When is Debt Help really Self Help?
We here at DebtHelp pride ourselves on being the one site and the one solution for all of your debt needs. However, with the total consumer credit debt reaching $12.8 trillion in 2008, sometimes the best debt help is looking yourself in the mirror. According to some sources, household debt averaged a record 133.7% of disposable income in the fourth quarter of 2007 - that means that people spent 33.7% more than they made. There are many of us who have more than $10,000 in credit card or other forms of debt, and the numbers just keep growing. However, there are many of us who are below the national average for debt amounts, yet we still have debt. The natural question is are debt consolidation and debt settlement companies right for those of us who are just a little bit in debt?
The answer is “maybe not”. Obviously, each person’s debt situation is unique and their ability to deal with their debt primarily depends on their level of debt, their ability to exercise self-control and their general prospects going forward. That is why we put together 3 easy steps to help those of us who are just a little bit in debt, become debt free.
1. Develop a budget. There are many ways to develop a budget for yourself and your family. There is the traditional method (yeah, the pen-and-paper kind) and there are also many different softwares that you can buy and download that enable you to sync up with your bank accounts to analyze your spending. However, there are also online options. One of our favorites is the personal finance site Mint.com. Mint is a free (yes it is free) web-based solution for online financial management. It enables its users to connect to their bank and credit card accounts and analyze their spending in a single screen. Here comes the best part - they also search through various offers on the Internet that match your current spending habits to help you save money.
2. Work out a plan with your creditors. One surprising fact that you may not be aware of is that your creditors actually do not want to turn you over to the collection agencies. When a collection agency gets a hold of an account, they get to keep an average of 33% of the money that they collect for that account. Since all of the creditors are businesses, their preference would be to keep all of the money collected; therefore, contacting your creditors when you realize that you are having trouble making your ends meet, rather than waiting for them to turn you over to a collection agency, will enable you to work out a payment plan with them. Many creditors have various options available and are more willing to work with you to get all of the money paid, rather than just turn you over to the collections.
3. Understand the difference between secured and unsecured loans. A secured loan is one that is backed by an asset and usually refers to auto loans, mortgages, etc. An unsecured loan is not tied to any asset and usually includes credit card debt, student loans, etc. If you get behind on payments for a secure loan, the creditors can come and collect the asset. That means if it is a car loan, they can come and repossess your car at any time - no notice required. If the asset happens to be your house, then the lenders can start the foreclosure process. Either way, the best way to prevent these actions from occurring is to be open with your creditors. Contact them as soon as you realize you are having a difficult time making your payments. By working closely with them, you can set up a payment plan that will enable you to keep your car, your house and your credit history in good shape.
Using these tips, you will be able to start damage control and utilize self help for your debt problem. If you are considering contacting a debt consolidation or a debt negotiation agency, we recommend using our debt consolidation service to find the right agency for you. You can also visit the Federal Trade Commission for additional information on Choosing a Credit Counselor.
As always, if you have other tips and recommendations, we would love to hear from you.
DebtHelp team.
(1 votes, average: 5 out of 5)
Loading ...7 ways to save money on gas
Remember the days when gasoline was $0.99/gallon? At that time few of us cared if we saved 5 cents a gallon; however, as the gasoline prices are inching closer to $5/gallon, we are all looking for ways to save some money.
We here at DebtHelp.com, put together a list of 7 ways to save money on gas this summer.
1. Use the Internet
Given that you are reading this on the Internet, we highly recommend using the Internet to find the best gas deals in your neighborhood. There are multiple sources on the Internet that provide information regarding lowest prices in your neighborhood and some of them offer text messaging services for your convenience. Our top 3 favorite Internet sites for gas comparison are MapQuest, GasBuddy.com and GasPriceWatch.com. While GasBuddy.com and GasPriceWatch.com rely on volunteers or the stations to post prices from around the country (and Canada too), MapQuest uses Oil Pricing Information Service (OPIS) to track gas prices. As a quick case study, we used GasBuddy.com to check gas prices in Los Angeles, San Francisco, Chicago and New York just to check how much could one really save - we were impressed. It turns out that in Los Angeles, the range of prices for regular were $4.09 to $4.68 that is a 59 cent difference, which means you would be able to save $11.80 per fill-up on a 20-gallon tank. In San Francisco, the price difference was 48 cents, bringing the savings to $9.60, in Chicago it was 52 cents with savings of $10.40 and in New York the difference was 30 cents, bringing the savings to $6. As we have just demonstrated it does pay to shop around (especially from the comfort of your own home). If you are on the road, you can use your cell phone to get a text message with the lowest prices. Although these services are free, you will have to pay for the text message. In order to take advantage of these services, just send a text message to gas@gasbuddy.com, sms@mobgas.com or gas@fuelgo.com.
2. Be aware of your surroundings
Often times, the gas right around freeways, in expensive neighborhoods or around repair services tends to be more expensive - you pay for convenience. So if you are driving on a freeway and spot a gas station, take the exit but proceed a few more blocks and chances are that you will find cheaper gas.
3. Pay attention to local advertising
If you have independent gas stations in your area, watch out for price wars as some of them may engage in these practices in order to take away the customers. Also, many smaller gas stations will offer different pricing if you pay with cash rather than a credit card - so keep some cash handy. Another suggestion would be to look at the complementary service offerings - in some instances, car washes with gas stations will offer lower pricing to customers who take advantage of both services - we have seen discounts as high as 20 cents a gallon from these promotions.
4. Check out wholesale clubs
Costco, Sam’s and many others often offer the convenience of gas stations right in their lots. As part of the service to their customers (read - membership fees), they offer lower gas prices. Therefore, if you are already a member this may be a great opportunity for you - otherwise, you may be spending the money that you saved on gas to pay for their membership.
5. Price-shop discount retailers
Stores like Wal-Mart and other discount retailers may use gas prices as a way to “lure” you into their store. They may charge a lower price per gallon in the hopes that they will be able to make the margin from all of your other purchases at their store.
6. Consider a gas-rebate card or a gas-station card
Many credit card companies offer gas-rebate cards, with which you will be able to get cash back on your purchases. Some gas stations, like Shell, also offer gas discount credit cards.
7. Last, but not least, consider signing up for a general purpose rebate card
Many credit card companies will offer various discounts, rebates, points or cash-backs on their credit cards. If you are already using a credit card for your purchases (be it gas, food or any other purchase), you would be able to get something back in return. Many of these companies also offer additional benefits to their card holders.
Now that we have armed with you with these 7 tips on saving money on gas, here is one thing that we recommend that you DON’T do is follow that one woman’s example and try to set gas stations on fire in your protest of the higher gas prices. We can guarantee that this will NOT save you money on gas and will only result in more financial and legal trouble.
If you have some other gas saving suggestions, please share as we always love hearing from our readers.
DebtHelp.com Team
(3 votes, average: 4.67 out of 5) Loading ...As if the economy was already not struggling enough - with the gas prices sky rocketing and the stock market continuously taking a dip, the recent unemployment numbers punched another hole. The unemployment rate had increased to 5.5% in May from the previous 5%. According to the Labor Department, this marks the fifth month of a decline, with a loss of 49,000 additional jobs in May.
There were 8.55 million people who were unemployed in May and of those, 1.55 million had been unemployed for a period of 27 weeks or longer. Under the current regulations, federal unemployment benefits expire after 26 weeks of unemployment. However, that may change in the near future as a current bill that has been approved by the Senate and is awaiting a vote in the House would add an additional 13 weeks of cash assistance.
This news comes during the policy debate in Washington regarding supplementary Iraq war financing bill. The unemployment numbers also cooled the speculation that the Fed may try to start slowly increasing the interest rates in an attempt to control the rising gas and food prices as well as provide additional support to the already weak dollar. The next Fed meeting is scheduled for the end of June and there is already plenty of speculation for what the next move by Bernanke may be.
As the Fed continuously lowered interest rates for the past 6 months, there was speculation that the economy was stabilizing and the banks were past their worst mortgage woes. However, these labor statistics and other economic indicators paint a very different picture.
What first started as a mortgage crisis has managed to touch all aspects of the economy. As the homeowners were experiencing financial difficulties, they cut their spending - which in turn impacted the sales in the shopping malls, grocery stores, and in the general home improvement category. This decrease in sales forced many businesses to cut payrolls. The business categories that have been hit the hardest include construction, professional and business services, manufacturing, transportation and warehousing, and of course retail.
Although there does not seem to be a bright light in the near future, US is still not considered to be in a recession, at least in accordance with the recession definition. How much worse can this get before we officially hit “recession”?
(2 votes, average: 5 out of 5) Loading ...Fannie Mae, Freddie Mac Make Moves to Help Consumers
The Fed’s recent moves to lower interest rates aren’t really making a dent in the tsunami of credit woes U.S. consumers are facing. Some economists call the lower Fed Funds rate a tax on the middle class, as this increases inflation, driving the dollar down and raising the price of oil. It’s more like driving a stake into the heart of the middle class.
But as the Fed stands by, fiddling a love song to banks and a swan song to consumers, the U.S. Office of Federal Housing Enterprise Oversight (HEO) made a move. The HEO, which oversees Fannie Mae and Freddie Mac, relaxed the two agencies’ capital requirements so they could pump $200 billion of financing for home loans to consumers.
The mandatory cash reserves Fannie and Freddie are required to carry, about $20 billion between the two, will be cut by about 33 percent under the plan, part of a broader strategy to ease the credit crisis that is making it tough for both consumers and businesses to borrow. The goal is to make money available so new home buyers can take out loans, and home owners facing mortgage interest rate resets can refinance into more affordable mortgages. This is the third step by the HEO to enable the two agencies to take up more of the burden in the mortgage market.
Last month’s $168-billion economic stimulus package included a temporary increase in the cap, from $417,000 to $729,750 in high-cost markets, on mortgages that the companies can purchase or guarantee. And a few weeks ago, the HEO freed Fannie and Freddie of a combined $1.5 trillion cap on their mortgage-investment holdings. Call it a reward for filing timely financial statements following multibillion-dollar accounting scandals.
The HEO estimates these three moves should allow Fannie and Freddie to purchase or guarantee roughly $2 trillion in mortgages this year. They now hold about $4.9 trillion in home-loan debt. So while the middle class consumer may be staked through the heart (thanks Fed!) and barely staying afloat while riding the wave of credit woes, at least the HEO is stepping up.
(1 votes, average: 4 out of 5) Loading ...Average Joe Asks Fed to Wake up and Smell the Economy
Wake up and smell the economy. At least that’s what the Chief Executive Barista of Starbucks Howard Schultz said Wednesday to about 6,000 shareholders at Starbucks’ annual meeting in Seattle, according to a report on Bloomberg News.
“You have an economy that really is in a tailspin, and many would say the consumer is in a recession,” Schultz was quoted as saying. “We are dealing with things that we haven’t seen before in terms of how people are responding to how tough it is.”
As the country’s prime caffeinator, Schultz sees the economy from a unique perspective. As consumers cut spending, Starbucks experienced its smallest gain in two years–a revenue rise of 17 percent. Its customer base has also dropped for two consecutive quarters.
I guess that as spiraling prices at the gas pump take more and more of a chunk out of consumers’ wallets, and the housing slump ripples into other sectors of the economy, more and more people are going without those lattes and cappuccinos.
Schultz told shareholders, “We began to see a slowdown in traffic that we believed was economy-driven. As we look at the balance of calendar ‘08, I don’t see any reason to believe that we’re going to see a change.”
But Starbucks aficionados who have been decaffeinating cold turkey don’t need to worry much longer: Schultz said Starbucks will introduce a rewards program in mid-April. Customers can earn free syrup or milk alternatives for their drinks, or free refills on brewed coffee if they use their Starbucks card.
This is on top of last month’s deal by which Starbucks Card holders get two hours of free wireless Internet access a day. Free wi-fi and nearly free coffee is a lot more than what the Fed is offering the average American, according to a report I saw on CNN’s Money.com. Despite cutting the Federal Funds rate to 2.25 percent, the Fed is not helping homeowners as the slumping housing market continues to take a toll on homeowners.
Despite the nearly rock bottom interest rates, banks are still not lending money. As banks cut themselves off from the crack cocaine of loose and easy borrowing to build up cash, consumers are caught in the middle.
Peter Cohan of Peter S. Cohan Associates, a venture capital firm, said lowering the Fed Funds rate is like a tax on the middle class because this drives up inflation, bringing the dollar down, and raising the price of oil “almost immediately and squeezing the middle class.”
I guess a lower Fed Funds rate and a quarter will just about get you a cup of coffee nowadays.
(1 votes, average: 5 out of 5) Loading ...Fighting Banks to Save Homes from Foreclosure
By Jim Perez,
DebtHelp, Inc. Staff Writer
The best defense is a good offense.
Or at least says Carl von Clausewitz, an 18th century Prussian soldier and military historian.
But does this also pertain to fighting to keep from losing your home to the bank through foreclosure?
Yes, say some consumer rights groups.
And in the United States, one way to fight foreclosure is:
Sue.
Yes, folks, truly It’s a Wonderful Life, and you can sue the Mr. Potters of your own private movies.
Consumer rights groups and legal-aid lawyers are joining forces with private lawyers to get a day in court for borrowers who, through shoddy underwriting practices, got loans they had little chance of repaying and, in many cases, shouldn’t have gotten in the first case.
These consumer advocacy lawyers say they aim to prove lenders granted fraudulent or "unconscionable" loans with terms skewed heavily in their favor, or to fight abuses by servicers, such as phony fees that cause homeowners to default.
Borrowers who go this route get the chance to not only stop foreclosures and rescind the loans, but to seek damages for abuses, in some cases
The number of lawyers specializing in consumer rights is small, and with the growing number of foreclosures, many are booked solid.
Melissa Huelsman, a Seattle lawyer who has focused on wrongful-foreclosure litigation since 2001, says her caseload has doubled in the past year.
Bill Purdy, a Soquel, Calif., lawyer, takes this approach. He first looks for violations of federal statutes such as the Truth in Lending Act, a 1968 law that requires disclosure of key terms of the loan and its costs. "There are tons of illegal loans out there, but nobody’s looking," he says.
Most cases settle out of court. But courts in West Virginia and California have been most friendly to suits against lenders and servicers, says Margot Saunders of the National Consumer Law Center, which assists attorneys in such suits.
Check the National Association of Consumer Advocates for a list of attorneys specializing in lender/servicer abuses, or call your local legal-aid office or bar association.
But caveat emptor: In some cases, borrowers who lose a suit may get saddled with fees for the lenders’ attorneys.
(No Ratings Yet) Loading ...GOP Senator Floats Last-gasp Home Rescue Scheme
By Jim Perez,
DebtHelp, Inc. Staff Writer
U.S. Sen. Norm Coleman,of Minnesota, is floating a plan to help homeowners who are facing foreclosure.
Called the HomeOwners Mortgage Emergency Act, the Republican’s Ponzi scheme would allowhomeowners to withdraw up to $100,000 from their retirement accounts withoutpaying any penalties or taxes. They could use the money to pay any latepayments and fines.
At first blush, the proposal sounds good.
If you’re sinking I guess any flotation device lookspromising.
But reading between the lines, the flotation device mayactually be the rock that drags a homeowner down for the third time.
Borrowers would have to repay the money back in three yearsor have a tax lien placed on their home for the taxes and withdrawal penaltiesthat were initially set aside.
One of the other factors not mentioned is that many familiesfacing foreclosure secured those homes with subprime loans.
According to the CongressionalBudget Office, most of those families may not actually have those retirementaccounts from which Coleman is so graciously allowing them to draw.
The CBO found that only 42 percent of people earning between$40,000 and $80,000 contribute to a 401(k), and just 10 percent contribute toIRAs. For those earning below $40,000 a year, the percentages are even lower.
These are the very families the subprime lenders preyed, Imean focused on.
If these families had the means to save in the first place,they would not be facing foreclosure now.
Of course Coleman’s plan doesn’t hold mortgage lendersaccountable for bad behavior.
The late Edward Gramlich, a Federal Reserve official, wrote that"the subprime market was the Wild West. Over half the mortgage loans weremade by independent lenders without any federal supervision."
Coleman doesn’t want a government bailout of homeowners.Rather, he wants the government to allow the banks to be able to raid the 401(k)sof homeowners, which they cannot currently do in the case of a bankruptcy.
If a homeowner declares bankruptcy, as many in foreclosure arelikely considering, retirement accounts are off limits.
Coleman’s scheme is a way for banks to strip every lastasset from homeowners before taking their house.
And as most politicians are so willing to do, Coleman isdancing with those who brought him tothe dance: According to the Centerfor Responsive Politics, as of June 2007, Coleman had received campaigncontributions totaling $1,069,649 from the securities and investment, realestate and commercial bank sectors.
I won’t even mention that retirement accounts – for thosewho do have them – should be left for retirement.
Of course, if Coleman and the rest of the GOP cabal havetheir way, the middle class won’t retire: We’ll all be working at Wal-Mart tosupplement our privatized Social Security that they invested in hedge funds forus.
(No Ratings Yet) Loading ...Mortgage Fraud Tops All Time Highs: FBI Describes Number of Cases as “Astronomical”
By Seth Kravitz,
DebtHelp, Inc. Staff Writer
Mortgage brokers and borrowers may be guilty of funneling as much as $100,000 per mortgage closing in commissions and closing costs into their bank accounts by falsely inflating the home valuations. This is the most recent proof that the mortgage meltdown may be more severe then currently anticipated. This new information comes from a FBI and California Department of Real Estate investigation.
While technically cash-back mortgages are legal, they turn into a felony when they misrepresent the value of a home and the borrower does not notify the lender that the valuation is inflated above market value. Apparently, thousands of mortgage brokers and borrowers in California alone, didn’t get that memo. Who knows how wide spread this practice may go.
Now that the market is crashing, all of a sudden these illegal loans are starting to surface and may expose the mortgage industry to an even more extreme potential risk in the future. With the Citigroup CEO resigning due nearly $12 billion in estimated losses for the year of 2007, its obvious even the biggest banks are really feeling the crunch now.
Adding in billions of dollars in illegal loans just now surfacing, is only going to fuel that fire even more.
In southern California, entire neighborhoods were sold house by house using illegally inflated mortgages. The problem has gotten so bad in this region that local governments like San Joaquin County, are forming real estate fraud task forces to start policing the area for these loans.
Its easy to see the draw of these illegal loans, they allow the borrower or broker to funnel tremendous amounts of cash into commissions or into the borrower’s bank account. When banks lowered their standards to allow nearly anyone to qualify for any loan they wanted, it became even easier to funnel these loans through the system without detection.
Then after these loans would process and the payments would be dealt out, the broker or the borrower or both, would sometimes flee the area and default on the mortgage.
Those of you familiar with buying a home would know the value of the house comes from an appraiser. An appraiser is sworn under strict legal terms, to remain neutral and provide an accurate and honest appraisal for a home. So, how did these brokers and borrowers get highly inflated appraisal prices?
The oldest trick in the book, bribes. They would line up 5-6 different appraisers to come out and look at the house and tell them they will award the appraisal to the company that produces the highest value.
When asked, a local real estate expert in Southern CA, said that cash-back mortgages had become so common, they were considered the “normal” route for many brokers.
While the broker and the borrower were involved in many of the transactions together, the investigation showed that many times the buyer was in the dark about the process, even though they may face criminal charges regardless.
As always in the mortgage world, ignorance is no defense.
For a lot of these mortgages to go through, it required the buyer and broker to go outside of escrow to complete the transaction. This is where the buyer ignorance defense gets its biggest strike against it. No borrower in their right mind should ever assume its normal for a bank to offer thousands, tens of thousands, or hundreds of thousands of dollars on a “credit” basis outside of the standard escrow system.
If you are wondering how these deals typically start, it usually will involve a call with an offer like this: The house is worth $350,000 and the broker will offer you $425,000 with a credit backing of $50,000 for “repairs” or “improvements”. He will send you the papers with an additional “rider” attached, typically on the last pages, outlining the terms of the mortgage. The the deal is completed and funded outside of escrow and the broker takes his $50,000-$100,000+ commision.
One company suspected of that exact process outlined above would be Freedom Capital Mortgage, who had six of its brokers indicted for creating illicit contracts involving cash-back mortgages. These brokers would add on an extra page at the end of the contact that the bank would never see, outlining the terms of the cash-back mortgage.
To sum this all up, it looks like predatory lending and mortgage fraud extend further then anyone is currently discussing. Since these bad loans can take months or even years to uncover, it could be quite a while before we get any real idea of how many illegal cash-back mortgages were dealt out.
An FBI spokesperson said mortgage fraud cases are “exploding” and the situation is “unlike any I have ever seen” and that the number of cases nationwide is “astronomical”.
Looks like we won’t be getting the big housing turn around any time soon like all the pundits on the news claim.
(No Ratings Yet) Loading ...Jobs Number Misleading if You Read Between the Lines
By Jim Perez,
DebtHelp, Inc. Staff Writer
In the Bizarro World of Wall Street, where the market goes up on bad news, and good news hurts investors, today’s Labor Department report that U.S. payrolls grew by a net 166,000 jobs, lifted the Dow.
Well, sort of.
The Dow Jones Industrial Average ended the day down 54 points, a paltry drop compared to the 360-point dive the day before.
Labor also reported that the unemployment rate stayed the same, at 4.7 percent, a figure considered low by historical standards.
But of course, this good news is tempered by other data contained in the rest of the report, says Dean Baker, of the Center for Economic and Policy Research.
Baker notes that the employment rate dropped to 62.7 percent, the lowest since June of 2005. He says this drop is especially discouraging, continuing a decline that began at the end of 2006. The employment to population ratio has dropped by 0.6 percentage points over this period.
He continues with the bad news, saying that despite October’s healthy job growth numbers, the private sector has generated an average of just 78,000 jobs over the last three months. Not very encouraging.
And the hourly wage growth has slowed down to an anemic 3.57 percent annual rate over the last quarter. This is down from a rate of more than 4 percent earlier in the year.
Even that 4 percent growth pales in comparison to the real, double-digit inflation that the Bureau of Labor Statistics has hidden in its 24-year shell game.
Baker says these numbers show a weakening labor market, and predicts more doom and gloom on the horizon as the housing market continues its slow, steady death march.
(No Ratings Yet) Loading ...Labor Bureau’s numbers racket takes consumers on 1-way ride
By Jim Perez,
DebtHelp, Inc. Staff Writer
Please don’t shoot the messenger.
I am not a doomsday prophet, merely a chronicler of economic events.
But I do have to say that after writing about economic events these past few months, sometimes I feel like grabbing a gun.
But which messenger I’ll be aiming at, I won’t be saying.
For example, despite Wednesday’s 137-point rise after the Fed cut interest rates a quarter point, the Dow on Thursday took a 360-point drop. I haven’t seen a roller coaster ride like this since I visited Magic Mountain, near Los Angeles, a few years ago.
I’m sure many individual investors wish they could get off this ride.
I know I do.
As for some fund managers, I’m sure many of those same individual investors would like to take those managers for a one-way ride.
Thursday’s drop was attributed to the Fed’s warning that Wall Street’s interest-rate-cut gravy train is running dry because the Fed is concerned about inflation.
If inflation continues to grow, the Fed might, Gasp! raise interest rates. Alan Greenspan would be rolling in his grave at the thought, if he were dead.
Adding to inflation worries, overnight oil prices topped $96 a barrel before crude traders scavenging for profits caused oil to drop. Predictions of $100 a barrel are now even-money bets.
Hammering at Wall Street even more, the Commerce Department said that consumer spending slowed in September, rising by 0.3 percent, slightly lower than the 0.4 percent increase that analysts had been expecting. Incomes matched August’s gain of 0.4 percent, in line with forecasts.
Inflation news from the consumer spending report was good, as usual.
The Fed’s preferred inflation gauge rose a moderate 0.2 percent in September. This measure is up 1.8 percent over the past 12 months, inside the Fed’s comfort zone of core inflation increases between 1 percent and 2 percent.
The Fed’s preferred inflation gauge excludes food and energy.
Nor is housing a concern for the Fed.
But if you are an average consumer, it is.
And as the housing market continues to slide, foreclosures being up 30 percent at the end of 2007’s third quarter, double the same period in 2006, more and more people are joining us in the ranks of average consumers.
The Economist magazine agrees with some, including me, who say that the Fed’s inflation-sleight-of-hand is stroking Wall Street and slapping Main Street.
The magazine says that an average of “all items†is going up not at 2 percent or 3 percent per year as the U.S. Bureau of Labor Statistics claims, but at 16.7 percent per year. Food is going up even faster – 31.6 percent.
Treasury Secretary Henry Paulson continues to tell us the dollar is strong.
I don’t know about you, but I’m having trouble living with Paulson’s “strong dollar.†I can only imagine what it would be like if the dollar were weak in Paulson’s eyes.
Strategic Investment’s Dan Amoss says that, "With each new release of economic indicators – the consumer price index, the new employment numbers, trade deficits, gross domestic product and more – every number, bad or not so bad, is contorted into ‘happy speak’ by the talking heads responsible for keeping the good times rolling."
Amoss continues:
"Just imagine how great your family budget would look if you didn’t have to include your mortgage payment, the gas to run your car, your heating bill or the weekly grocery bill. You’d probably feel pretty rich, too. But reasonable people know you just can’t ignore these bills without some pretty serious consequences.
"In addition to excluding the above three, the Fed also plays a cool sleight of hand with the prices it does include. For example, we all know that a computer is twice as capable as one from five years ago, but costs about the same price. But the Fed goes ahead and adjusts the price downward to contribute a 50 percent decline in price in the CPI.
"So if you were to take out the adjustment tricks, inflation would probably run 3 or 4 percentage points higher than what the government will admit. Just think how fast an 8 percent inflation rate can eat into savings and investments."
Of course, if banks were paying a reasonable return on our savings, because bond traders and investors demand a 2 percent return after inflation, this would mean that bond and money-market yields could climb into the double digits.
Imagine getting a double-digit return on a bond or money-market fund.
As I said a few weeks ago, that’s unthinkable:
Having to pay a high return to common folk investors such as us would cause the salaries and bonuses of bank and fund managers to drop below the $10 million mark.
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