelin Man...
We all know him and just about all of us love him, whether or not we’ve ever purchased his tires, but how much do we really know about the Michelin Man?
I hadn’t given him much thought until my wife pointed out that the Michelin tires I bought a few months back had the Michelin Man right on the sidewall. Then, just a few weeks ago, there was an article about him in Fortune Magazine, so I just had to read it.
His name his Bibendum, which is a Latin gerundive which means, "Drinking to be done." To understand why they gave him a name synonymous with drinking, you must remember that 107 years ago, only wealthy well-to-do’s could afford cars and drinking and driving wasn’t really frowned upon yet.
Though he has become such a lasting icon, Bibendum came from pretty simple beginnings. Bibendum first came to the mind of Edouard Michelin when he and his brother Andres were at an auto expo in Lyon in 1894 and Edouard commented that some stacks of tires in a row looked like a line-up of tire men...all you had to do was add the arms.
It was just four years later in 1898 that Bibendum appeared in his first Michelin ad, a poster that depicted him as being so tough that he was eating broken glass.
Later in 1898, Bibendum was depicted as having just triumphed over two other tire men in a fight who looked notably like John Boyd Dunlop and the then-chief of Continental Tire.
Bibendum as a mascot made his debut in Paris in 1898 as well when an actor was paid to stand behind a cardboard cut-out of Bibendum at a cycle show to entertain the show’s patrons.
Bibendum was so popular an attraction at the show that Michelin’s rivals started shoving patrons, trying to get them away from the Michelin exhibit, and police had to be called in to restrain them.
It might seem a little much, but early tire manufacturing was a very competitive business that in those days catered only to the folks who were affluent enough to be able to afford motorized, wheeled transportation.
The industry's competitiveness even sparked a series of Bibendum ads in the early 1900s that had him standing in triumph, sword-in-hand, over fields of battered and bloodied tire men, crying out for mercy.
Then, in 1914, we finally saw the makings of the Bibendum of today when he appeared in an ad as a middle-aged good samaritan driver, cigar-in-mouth, lending a fellow motorist his best tire from his mid-section.
Today, you can catch the Michelin Man at auto expos and trade shows. Due to the risk of liability in today’s world, the actor inside Bibendum is under strict instructions not to say anything. Bibendum will take a picture with you, but he won’t put his arm around you, and keep his hands visible in front of him at all times. They’ve kept his name, but you won’t see today’s Bibendum bibending anymore...
I hadn’t given him much thought until my wife pointed out that the Michelin tires I bought a few months back had the Michelin Man right on the sidewall. Then, just a few weeks ago, there was an article about him in Fortune Magazine, so I just had to read it.
His name his Bibendum, which is a Latin gerundive which means, "Drinking to be done." To understand why they gave him a name synonymous with drinking, you must remember that 107 years ago, only wealthy well-to-do’s could afford cars and drinking and driving wasn’t really frowned upon yet.
Though he has become such a lasting icon, Bibendum came from pretty simple beginnings. Bibendum first came to the mind of Edouard Michelin when he and his brother Andres were at an auto expo in Lyon in 1894 and Edouard commented that some stacks of tires in a row looked like a line-up of tire men...all you had to do was add the arms.
It was just four years later in 1898 that Bibendum appeared in his first Michelin ad, a poster that depicted him as being so tough that he was eating broken glass.
Later in 1898, Bibendum was depicted as having just triumphed over two other tire men in a fight who looked notably like John Boyd Dunlop and the then-chief of Continental Tire.
Bibendum as a mascot made his debut in Paris in 1898 as well when an actor was paid to stand behind a cardboard cut-out of Bibendum at a cycle show to entertain the show’s patrons.
Bibendum was so popular an attraction at the show that Michelin’s rivals started shoving patrons, trying to get them away from the Michelin exhibit, and police had to be called in to restrain them.
It might seem a little much, but early tire manufacturing was a very competitive business that in those days catered only to the folks who were affluent enough to be able to afford motorized, wheeled transportation.
The industry's competitiveness even sparked a series of Bibendum ads in the early 1900s that had him standing in triumph, sword-in-hand, over fields of battered and bloodied tire men, crying out for mercy.
Then, in 1914, we finally saw the makings of the Bibendum of today when he appeared in an ad as a middle-aged good samaritan driver, cigar-in-mouth, lending a fellow motorist his best tire from his mid-section.
Today, you can catch the Michelin Man at auto expos and trade shows. Due to the risk of liability in today’s world, the actor inside Bibendum is under strict instructions not to say anything. Bibendum will take a picture with you, but he won’t put his arm around you, and keep his hands visible in front of him at all times. They’ve kept his name, but you won’t see today’s Bibendum bibending anymore...
Thursday, October 13, 2005
Some Snacking Milestones
Doughnuts without holes existed in medieval Europe, but it is said that in 1847 a Maine sea captain by the name of Hanson Crockett poked out the pastry’s center to fit over the handles of a ship’s wheel, thus giving us the doughnut as it is today.
In 1896, Louis Rueckheim gives his popcorn snack to a salesman, who tries it and says, "That’s crackerjack!" It is a real word...look it up. Rueckheim trademarks the word.
In 1916, Antonio Gentille, a 14 year-old from Virginia, wins the Planter’s peanut logo contest by creating Mr. Peanut. He receives $5 as his prize. The hat, monocle, cane and gloves are then added by a professional artist.
In 1930, the Mars company creates a candy bar and names it after the family’s horse, Snickers.
In 1930, Jimmy Dewar, manager of the Hostess bakery in Chicago, creates the first Twinkie, filled with banana cream. He gives the cakes their name after seeing a billboard for Twinkle Toe Shoes. The banana filling remains until World War II when America has a banana shortage, forcing the switch to vanilla.
In 1932, after tasting Fritos in a San Antonio cafe, struggling ice cream maker Elmer Doolin purchases the recipe for $100. He makes the chips in his mom’s kitchen and distributes them in his car.
In 1941, M&M’s are first sold, primarily to the American military. The coating that prevents the candies from melting in your hand makes them a popular snack for soldiers in any climate, say even Northern Africa.
In 1965, Lay’s potato chips, which already have the "Betcha can’t eat just one" slogan, become the first chips to be sold nationally.
In 1896, Louis Rueckheim gives his popcorn snack to a salesman, who tries it and says, "That’s crackerjack!" It is a real word...look it up. Rueckheim trademarks the word.
In 1916, Antonio Gentille, a 14 year-old from Virginia, wins the Planter’s peanut logo contest by creating Mr. Peanut. He receives $5 as his prize. The hat, monocle, cane and gloves are then added by a professional artist.
In 1930, the Mars company creates a candy bar and names it after the family’s horse, Snickers.
In 1930, Jimmy Dewar, manager of the Hostess bakery in Chicago, creates the first Twinkie, filled with banana cream. He gives the cakes their name after seeing a billboard for Twinkle Toe Shoes. The banana filling remains until World War II when America has a banana shortage, forcing the switch to vanilla.
In 1932, after tasting Fritos in a San Antonio cafe, struggling ice cream maker Elmer Doolin purchases the recipe for $100. He makes the chips in his mom’s kitchen and distributes them in his car.
In 1941, M&M’s are first sold, primarily to the American military. The coating that prevents the candies from melting in your hand makes them a popular snack for soldiers in any climate, say even Northern Africa.
In 1965, Lay’s potato chips, which already have the "Betcha can’t eat just one" slogan, become the first chips to be sold nationally.
Thursday, June 9, 2005
Know We're Paying For That?
When you depsoit your money in the bank, you feel comfortable because of those FDIC plates that tell you that your money is insured.
Well, it is true that your money is insured, but here is something that you may not have known...if the U.S. Government had to pay out on that FDIC insurance on a mass scale, it could total up to $3.4 trillion based on current deposit rates.
Where do you think the U.S. Government will get that $3.4 trillion dollars when it needs it? Why from the citizens, of course, through a tax hike, where else?
Here are some other things that you might not know.
The U.S. Government insures American farmers - we all know that - but did you know that the potential for loss could be as high as $41 billion in a single farm season?
When you buy flood insurance, chances are that you are buying that flood insurance from the U.S. Government because almost all private insurance companies will not take on the risk. An unheard-of catastrophic flood season could potentially carry a bill for the tax-payers of $643 billion.
How about nuclear power plants? Did you know that once an accident bill at a nuclear power plant exceeds $9.4 billion, there are laws in place that say every penny over that amount will be paid for by the U.S. Government, again, meaning the tax-payers?
Now, here is the real kicker. You might work a job where you have no pension, or no retirement plan, but when the U.S. Government steps in to bail out failed pension plans through The Pension Benefit Guaranty Corp., it uses your income tax dollars to bail out the pension. It doesn’t matter what side of the political spectrum you are on...that’s gotta upset you.
Well, it is true that your money is insured, but here is something that you may not have known...if the U.S. Government had to pay out on that FDIC insurance on a mass scale, it could total up to $3.4 trillion based on current deposit rates.
Where do you think the U.S. Government will get that $3.4 trillion dollars when it needs it? Why from the citizens, of course, through a tax hike, where else?
Here are some other things that you might not know.
The U.S. Government insures American farmers - we all know that - but did you know that the potential for loss could be as high as $41 billion in a single farm season?
When you buy flood insurance, chances are that you are buying that flood insurance from the U.S. Government because almost all private insurance companies will not take on the risk. An unheard-of catastrophic flood season could potentially carry a bill for the tax-payers of $643 billion.
How about nuclear power plants? Did you know that once an accident bill at a nuclear power plant exceeds $9.4 billion, there are laws in place that say every penny over that amount will be paid for by the U.S. Government, again, meaning the tax-payers?
Now, here is the real kicker. You might work a job where you have no pension, or no retirement plan, but when the U.S. Government steps in to bail out failed pension plans through The Pension Benefit Guaranty Corp., it uses your income tax dollars to bail out the pension. It doesn’t matter what side of the political spectrum you are on...that’s gotta upset you.
Monday, May 23, 2005
Ukraine's Samyilo Adamovich
Since being let out from underneath the Iron Fist of the Soviet Union, Ukranian historians have been digging deep into their history, an endeavor that was virtually impossible under communist Soviet rule.
According to the Ukranian press, Ukranian historians have uncovered evidence that a man by the name of Samyilo Adamovich moved to London shortly after the Russian-Swedish war in 1708.
Once in London, Samyilo changed his name to Sam Adams, and eventually moved from London to the American colonies, where is son, Sam Adams, was born and later became the Sam Adams that we know today.
Ukranian historians also claim to have found a 1712 draft of a constitution strikingly similar to ours.
According to the Ukranian press, Ukranian historians have uncovered evidence that a man by the name of Samyilo Adamovich moved to London shortly after the Russian-Swedish war in 1708.
Once in London, Samyilo changed his name to Sam Adams, and eventually moved from London to the American colonies, where is son, Sam Adams, was born and later became the Sam Adams that we know today.
Ukranian historians also claim to have found a 1712 draft of a constitution strikingly similar to ours.
Wednesday, May 18, 2005
No Protection For Owners
When a reserve soldier is called up to active duty, there are laws and regulations that protect that soldier’s job while he or she is away on active duty.
What most people are not aware of, however, is that there are little to no regulations, laws, or protections for the small business owner who is also a reservist.
I recently read an article about small business owners and how their newly activated reserve status is affecting them and their businesses and felt compelled to share with my readers the facts.
As an employer, you can fill the job of a reservist, but it must be waiting for that reservist when they return from active duty, but, what about the employer him- or herself? There are no safeguards to assist the small business owner when his or her unit is called up to active duty.
There are no government subsidies that provide for lost income, provide for lost revenue, or damage to the business while the business’s owner is overseas on deployment.
I, for one, would like to see this change, but I think we all know how likely it is that this will change any time soon. For now, we need to be aware of this pitfall in our nation’s reserve policy and demand changes from our elected officials.
What most people are not aware of, however, is that there are little to no regulations, laws, or protections for the small business owner who is also a reservist.
I recently read an article about small business owners and how their newly activated reserve status is affecting them and their businesses and felt compelled to share with my readers the facts.
As an employer, you can fill the job of a reservist, but it must be waiting for that reservist when they return from active duty, but, what about the employer him- or herself? There are no safeguards to assist the small business owner when his or her unit is called up to active duty.
There are no government subsidies that provide for lost income, provide for lost revenue, or damage to the business while the business’s owner is overseas on deployment.
I, for one, would like to see this change, but I think we all know how likely it is that this will change any time soon. For now, we need to be aware of this pitfall in our nation’s reserve policy and demand changes from our elected officials.
Tuesday, May 17, 2005
Keep Your Plutonium...
You’ve heard of the police stings where they send notices to people with arrest warrants that say they have won a car or a boat, then when the unsuspecting criminal shows up to claim their prize, they get handcuffed instead...You’ve also heard of programs where law enforcement officials buy back weapons, right?
Well, frighteningly enough, there is enough unaccounted-for nuclear material in Russia that they are combining the sting and the buyback and have offered to buy nuclear material at $8.25 per milligram, then are arresting the people that bring in large quantities of material.
The program has yielded an arrest of a former government enrichment plant worker. The man, Leonid Grigorow, received word from the Russian government that they were closing his plant in 1992, but when Leonid’s requests for disposal of the plant’s weapons-grade plutonium went completely unanswered by the Russian government, he simply put all 400 grams of the plant’s plutonium in a lead case, took it home, and put it in his garage, where it has been since 1992.
Upon hearing about the buyback program, Leonid did the math and realized that 400 grams at $8.25 per milligram would yield him $3.3 million, but when he went to turn in the plutonium, Leonid was arrested.
Let’s all thank the Russian government for teaching everyone that turning in plutonium to the proper officials will result in an arrest, while selling it to terrorists will actually probably get you the $3.3 million.
Well, frighteningly enough, there is enough unaccounted-for nuclear material in Russia that they are combining the sting and the buyback and have offered to buy nuclear material at $8.25 per milligram, then are arresting the people that bring in large quantities of material.
The program has yielded an arrest of a former government enrichment plant worker. The man, Leonid Grigorow, received word from the Russian government that they were closing his plant in 1992, but when Leonid’s requests for disposal of the plant’s weapons-grade plutonium went completely unanswered by the Russian government, he simply put all 400 grams of the plant’s plutonium in a lead case, took it home, and put it in his garage, where it has been since 1992.
Upon hearing about the buyback program, Leonid did the math and realized that 400 grams at $8.25 per milligram would yield him $3.3 million, but when he went to turn in the plutonium, Leonid was arrested.
Let’s all thank the Russian government for teaching everyone that turning in plutonium to the proper officials will result in an arrest, while selling it to terrorists will actually probably get you the $3.3 million.
Tuesday, May 10, 2005
The Most Beautiful Benz Is The One That Saves Your Life...
Imagine that you are loyal to a car company with every purchase you have made for the past decade...then imagine that one of those cars saves the life of one of your loved ones.
There is not a single year of my life that has not been spent as a resident of Orange County, and as such, when I say that this winter’s rainy season was the worst I’d ever seen, even beating out 1993, which seemed impossible, I know what I’m talking about.
The worst day this winter for us came on December 28, 2004 when I was awoken by a call from my wonderful girlfriend of 7 years, Teresa, while on her way to work, telling me that she had been involved in a car accident.
If you’ve ever received one of those "accident" calls, you know the feelings I was experiencing at the time.
That morning, as I was driving down the 73 to get to where Teresa was, I was driving through, literally, one of the worst rain storms I have ever seen in my life.
Now, I figured that if Teresa had been able to call me to tell me she’d been in an accident, that was the most promising sign that she was, in fact, all right. The fact that she had been able to tell me that she had not hit any other cars and describe what had happened as she slid off the road was also reassuring, but I must admit that as I arrived to where the car had slid off the road, literally bent the guard rail into a "U" and was sitting in six-inch deep mud, I became very worried.
Then, when I saw the car, I became extremely worried...but, as I got to Teresa, she looked a little shaken up, but seemed totally fine. The OC Fire Authority was there and I can’t thank them enough for the job they did caring for Teresa that morning.
Teresa was taken by ambulance to Hoag and was given a clean bill of health. Though she had a bit of soreness in her neck for a couple days, otherwise, Teresa came out of the accident completely unharmed.
That morning, Teresa’s 1998 Mercedes-Benz C230 did exactly what we had bought it to do...save her life.
When something in the road blew out the car’s right front tire and the mass of water in the road from the downpour sent the car veering off the road uncontrollably, it wasn’t the "luxury" part of the car that saved Teresa that morning, it was the century of unparalleled safety engineering.
Later in the morning, when we went to the towing yard to get Teresa’s things out of the car, the workers there commented about how they hoped whoever was driving the car, described by them as in the worst condition of any car they’d seen in a long while, was making it through okay, and I amazed them by telling them that she was right there, walking next to me.
A Mercedes-Benz looks beautiful sitting, shiny and new on the car lot and looks and feels beautiful as it performs out on the road, but you’ll come to find that the most beautiful Mercedes-Benz that you will ever see is the one that saves your life.
Wednesday, April 20, 2005
A U.S. Tax Timeline...
1913 - The 16th Amendment authorizes income taxes. Congress taxes income over $3,000.
1918 - During World War I, Congress institutes progressive tax rates with a top bracket of 77%.
1919 - Prohibition begins. The commissioner of Internal Revenue must enforce it.
1931 - Gangster and bootlegger Al Capone is convicted of tax evasion.
1933 - Prohibition is repealed.
1942 - The Revenue Act raises tax rates but allows deductions for medical and investment expenses. President Franklin D. Roosevelt says, "In time of this grave national danger, when all excess income should go to win the war, no American citizen ought to have a net income, after he has paid his taxes, of more than $25,000 a year."
1943 - Payroll withholding is introduced.
1944 - Congress creates the standard deduction.
1954 - April 15 replaces March 15 as the deadline for filing income taxes.
1974 - The Employee Retirement and Income Security Act gives the IRS regulatory responsibility for employee benefit plans.
1981 - Congress enacts a $750 billion tax cut, the largest in U.S. history. 401(k)s are introduced. IRAs become widely available to Americans.
1982 - Deficits soar and tax cuts are repealed.
1984 - Deficits still soar and more tax cuts are repealed.
1988 - George H.W. Bush says, "Read my lips; no new taxes."
1990 - Taxes rise for the wealthy. Observers later suggest that this hike will cost George H.W. Bush the 1992 election.
1993 - President Bill Clinton signs into law a $496 billion tax hike.
1997 - President Bill Clinton cuts capital-gains rates and introduces the $500 child credit.
2001 - President George W. Bush cuts taxes and the IRS mails outs "advance refunds."
2003 - A 10-year $350 billion tax cut temporarily reduces dividend, gain and estate taxes.
Tuesday, April 19, 2005
When It's 2010, 2015, & 2050...
When it’s 2010, the average life expectancy of men turning 65 will be 81.4 years, while women turning 65 in 2010 will live to 84.1 years.
Mean household income, which is $92,553 today, will get up to $113,361 in 2010 and $133,831 in 2015.
Americans’ taxable payroll which is at $4.7 trillion today will go up to $5.4 trillion in 2010 and $6.1 trillion in 2015.
The U.S. GDP which is at $12.1 trillion today will shoot up to $13.9 trillion in 2010 and $15.7 trillion in 2015.
Today, Social Security revenue is 12.73 cents per $1 of taxable payroll with 11.05 cents of revenue being paid out and 1.68 cents of revenue being put into the surplus fund. In 2010, Social Security revenue will go up to 12.83 cents per $1 of taxable payroll with 11.34 cents being paid out and only 1.49 cents being put away. By 2015, Social Security revenue will reach 12.95 cents per $1 of taxable income with 12.26 being paid out and only 0.69 cents being put away.
Today, U.S. unemployment is at 5.25% and is expected to go down to 5.21% in 2010 and 5.20% in 2015.
The U.S. population, at 288 million people today, will go up to 309 million in 2010, 323 million in 2015, and reach 421 million in 2050.
Within the U.S. population, people over the age of 65 make up 12.4% today, will make up 13.0% in 2010, make up 14.5% in 2015 and make up 20.7% in 2050.
So what else is in store for 2050?
According to Elizabeth Gardner from Financial Planning Magazine:
Mean household income, which is $92,553 today, will get up to $113,361 in 2010 and $133,831 in 2015.
Americans’ taxable payroll which is at $4.7 trillion today will go up to $5.4 trillion in 2010 and $6.1 trillion in 2015.
The U.S. GDP which is at $12.1 trillion today will shoot up to $13.9 trillion in 2010 and $15.7 trillion in 2015.
Today, Social Security revenue is 12.73 cents per $1 of taxable payroll with 11.05 cents of revenue being paid out and 1.68 cents of revenue being put into the surplus fund. In 2010, Social Security revenue will go up to 12.83 cents per $1 of taxable payroll with 11.34 cents being paid out and only 1.49 cents being put away. By 2015, Social Security revenue will reach 12.95 cents per $1 of taxable income with 12.26 being paid out and only 0.69 cents being put away.
Today, U.S. unemployment is at 5.25% and is expected to go down to 5.21% in 2010 and 5.20% in 2015.
The U.S. population, at 288 million people today, will go up to 309 million in 2010, 323 million in 2015, and reach 421 million in 2050.
Within the U.S. population, people over the age of 65 make up 12.4% today, will make up 13.0% in 2010, make up 14.5% in 2015 and make up 20.7% in 2050.
So what else is in store for 2050?
According to Elizabeth Gardner from Financial Planning Magazine:
- There will be "solar" paint with embedded semiconductor particles that can power the electronic devices that are painted with it
- Wearable electronic devices will run on power generated by the wearer’s skin (a process patented by Microsoft in 2004 that will help the company reach $1.4 trillion in market value by 2050)
- People of two or more races will be so common in the U.S. that the Census Bureau will consider dropping the "race" question from the census (the CB will actually drop the question sometime after 2100)
- Printable transistors will be woven into clothing so that people can sell commercial time on their clothing to advertisers
- Distance learning will replace institutions of learning like Harvard for the most part (where annual tuition will be $320,000 in 2050) and individual instructors who teach students all over the world remotely will become the new icons of learning
- California will be forced to institute once again an English-only policy for official city and state signage as ethnically-centered populations have resulted in entire cities having official signs in only that city’s most popular language
- Human tissue, bones and organs will be custom-made using devices that build three-dimensional structures of living cells, revolutionizing prosthetics and the plastic and restorative surgery industries
- The penny will finally be officially eliminated by congress, but other cash and coin in the U.S. will still be around for private, in-person transactions, while a new form of currency that is worldly universal for use over the Internet and electronic shopping methods will have been popularized and replace the U.S. dollar as the defacto standard for the world’s currency
- Land-fill mining companies will be becoming popular, mining old landfills for metals, minerals and other materials whose natural resources have been exhausted
- The youngest baby boomer will be 86, the oldest 104
- Books will be a retro luxury much like vinyl records are today with some pretty common books by today’s standards being displayed in museums while book-binding will become a well-to-do hobby like home wine-making or beer-brewing is today
- To deal with seething social unrest caused by an excess of single men, China will offer attractive financial packages to Chinese girls adopted buy U.S. families to get them to come back to China
- There are 800 million cars on the world’s roads today, but there will be 3.25 billion by 2050
Thursday, March 17, 2005
I'm Officially On The Fence...
I am a traditionalist, but I love animals. I enjoy the pageantry of days-of-old, and am not one to root for change too easily, but what to do when the change might be better?
Either way, it became official in late February...the traditional English fox hunt is now illegal.
The British government ruled that it is cruel to use dogs for hunting, thus rendering the red-coated, horse-backed, horn-blowing, barking and howling hunt that gave us so many hilarious cartoons, illegal.
Remember the one with Droopy and all the foxes at the formal dining table in the hunting lodge? Hilarious.
Now, here’s another factor. Much of the English countryside has been kept and maintained to facilitate fox hunts at quite a good deal of profit to the lodges and farms that host the hunts. Hedges are left in place for riders to jump over and thickets are left wild for foxes to hide in. Many experts worry that the loss of this tradition will effect the landscape for the worse.
It’s better for the foxes, no doubt, but in a world where a lot of change ends up being for the worse, is it better to lose such a long-standing tradition? I’m officially on the fence on this one...
Either way, it became official in late February...the traditional English fox hunt is now illegal.
The British government ruled that it is cruel to use dogs for hunting, thus rendering the red-coated, horse-backed, horn-blowing, barking and howling hunt that gave us so many hilarious cartoons, illegal.
Remember the one with Droopy and all the foxes at the formal dining table in the hunting lodge? Hilarious.
Now, here’s another factor. Much of the English countryside has been kept and maintained to facilitate fox hunts at quite a good deal of profit to the lodges and farms that host the hunts. Hedges are left in place for riders to jump over and thickets are left wild for foxes to hide in. Many experts worry that the loss of this tradition will effect the landscape for the worse.
It’s better for the foxes, no doubt, but in a world where a lot of change ends up being for the worse, is it better to lose such a long-standing tradition? I’m officially on the fence on this one...
Sunday, March 6, 2005
Reaganisms...
“No arsenal, or no weapon in the arsenals of the world, is so formidable as the will and moral courage of free men and women.”
“Here’s my strategy on the Cold War: We win, they lose.”
“The most terrifying words in the English language are: I’m from the government and I’m here to help.”
“The trouble with our liberal friends is not that they’re ignorant: It’s just that they know so much that isn’t so.”
“Of the four wars in my lifetime none came about because the U.S. was too strong.”
“I have wondered at times about what the Ten Commandments would have looked like if Moses had run them through the U.S. Congress.”
“The taxpayer: That’s someone who works for the federal government but doesn’t have to take the civil service examination.”
“Government is like a baby: An alimentary canal with a big appetite at one end and no sense of responsibility at the other.”
“If we ever forget that we’re one nation under God, then we will be a nation gone under.”
“The nearest thing to eternal life we will ever see on this earth is a government program.”
“I’ve laid down the law, though, to everyone from now on about anything that happens: no matter what time it is, wake me -- even if it’s in the middle of a Cabinet meeting.”
“It has been said that politics is the second oldest profession. I have learned that it bears a striking resemblance to the first.”
“Government’s view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.”
“Here’s my strategy on the Cold War: We win, they lose.”
“The most terrifying words in the English language are: I’m from the government and I’m here to help.”
“The trouble with our liberal friends is not that they’re ignorant: It’s just that they know so much that isn’t so.”
“Of the four wars in my lifetime none came about because the U.S. was too strong.”
“I have wondered at times about what the Ten Commandments would have looked like if Moses had run them through the U.S. Congress.”
“The taxpayer: That’s someone who works for the federal government but doesn’t have to take the civil service examination.”
“Government is like a baby: An alimentary canal with a big appetite at one end and no sense of responsibility at the other.”
“If we ever forget that we’re one nation under God, then we will be a nation gone under.”
“The nearest thing to eternal life we will ever see on this earth is a government program.”
“I’ve laid down the law, though, to everyone from now on about anything that happens: no matter what time it is, wake me -- even if it’s in the middle of a Cabinet meeting.”
“It has been said that politics is the second oldest profession. I have learned that it bears a striking resemblance to the first.”
“Government’s view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.”
Thursday, February 24, 2005
Time To Start Checking Your Credit Reports
As of December 1, 2004, California residents are entitled to view their credit report from each of the 3 big credit bureaus, free of charge, once every 12 months.
I recommend that you get one of the three reports every four months so that over the course of the year, you see all three reports, but are monitoring your information once every four months.
You can begin the process at www.annualcreditreport.com.
Be fair-warned, though, while the reports are free, you’ll have to pay about $6 to actually see your credit score.
The good news is, though, you can dispute the inaccuracies that you find right then and there online.
Be sure to call your creditor yourself to dispute as well...don’t rely on the credit reporting bureau to do it all on their own.
I recommend that you get one of the three reports every four months so that over the course of the year, you see all three reports, but are monitoring your information once every four months.
You can begin the process at www.annualcreditreport.com.
Be fair-warned, though, while the reports are free, you’ll have to pay about $6 to actually see your credit score.
The good news is, though, you can dispute the inaccuracies that you find right then and there online.
Be sure to call your creditor yourself to dispute as well...don’t rely on the credit reporting bureau to do it all on their own.
Tuesday, February 8, 2005
Truth About Credit Cards: So, In Conclusion...
So, as we sum up this look at the credit card industry, what have we learned?
There are no laws in existence today that limit how high your credit card interest rate can go. There are no laws in existence that limit the number of fees that the credit card companies can charge you, nor the dollar amount of those fees. Even though you can avoid fees by paying your credit card bill on time, all the credit card company needs to do to raise your rate is declare that you are in Universal Default and once that happens, they can amend their agreement with you however they wish.
If you feel that you are being ripped off, the only place you can turn to is an inept federal agency that isn’t going to do anything. We have learned, that in essence, the credit card companies can do whatever they want, when they want, and there is nothing that consumers can do about it.
So, why then, do millions of Americans keep running up credit card debt? Why do we all refuse to learn the knowledge that we need in order to make the right financial decisions when it comes to credit, especially these evil monsters known as credit cards?
It is because it is so easy. A piece of plastic you carry around with you that allows you to buy things that you don’t have the money to buy. It is instant gratification without any concern for the long-term effects of that instant gratification. If that does not define humanity, then I do not know what does.
There is an industry in this country that has perfected its methodology of legally extorting more and more money from the consumer over the course of the past 40 years that is working against us and we refuse to even be bothered with such chores as reading a credit card agreement from start to finish.
We all know smoking is bad for us, but there are still smokers out there. We all know that credit card debt is bad for us, but 90 million of us are Revolvers. 90 million of us at one point had $0 in credit card debt and knew long before we charged dollar one that credit card debt was a bad idea and was going to cost us in some cases over 100% more than the actual purchase price of whatever it was that we could not live without, yet we still handed that piece of plastic over to the sales rep.
They get us with late payment fees, over-limit fees, minimum payment fees, cash advance fees and interest rates that are completely ridiculous, especially when compared to deposit interest rates, yet we keep begging for more.
7 million bankrupt families worth of it over the past 5 years alone.
If you owned a 1979 Honda and a 2005 Ferrari and I bought the Honda from you for $300, then came back after the fact and told you I thought I paid $300 for the Ferrari then took you to court, we all know I’d be laughed out of there by the judge.
Yet, we “sign” open-ended credit card loan agreements that allow the credit card companies to change the deal after the fact however and whenever they want, and we keep screaming for more.
Everyone is up in arms about those damned evil cigarette companies that knowingly sold us poison for years, but how many of us are calling our government representatives about the credit card companies and the lack of laws and regulations that govern what they do to us?
How can a FICO score determine the home we get, the car we are able to drive, the very interest rates on everything that we borrow, yet be something that is a complete and total mystery to us?
How can we be surprised that a multi-billion-dollar-a-year industry has no concern for us on an individual level and be surprised when after making ten years worth of on-time payments, turn around and raise our interest rate and penalize us after just one late payment?
Whether we learned that fire could burn because our parents told us, or we found out the hard way, we only had to learn once that fire could burn and you can bet that we stay the hell away from it.
Why, if we all know that credit cards burn, do we all keep touching the flame?
Let me close with some final words...a quote from my Bank of America credit card agreement:
“If at any time during any rolling consecutive twelve billing cycle period you fail to make two Minimum Payments on a timely basis or exceed your Credit Limit twice, we may elect to increase your Purchase, Cash Advance and/or Balance Transfer APRs to the Penalty APRs.”
For my purchases on that particular card, that means going from an interest rate of 13.24% to 29.24%.
And that, is why the credit card companies love Revolvers so much...
There are no laws in existence today that limit how high your credit card interest rate can go. There are no laws in existence that limit the number of fees that the credit card companies can charge you, nor the dollar amount of those fees. Even though you can avoid fees by paying your credit card bill on time, all the credit card company needs to do to raise your rate is declare that you are in Universal Default and once that happens, they can amend their agreement with you however they wish.
If you feel that you are being ripped off, the only place you can turn to is an inept federal agency that isn’t going to do anything. We have learned, that in essence, the credit card companies can do whatever they want, when they want, and there is nothing that consumers can do about it.
So, why then, do millions of Americans keep running up credit card debt? Why do we all refuse to learn the knowledge that we need in order to make the right financial decisions when it comes to credit, especially these evil monsters known as credit cards?
It is because it is so easy. A piece of plastic you carry around with you that allows you to buy things that you don’t have the money to buy. It is instant gratification without any concern for the long-term effects of that instant gratification. If that does not define humanity, then I do not know what does.
There is an industry in this country that has perfected its methodology of legally extorting more and more money from the consumer over the course of the past 40 years that is working against us and we refuse to even be bothered with such chores as reading a credit card agreement from start to finish.
We all know smoking is bad for us, but there are still smokers out there. We all know that credit card debt is bad for us, but 90 million of us are Revolvers. 90 million of us at one point had $0 in credit card debt and knew long before we charged dollar one that credit card debt was a bad idea and was going to cost us in some cases over 100% more than the actual purchase price of whatever it was that we could not live without, yet we still handed that piece of plastic over to the sales rep.
They get us with late payment fees, over-limit fees, minimum payment fees, cash advance fees and interest rates that are completely ridiculous, especially when compared to deposit interest rates, yet we keep begging for more.
7 million bankrupt families worth of it over the past 5 years alone.
If you owned a 1979 Honda and a 2005 Ferrari and I bought the Honda from you for $300, then came back after the fact and told you I thought I paid $300 for the Ferrari then took you to court, we all know I’d be laughed out of there by the judge.
Yet, we “sign” open-ended credit card loan agreements that allow the credit card companies to change the deal after the fact however and whenever they want, and we keep screaming for more.
Everyone is up in arms about those damned evil cigarette companies that knowingly sold us poison for years, but how many of us are calling our government representatives about the credit card companies and the lack of laws and regulations that govern what they do to us?
How can a FICO score determine the home we get, the car we are able to drive, the very interest rates on everything that we borrow, yet be something that is a complete and total mystery to us?
How can we be surprised that a multi-billion-dollar-a-year industry has no concern for us on an individual level and be surprised when after making ten years worth of on-time payments, turn around and raise our interest rate and penalize us after just one late payment?
Whether we learned that fire could burn because our parents told us, or we found out the hard way, we only had to learn once that fire could burn and you can bet that we stay the hell away from it.
Why, if we all know that credit cards burn, do we all keep touching the flame?
Let me close with some final words...a quote from my Bank of America credit card agreement:
“If at any time during any rolling consecutive twelve billing cycle period you fail to make two Minimum Payments on a timely basis or exceed your Credit Limit twice, we may elect to increase your Purchase, Cash Advance and/or Balance Transfer APRs to the Penalty APRs.”
For my purchases on that particular card, that means going from an interest rate of 13.24% to 29.24%.
And that, is why the credit card companies love Revolvers so much...
Monday, February 7, 2005
Truth About Credit Cards: Universal Default
Universal Default. Sounds scary, doesn’t it? Well, it is.
When you apply for a loan for a car or a home, there is an agreement between you and the bank over the interest rate. In some cases, the rate is fixed for the life of the loan and in other cases, the interest rate may fluctuate as the prime interest rate fluctuates.
Either way, you do know what your interest rate is and there is an agreement between you and the bank that spells out what it is and how it is figured. Not with credit cards, though.
You may even have a fixed rate credit card, but even the interest rate on that card can change. A credit card is a short term loan, designed to be paid off each and every month. A credit card limit and a credit card interest rate are assigned to you based on what your credit score is at the time that you apply, just like with any other loan.
The difference between a credit card loan and other types of loans is that a credit card company views their terms with you as short terms and can re-evaluate you each and every month if they wish.
How do they evaluate you? They run your credit and look at what your score is doing. Say you applied for a card and had a 750 and landed a 12.9% fixed rate. Pay your payments on time and in full and keep your 750 and there is no problem, but if your score goes down, you have made a change in the terms and the credit card company can raise your rate based on that.
Also, if they give you credit based on a good payment history and find that a year later, even though you have been paying them on time, you have been making late payments elsewhere, they can find that you no longer have a good payment history and raise your rates.
This change in your credit score and payment history is the concept called, Universal Default. You have not made a late payment on your credit card, but a late payment on anything anywhere else, or a drop in your credit score can put you in Universal Default.
All credit card agreements site Universal Default as a justified reason for raising your interest rate, even on a fixed rate credit card. All they have to do is give you 15 days notice before they change your rate and they can raise your rate to whatever they want.
When you apply for a loan for a car or a home, there is an agreement between you and the bank over the interest rate. In some cases, the rate is fixed for the life of the loan and in other cases, the interest rate may fluctuate as the prime interest rate fluctuates.
Either way, you do know what your interest rate is and there is an agreement between you and the bank that spells out what it is and how it is figured. Not with credit cards, though.
You may even have a fixed rate credit card, but even the interest rate on that card can change. A credit card is a short term loan, designed to be paid off each and every month. A credit card limit and a credit card interest rate are assigned to you based on what your credit score is at the time that you apply, just like with any other loan.
The difference between a credit card loan and other types of loans is that a credit card company views their terms with you as short terms and can re-evaluate you each and every month if they wish.
How do they evaluate you? They run your credit and look at what your score is doing. Say you applied for a card and had a 750 and landed a 12.9% fixed rate. Pay your payments on time and in full and keep your 750 and there is no problem, but if your score goes down, you have made a change in the terms and the credit card company can raise your rate based on that.
Also, if they give you credit based on a good payment history and find that a year later, even though you have been paying them on time, you have been making late payments elsewhere, they can find that you no longer have a good payment history and raise your rates.
This change in your credit score and payment history is the concept called, Universal Default. You have not made a late payment on your credit card, but a late payment on anything anywhere else, or a drop in your credit score can put you in Universal Default.
All credit card agreements site Universal Default as a justified reason for raising your interest rate, even on a fixed rate credit card. All they have to do is give you 15 days notice before they change your rate and they can raise your rate to whatever they want.
Friday, February 4, 2005
Truth About Credit Cards: Watch Your Due Dates
So, they can do whatever they want to? Why yes, they can. Take a look at your due dates.
You might find that some of your cards have due dates that change each month.
There is not a wide fluctuation, like say from the 3rd to the 23rd, but it may move a day or two here and there.
So, what this allows the credit card companies to do is put your due date on a Sunday or a holiday here and there in the hopes that you might get a little too busy and forget to make your payment on time.
It might sound a little trivial, but they make millions in extra revenue each year by doing this and it is all perfectly legal...
You might find that some of your cards have due dates that change each month.
There is not a wide fluctuation, like say from the 3rd to the 23rd, but it may move a day or two here and there.
So, what this allows the credit card companies to do is put your due date on a Sunday or a holiday here and there in the hopes that you might get a little too busy and forget to make your payment on time.
It might sound a little trivial, but they make millions in extra revenue each year by doing this and it is all perfectly legal...
Thursday, February 3, 2005
Truth About Credit Cards: No Laws On Fees, Either
Just like there once was a limit to how much the banks could charge in interest on credit card loans, there once was a limit to the fees that they could charge you as well.
Then, a court decision, Smiley vs. CitiBank went in CitiBank’s favor and it removed all of the limits on fees.
Back in the 1970s and 1980s, a late payment fee was usually around $5 and all that happened when you reached your limit was that your card stopped working.
Today, the high late payment fees hover around $39 per occurrence and are expected to creep up to $49 pretty soon. Today, your card still works past the limit for a little bit so that when your statement cycles, you can be charged an over-limit charge.
All fees and charges go on your balance and can result in even more fees and charges. All of this is perfectly legal because thanks to Smiley vs. CitiBank, there are no limits to dollar amount of fees and the number of fees you can be charged.
Today, compared to twenty years ago, fee income for credit card companies has more than doubled. This is where the credit card companies really make their money today.
Thanks to Smiley vs. CitiBank, there have been no aspects of the credit card loan interest and fee rates that have been regulated by law since 1986.
This means that these credit card companies can charge us whatever they want to, when they want to and it is all nice and legal...
Then, a court decision, Smiley vs. CitiBank went in CitiBank’s favor and it removed all of the limits on fees.
Back in the 1970s and 1980s, a late payment fee was usually around $5 and all that happened when you reached your limit was that your card stopped working.
Today, the high late payment fees hover around $39 per occurrence and are expected to creep up to $49 pretty soon. Today, your card still works past the limit for a little bit so that when your statement cycles, you can be charged an over-limit charge.
All fees and charges go on your balance and can result in even more fees and charges. All of this is perfectly legal because thanks to Smiley vs. CitiBank, there are no limits to dollar amount of fees and the number of fees you can be charged.
Today, compared to twenty years ago, fee income for credit card companies has more than doubled. This is where the credit card companies really make their money today.
Thanks to Smiley vs. CitiBank, there have been no aspects of the credit card loan interest and fee rates that have been regulated by law since 1986.
This means that these credit card companies can charge us whatever they want to, when they want to and it is all nice and legal...
Wednesday, February 2, 2005
Truth About Credit Cards: Minimum Payment Scam
Now, let’s talk about minimum payments. Back in the 1970s when banks wanted you to pay your credit card balances down to get their money back because they really didn’t make that much from the capped interest rates, it was the norm to expect no less than 5%, and even sometimes more, as a minimum monthly payment on your credit card balance.
This average of a 5% minimum payment each month was the norm for many years, that was until the credit card companies turned to a man named Andrew Kahr, who today very rarely grants interviews, and will only do interviews if reporters promise not to reveal what part of the country he lives in and who his clients are and were.
The big banks that were turning into credit card companies brought Andrew Kahr in to see how they could squeeze even more money out of the consumers they were now charging 20% interest.
Andrew looked at the psychology behind America’s emerging lack of financial responsibility in the 1980s and came up with a theory. Andrew felt that the 5% minimum payment was requiring the debtor to properly manage and worry about the amount of debt they took on, but that if the credit card companies lowered that minimum to a mere 2%, the debtor would have a much smaller minimum payment to worry about and would feel free to become relaxed about their debt management.
Not only was Andrew’s theory correct, it resulted in a fringe benefit for the credit card companies. See, at a 5% minimum, it would take you much less than half the time to pay off the debt that it would at a 2% minimum, and on top of it, the people making the 2% minimum still would think they were being financially responsible because they were not missing payments.
Today, the 2% minimum is industry wide and consumers take on a larger amount of debt because their monthly minimum payments are lower and all the while, it is taking them more than twice as long to pay off their debt, giving the credit card companies more chances at late payment fees and over-limit fees.
This average of a 5% minimum payment each month was the norm for many years, that was until the credit card companies turned to a man named Andrew Kahr, who today very rarely grants interviews, and will only do interviews if reporters promise not to reveal what part of the country he lives in and who his clients are and were.
The big banks that were turning into credit card companies brought Andrew Kahr in to see how they could squeeze even more money out of the consumers they were now charging 20% interest.
Andrew looked at the psychology behind America’s emerging lack of financial responsibility in the 1980s and came up with a theory. Andrew felt that the 5% minimum payment was requiring the debtor to properly manage and worry about the amount of debt they took on, but that if the credit card companies lowered that minimum to a mere 2%, the debtor would have a much smaller minimum payment to worry about and would feel free to become relaxed about their debt management.
Not only was Andrew’s theory correct, it resulted in a fringe benefit for the credit card companies. See, at a 5% minimum, it would take you much less than half the time to pay off the debt that it would at a 2% minimum, and on top of it, the people making the 2% minimum still would think they were being financially responsible because they were not missing payments.
Today, the 2% minimum is industry wide and consumers take on a larger amount of debt because their monthly minimum payments are lower and all the while, it is taking them more than twice as long to pay off their debt, giving the credit card companies more chances at late payment fees and over-limit fees.
Tuesday, February 1, 2005
Truth About Credit Cards: Are You Friend Or Foe?
Some of this may be hard to hear, but believe me, it is important for consumers to know and understand this information. I've explained how the banks became credit card companies and I hope that we can all agree that someone who would borrow a dollar from you at 0.25% interest, then turn around and loan you that same dollar at over 20% interest, is not a friend.
So now, let me ask you if you are a friend or a foe of the credit card companies?
Don’t answer just yet...let me give you some more info first.
55 million Americans pay off their credit card balances down to $0 each and every month. The credit card industry calls those people “Deadbeats.” 90 million Americans do not pay off their credit card balances down to $0 each and every month. The credit card industry calls those people “Revolvers.”
Deadbeats are foes of the credit card industry and Revolvers are friends of the credit card industry. So, now, answer...are you a friend or a foe of the credit card industry?
Deadbeats are foes because the credit card company does not make any monthly interest off of them and does not make any fee income off of them with over-limit fees and late payments fees.
Though credit card companies make a small percentage from the merchants that the Deadbeats purchase from, that is all they ever get from Deadbeats.
Revolvers are wonderful friends of the credit card companies because they are able to make monthly finance charge income that, in turn, goes on top of the credit card balance, compounding to a point at which even the interest can result in over-limit and late fees. Revolvers are much more prone to miss payments or not make minimum payments, generating late payment fee income, again, which also compounds on top of the credit card balances.
So, now, answer...are you a friend or a foe of the credit card industry?
So now, let me ask you if you are a friend or a foe of the credit card companies?
Don’t answer just yet...let me give you some more info first.
55 million Americans pay off their credit card balances down to $0 each and every month. The credit card industry calls those people “Deadbeats.” 90 million Americans do not pay off their credit card balances down to $0 each and every month. The credit card industry calls those people “Revolvers.”
Deadbeats are foes of the credit card industry and Revolvers are friends of the credit card industry. So, now, answer...are you a friend or a foe of the credit card industry?
Deadbeats are foes because the credit card company does not make any monthly interest off of them and does not make any fee income off of them with over-limit fees and late payments fees.
Though credit card companies make a small percentage from the merchants that the Deadbeats purchase from, that is all they ever get from Deadbeats.
Revolvers are wonderful friends of the credit card companies because they are able to make monthly finance charge income that, in turn, goes on top of the credit card balance, compounding to a point at which even the interest can result in over-limit and late fees. Revolvers are much more prone to miss payments or not make minimum payments, generating late payment fee income, again, which also compounds on top of the credit card balances.
So, now, answer...are you a friend or a foe of the credit card industry?
Monday, January 31, 2005
Truth About Credit Cards: Interest Rates
I have always considered myself in-the-know when it comes to credit and pride myself on what my little three-digit number is, but I just learned some very, very interesting things about credit cards that I am anxious to share.
First and foremost, today, we are going to take a look at credit card interest rates and how they became the monsters that they are today.
I don’t know if this stuff is new to all of you, but it was to me. Though it is hard to imagine in today’s world where the average American family has $8,000 worth of credit card debt at average interest rates that tower over 20%, there was once a day when credit card companies were real banks and were regulated like banks.
Let me take you back to the early 1970s for a picture of the credit card industry that is unimaginable today. See, back then, your bank and the bank that issued your credit cards made money from loaning money out at a higher interest rate than it paid on deposits.
Just like today, right? Well, not exactly.
Back then, there were state laws in place called Usury Laws that, in order to protect consumers, capped the interest rates that people could be charged on loans from banks. There was a limit for the rate for a new car loan, a limit for the rate for a used car loan, a limit for the rate for a mortgage, and yes, a limit for the rate for credit card loans.
Though we tend to forget today, that credit card balance is a loan. Credit cards were a small business back then and the credit card powerhouses of today were just banks that offered credit cards as one form of a loan.
So, what in the world happened? Well, in the late 1970s and early 1980s interest rates were skyrocketing. Credit card issuers, like CitiBank, were being forced to pay nearly 20% on its deposits to keep competitive with the market, but the New York State Usury Laws capped credit card interest at 12%.
Do the math and you’ll see that CitiBank was going to run out of money and run itself out of business with high interest rates on deposits and low interest rate caps on loans. With conditions like this, capitalism did what it is supposed to do and created an opportunity.
With Usury Laws capping loan interest rates in all 50 states, what if you were the one state that turned things upside down by eliminating the caps on interest rates, allowing banks to charge higher interest rates on loans?
Bill Janklow was elected governor of South Dakota and immediately asked that question. He, in a matter of mere weeks, pushed through legislation that revoked all Usury Laws in the state of South Dakota. So, long story short, CitiBank moves its credit card division to South Dakota and begins charging a rate higher than the going interest rate being paid on deposits in South Dakota. Shortly thereafter, other banks moved their credit card divisions to South Dakota, and then, seeing South Dakota’s new-found success, a few other states dropped their Usury Laws.
As bad as this was for consumers in these states who were once protected by Usury Laws, the final nail in the coffin on Usury Laws that capped loan interest rates came in the early 1980s with a court decision called the Marquette Decision that allowed all U.S. banks to export the non-capped rates of their home state to all other 50 states, thus, in essence, rendering all the Usury Laws in all the states null and void as long as a bank’s credit card headquarters was in a state without credit card Usury Laws.
So, in essence, following the Marquette Decision, there were no more caps on what banks could charge their customers for loans through credit cards.
Needless to say, that as interest rates on deposits deflated and came down over the years, the banks never adjusted their credit card loan rates back down and today, while you get a 40-year low of 0.25% on a savings account from a bank, that same bank will charge you over 20% on the credit card you have with them.
With the Usury Laws null and void, it is perfectly legal for the bank to do this.
The mass of income that this has generated over time as Americans became less and less responsible with their credit and personal finances turned those banks like CitiBank into credit card companies with credit card interest being their main money-maker.
First and foremost, today, we are going to take a look at credit card interest rates and how they became the monsters that they are today.
I don’t know if this stuff is new to all of you, but it was to me. Though it is hard to imagine in today’s world where the average American family has $8,000 worth of credit card debt at average interest rates that tower over 20%, there was once a day when credit card companies were real banks and were regulated like banks.
Let me take you back to the early 1970s for a picture of the credit card industry that is unimaginable today. See, back then, your bank and the bank that issued your credit cards made money from loaning money out at a higher interest rate than it paid on deposits.
Just like today, right? Well, not exactly.
Back then, there were state laws in place called Usury Laws that, in order to protect consumers, capped the interest rates that people could be charged on loans from banks. There was a limit for the rate for a new car loan, a limit for the rate for a used car loan, a limit for the rate for a mortgage, and yes, a limit for the rate for credit card loans.
Though we tend to forget today, that credit card balance is a loan. Credit cards were a small business back then and the credit card powerhouses of today were just banks that offered credit cards as one form of a loan.
So, what in the world happened? Well, in the late 1970s and early 1980s interest rates were skyrocketing. Credit card issuers, like CitiBank, were being forced to pay nearly 20% on its deposits to keep competitive with the market, but the New York State Usury Laws capped credit card interest at 12%.
Do the math and you’ll see that CitiBank was going to run out of money and run itself out of business with high interest rates on deposits and low interest rate caps on loans. With conditions like this, capitalism did what it is supposed to do and created an opportunity.
With Usury Laws capping loan interest rates in all 50 states, what if you were the one state that turned things upside down by eliminating the caps on interest rates, allowing banks to charge higher interest rates on loans?
Bill Janklow was elected governor of South Dakota and immediately asked that question. He, in a matter of mere weeks, pushed through legislation that revoked all Usury Laws in the state of South Dakota. So, long story short, CitiBank moves its credit card division to South Dakota and begins charging a rate higher than the going interest rate being paid on deposits in South Dakota. Shortly thereafter, other banks moved their credit card divisions to South Dakota, and then, seeing South Dakota’s new-found success, a few other states dropped their Usury Laws.
As bad as this was for consumers in these states who were once protected by Usury Laws, the final nail in the coffin on Usury Laws that capped loan interest rates came in the early 1980s with a court decision called the Marquette Decision that allowed all U.S. banks to export the non-capped rates of their home state to all other 50 states, thus, in essence, rendering all the Usury Laws in all the states null and void as long as a bank’s credit card headquarters was in a state without credit card Usury Laws.
So, in essence, following the Marquette Decision, there were no more caps on what banks could charge their customers for loans through credit cards.
Needless to say, that as interest rates on deposits deflated and came down over the years, the banks never adjusted their credit card loan rates back down and today, while you get a 40-year low of 0.25% on a savings account from a bank, that same bank will charge you over 20% on the credit card you have with them.
With the Usury Laws null and void, it is perfectly legal for the bank to do this.
The mass of income that this has generated over time as Americans became less and less responsible with their credit and personal finances turned those banks like CitiBank into credit card companies with credit card interest being their main money-maker.
Wednesday, January 26, 2005
How Wal-Mart Pricing Works...
The CEO of Wal-Mart will tell you (and I’ve seen the interviews, folks) that the giant chain does not get discounts from their vendors because they purchase from them in such large volumes.
Though he’s not telling the truth entirely, he’s not lying entirely, either. Here is how the big chain’s pricing edge works.
A local mom and pop tire store will purchase a tire for $18 from Goodyear. Wal-Mart will buy a very very similar tire from Goodyear for $6. Naturally, the final price the consumer pays at Wal-Mart is much lower than the price they will pay at the mom and pop tire store.
First, Goodyear can get away with charging Wal-Mart so much less for the tire because Wal-Mart buys a large volume of tires. Also, large chain stores like Wal-Mart do their own advertising, so Goodyear has absolutely $0 in promotional and marketing costs in order to sell the large number of tires that are purchased by Wal-Mart to be re-sold to the end consumer.
Now, you ask in your 1930s draw, “ain’t there laws a’gain’ it?” Yes, there is, but here is how they work.
The competition pricing laws, most passed during the 1930s, were designed to protect the end consumer from price fixing. The laws state that a company like Goodyear cannot sell the exact same tire at grossly different prices to different customers unless they can justify the cost difference as a saving to their own bottom line.
The lack of promotional and marketing costs are the justification for the price difference and what companies like Goodyear do is add a number or two to their model number or maybe a different notch in the tread pattern and they are now no longer selling the same exact tire to the mom and pops as they are to Wal-Mart.
So, between the “different” tire and the “justification” of the price difference, the mom and pops do not have a leg to stand on.
To seal the deal, all of the 1930s competition laws state that in all cases, the consumer must be the end beneficiary of any intervention, so when the consumer can save 2/3 of their money by buying from the chain, there aren’t many lawmakers out there who are going to want to force the consumer to buy from the mom and pops.
Though he’s not telling the truth entirely, he’s not lying entirely, either. Here is how the big chain’s pricing edge works.
A local mom and pop tire store will purchase a tire for $18 from Goodyear. Wal-Mart will buy a very very similar tire from Goodyear for $6. Naturally, the final price the consumer pays at Wal-Mart is much lower than the price they will pay at the mom and pop tire store.
First, Goodyear can get away with charging Wal-Mart so much less for the tire because Wal-Mart buys a large volume of tires. Also, large chain stores like Wal-Mart do their own advertising, so Goodyear has absolutely $0 in promotional and marketing costs in order to sell the large number of tires that are purchased by Wal-Mart to be re-sold to the end consumer.
Now, you ask in your 1930s draw, “ain’t there laws a’gain’ it?” Yes, there is, but here is how they work.
The competition pricing laws, most passed during the 1930s, were designed to protect the end consumer from price fixing. The laws state that a company like Goodyear cannot sell the exact same tire at grossly different prices to different customers unless they can justify the cost difference as a saving to their own bottom line.
The lack of promotional and marketing costs are the justification for the price difference and what companies like Goodyear do is add a number or two to their model number or maybe a different notch in the tread pattern and they are now no longer selling the same exact tire to the mom and pops as they are to Wal-Mart.
So, between the “different” tire and the “justification” of the price difference, the mom and pops do not have a leg to stand on.
To seal the deal, all of the 1930s competition laws state that in all cases, the consumer must be the end beneficiary of any intervention, so when the consumer can save 2/3 of their money by buying from the chain, there aren’t many lawmakers out there who are going to want to force the consumer to buy from the mom and pops.
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