American maxing out their credit cards

We like to crack a joke about this, but the reality is just too sobering. Consumer credit-card debt in the US has hit an all time high. The poor economy, a consumption-driven culture, and predatory banks offering credit to those who can’t pay. These facts from the current Huffington Post contradict a recent article in Time Magazine celebrating an apparent decline in overall household debt. But if you read the fine pint in the Time article, you see that the gross number drop is cause by massive loan defaults across the country. As Martin Crutsinger writes in Huff Post,

Americans swiped their credit cards more often in October and borrowed more to attend school and buy cars. The increases drove U.S. consumer debt to an all-time high.

The Federal Reserve said Friday that consumers increased their borrowing by $14.2 billion in October from September. Total borrowing rose to a record $2.75 trillion. Continue reading “American maxing out their credit cards”

More reasons to hate bankers

“In the 2012 edition of Occupy Money released this month, Professor Margrit Kennedy writes that a stunning 35% to 40% of everything we buy goes to interest. This interest goes to bankers, financiers, and bondholders, who take a 35% to 40% cut of our gross domestic product.” So says an article in today’s Asia Times by Ellen Brown, entitled  “Why Bankers Rule the World.”

As Brown continues, “That helps explain how wealth is systematically transferred from Main Street to Wall Street. The rich get progressively richer at the expense of the poor, not just because of “Wall Street greed” but because of the inexorable mathematics of our private banking system.

“This hidden tribute to the banks will come as a surprise to most people, who think that if they pay their credit card bills on time and don’t take out loans, they aren’t paying interest. This, says Kennedy, is not true. Tradesmen, suppliers, wholesalers and retailers all along the chain of production rely on credit to pay their bills. They must pay for labor and materials before they have a product to sell and before the end buyer pays for the product 90 days later. Each supplier in the chain adds interest to its production costs, which are passed on to the ultimate consumer.

“By 2010, 1% of the population owned 42% of financial wealth, while 80% of the population owned only 5% of financial wealth. Dr Kennedy observes that the bottom 80% pay the hidden interest charges that the top 10% collect, making interest a strongly regressive tax that the poor pay to the rich.

“People generally assume that if they pay their bills on time, they aren’t paying compound interest; but again, this isn’t true. Compound interest is baked into the formula for most mortgages, which compose 80% of US loans. And if credit cards aren’t paid within the one-month grace period, interest charges are compounded daily.

For more, see “Why Bankers Rule the World.”