It is well known that we are spending trillions of dollars that we don’t have.  It is well known that we have debt that generations 2 to 3 times removed will be feeling the effect of.  We are very dependent on tax revenues to pay for all of this practice of socialism.  Tax revenues are simply the taxes that you and I pay each year in the form of income taxes and are extremely important in the offsetting of all of this spending. 

So, how are those tax revenues looking now that we are beyond April 15th?  According to the American Institute for Economic Research, things don’t look so good.  Here is some of the information they just sent out in a press release:

Income tax season is over and the numbers are in:  The U.S. Treasury experienced the largest April-to-April decrease in revenues in nearly 30 years (since at least 1981, the earliest year for which monthly data are available).

History shows that federal tax revenues are usually highest in the month of April, when most tax returns are filed.  But according to a new commentary published by the American Institute for Economic Research (AIER), federal revenue showed a nearly 50% year-to-year decline, from $404 billion in April 2008 to just $266 billion in April 2009.

OK, President Obama I hope that you have an alternative game plan while you are not planning on raising taxes on the majority of America per your campaign promise.  I think that anyone can see the game plan.  It is simple math.  If you spend $1,000, you need at least $1,000 to cover the expenditure.  If you don’t have the $1,000, you have to find a way to increase the amount that comes into the bank. 

The only way the Federal Government can increase the amount needed to cover the outrageous spending is by raising taxes for EVERYONE. 

On a side note, I had an interesting conversation with someone last night who is a supporter of Obama.  I am always fascinated to hear the reasons why someone supports any politician.  I asked a simple question.  “Do you like the fact that the Obama Administration is turning this country into a socialistic country?”  His reply was “no, that really does bother me.”   Still he was a supporter.  There are a lot of Americans who believe that the whole concept of socialism is not a problem.  Obama’s support base is huge in this country regardless of his socialistic agenda.  I wonder how higher taxes are going to sit with those who support Obama? 

Don’t kid yourself – just taxing the “wealthy” in this country will not pay the bill.  It is going to take tax increase across the board.

Tags: American Institute for Economic Research, April 15, Bob Brooks, Deceptive Money, federal government, federal tax revenues, Income Tax, Obama, Obama Administration, politician, President Obama, Prudent Money, socialism, tax increase, Tax revenues, taxes, U.S. Treasury

I knew that the exclusion would be in the new laws. When I found a copy of the Credit Card Accountability Responsibility and Disclosure Act, I immediately went to the section that detailed when credit card companies can raise your rates.  For the most part, this new law stops credit card companies from utilizing the Universal Default Clause. This is the part of the credit contract that allows the credit card company to change the terms and conditions of the credit agreement for really no reason.  However, there are still parts of the law that give the credit card companies the ability to raise rates.

If you are over 60 days late, they can raise your interest rates.  Section 171 Part 3 is where the credit card companies are going to get millions of Americans.  The law states that “an increase (in interest rates is allowed) due to the completion of a workout or temporary hardship arrangement by the obligor (debtor) or the failure of the obligor (debtor) to comply with the terms of a workout or temporary hardship arrangement.”

IN PLAIN ENGLISH – If you rework your credit card debt, they can raise your rates.  A debt management program is a workout.  What these companies do for (to) consumers, in my opinion, fit the exception that is stated in the new law that allows credit card companies to raise interest rates and charge fees.  Why is that significant?  The credit card industry has put together this new campaign to “help” people who cannot make their payments.  The site is www.helpwithmycredit.org.  It is billed as a site you can go to get educated on your options.  Actually, it is a front for consumer credit counseling and basically steers you towards a credit counselor who then pitches a debt management program or a workout.  Plus consumer credit counseling is in overdrive advertising their services.

I believe that the credit card industry will steer as many people as possible towards those programs in order to get as much of the outstanding debt as possible away from the protection of this new law.  It is actually ingenious.  The credit card industry has always been ingenious in finding ways to make as much money as possible at the consumer’s expense.  As I stated yesterday, Congress is going to make sure that their campaign contributors (the credit industry) are just fine.

You not only need to read the fine print of credit card agreements. You also need to read the fine print of the credit card laws.

Tags: Bob Brooks, campaign contributors, Congress, Credit Card Accountability Responsibility and Disclosure Act, Credit Card Companies, credit card debt, Debt, Deceptive Money, Prudent Money, rates, Universal Default Clause

Please answer one question for me – Why can’t politicians write laws that are easy to interpret?  Maybe it is because they don’t want them to be easy to interpret?  Maybe they want to keep it confusing?    

I think I have done something that not even all of the politicians have done prior to voting.  I have read over the Credit Card Accountability Responsibility and Disclosure Act of 2009 (Credit Cardholders Bill of Rights – the Senate had to rename it of course) and still am trying to make appropriate interpretations of some of these laws.  The bottom line is that the politicians give the industry plenty of wiggle room.  In other words, this appears to be nothing more than a slap on the hand.  With the exception of a few aspects of these laws, this is not a huge victory for the consumer.

As I will demonstrate over the next several days, this is one big victory for the credit card companies and not so much for the consumer.  Let’s take a look at a few facts.

There are two clear cut facts about this new legislation.  First, it will force the credit card company to make disclosures about credit more “suspicious” and readily available for consumers.  Second, it gets rid of the credit card company’s ability to increase interest rates for no reason.  This bill just defines how credit card companies can raise rates on you.

There are 3 major reasons why this is a victory for the credit card companies:

(1)     Gives the go ahead to raise fees – This is where the consumer is going to get hurt.  The credit card industry will just figure out ways to add more fees.  Now this adds up when you start thinking about the sheer number of cards in circulation.  Let’s take Chase for example. They have 119.4 million credit cards in circulation.  If they just started charging or increasing annual fees by $25, they would bring onto their balance sheet, either through an increase in money owed to them or fees paid by credit card holders, almost 3 billion dollars a year.  That is not bad for a hand slap.  They can easily get away with it now because of the new laws.

(2)     Bans the Universal Default Clause – Congress says credit card companies can no longer raise rates for any reason. They are claiming this to be a huge victory for the consumers and are declaring that they have hit the credit industry hard.  Actually, this is far from the truth.  The ability for the credit card industry to raise rates for any reason was going away regardless of these new laws. Realistically, there was a shelf life on how long they could get away with it.  The credit party is over.  Plus, they have 9 months to comply with the new laws (thanks to the Senate) and have plenty of time to raise rates and do whatever they want.  The House version of the bill only gave them 3 months to comply with the new laws.

(3)     They finally have Congress off of their back – The staged drama is over.  Congress has defeated the big bad credit industry.  Senator Dodd might have saved his political career.  Now, they don’t have to bother the industry that contributes heavily to their campaigns.  They did so without even having to inflict any real pain on the credit card industry.  This was political mastery.    

This is just another dog and pony show by our politicians.  Make no mistake about it – besides inconveniences, the credit industry wins on this one. The player with the biggest campaign contributions always wins in the fight for power and greed.

Tags: annual fees, Bob Brooks, Chase, Credit Card Accountability Responsibility and Disclosure Act of 2009, Credit Card Companies, credit card holders, Credit Cardholders Bill of Rights, Deceptive Money, Fees, House, politicians, Prudent Money, Senate, Senator Dodd, Universal Default Clause

As everyone applauds the protection offered by the Credit Cardholders Bill of Rights, there is one group that gets no benefit from these laws at all.  The LA Times reports:

“The new law, which shields consumers from predatory fees and sudden rate hikes, doesn’t include customers holding credit cards backed by their companies. An amendment that would have extended the protections to cardholders whose businesses have fewer than 50 employees was killed before the final bill was voted on.”

So the small business owner that has relied on lines of credits through business credit cards throughout the past 5 years or so is still going to be subject to the abuse of the credit card industry.  I haven’t been able to find the total amount of small business credit card debt.  However, I would imagine that it is sizeable.  Over the past 5 years, credit card companies were handing out small business credit cards like candy. You could get credit limits as high as $50,000 per card in most cases.  None of these credit cards would show up on a business owner’s credit report.  So, a small business owner could have an enormous amount of business credit card debt and it never be reflected on a credit score.  This of course enabled the small business owner to obtain more and more credit.

It makes no sense to exclude small business owners.  Leave it up to Congress to pass laws that do not protect everyone in the system.  It is not like the business debt (separate from the business owner) belongs to the company or small business. The business owner is personally responsible for that debt as he or she would be if it were personal debt. 

Then I came across this article in Inc.  that stated the following:

“….the National Federation of Independent Business, an advocacy group, supported the bill. Brad Close, the NFIB’s director of public policy in the House, said it was a straightforward piece of legislation to address the needs of entrepreneurs who use their personal credit cards for business.” 

That makes no sense at all since there is no distinction between a business credit card and a personal credit card.  How could this organization that is supposed to be the voice of small businesses ever think that this is a good thing?  Once again, it would be different if the business rather than the business owner was personally liable for the business card.  Besides, it makes no sense for a small business owner to use personal credit cards for business purposes when he or she can obtain a credit card in the small business name and the credit limit never be reflected on the credit report. 

For all of the politicians that voted to not protect small business owners, you have once again not done your job as an elected official.  The small business owner represents the backbone of capitalism which is probably the reason there is no protection.  It is a little disingenuous for the politicians to talk about helping the small business owner thrive when they don’t even have the backbone to stand up against the credit card companies and protect them.

Tags: Bob Brooks, business debt, Congress, credit, Credit Card Industry, Credit Cardholders Bill of Rights, credit report, Debt, Deceptive Money, LA Times, lines of credit, politicians, Prudent Money, small business credit card debt, small business owners

The house of representatives voted to pass the credit card holders bill of rights and the President will be signing that bill into law today. 

To further increase your protection from the credit card industry, politicians added a “special” piece of legislation.  I appreciate that the politicians are working hard to protect consumers.  This “special” piece of legislation completes the package!! 

The credit card holders bill of rights makes it legal for you to carry a gun in National Parks – you know, just in case a credit card executive tries to attack you while vacationing in Big Bend.

It is amazing to me (not surprising) that the politicians will slip a piece of totally non-related legislation (making it lawful to allow guns in National Parks) into a bill as important as credit card legislation. 

“Today is a victory for every American who holds a credit card,” said Rep. Carolyn Maloney, D-N.Y. “I regret that added to it was the unrelated and dangerous gun bill, and we should not have had to do credit card reform at the barrel of a gun.”   

All of the politicians must get their sound bites in on this legislation. 

With all due respect Representative Maloney this would have been a victory had this happened years ago or, at least, if Congress hadn’t given the credit industry a 9-month timeframe to comply. 

The credit card companies will have plenty of time to do three things to consumers – cut your credit limits, close your accounts, and raise your rates.

Thank you to all of the politicians who continue to work hard for the consumers. 

After I get a chance to go through the bill, I will write more about it.  For now, I am taking some time off for Memorial Day and will see you next Tuesday.  Have a great holiday weekend!

Tags: Bob Brooks, consumers, Credit Card Companies, Credit Card Industry, credit cardholder bill of rights, Debt, Deceptive Money, federal regulators, Fees, legislation, politicians, Prudent Money

Over the weekend, I received an e-mail from a listener in Japan.  He listens to Prudent Money via the daily podcasts.  He was asking me about an investment trading strategy that he had some success using.  He asked me if it were a zero sum game if he was making money while everyone else lost. 

My answer to him was that whenever someone loses money, there is someone who makes money.  When the market was going down last year, there was someone making money.  With any investment trade, you have a winner and a loser.  You just need to have a strategy.  What most investors think of as a strategy might really end up being a disaster.  This listener has gone out and learned an investment strategy.  Buying and holding and doing nothing is a strategy.  However, it is not a good one considering this particular environment.

When I speak of this particular environment, I am talking about the new environment which is a permanent change.  I truly believe that we will never go back to the old days (pre-2008) when it comes to investing.  If I am correct in my thinking, those who do not adapt to this new environment could be in for some real heartache.

Well, consider the environment and tell me how this enormous amount of debt is going to go away and things get back to normal.  Also consider that the Federal Government seems to be set on continuing to add to the debt on a daily basis with more and more government spending.  The following excerpt is from Michael Panzner’s blog Financial Armageddon.

Even under the best of economic circumstances, tax season is a tense time for American households. The number of hours we collectively spend working on our returns is probably a lot more than government agencies claim.

The burden in financial terms is even greater: A recent independent survey found that the average American’s total federal, state and local tax bill roughly equals his or her entire earnings from January 1 up until right before tax day.

Now imagine that tax bill doubling over time.

In recent years, the federal government has spent more money than it takes in at an increasing rate. Total federal debt almost doubled during President George W. Bush’s administration and, as much as we needed some stimulus spending to boost the economy, the nonpartisan Congressional Budget Office now estimates total debt levels could almost double again over the next eight years based on the budget recently outlined by President Obama.

Regardless of what politicians tell you, any additional accumulations of debt are, absent dramatic reductions in the size and role of government, basically deferred tax increases. Remember the old saw? “You can pay me now or you can pay me later, with interest.”

To help put things in perspective, the Peterson Foundation calculated the federal government accumulated $56.4 trillion in total liabilities and unfunded promises for Medicare and Social Security as of September 30, 2008. The numbers used to calculate this figure come directly from the audited financial statements of the U.S. government.

If $56.4 trillion in financial commitments is too big a number to digest, think of it as $483,000 per American household, or $184,000 for every man, woman and child in the country.

So, this is the environment that we are dealt and it is full of risk.  Investors need to learn a strategy or have someone manage money that understands the concept of strategy and investing versus buying and holding.

Treasury Secretary Tim Geithner – AKA the Car CZAR, the Bank CZAR, etc. 

CZAR – One having great power or authority.  Also – also tsar or tzar (zär, tsär) A male monarch or emperor

I wrote a blog Monday about my friend Scott Lau, whose Chrysler dealership has been in the family 42 years and was just forced out of business due to the Government’s “surgical” Chrysler bankruptcy.  I interviewed Scott yesterday about his story on Prudent Money. As I was preparing for the show, so many things started to dawn on me about the whole Government involvement and Chrysler.

First, let’s consider Scott’s dealership for a moment.  Here is a business that has been a family operated small business for 42 years.  It has been a solid business with a great business plan.  It has been profitable through the years and was weathering the financial crisis.  When it was all said and done, I believe that Preston Chrysler Jeep would have survived the financial crisis.  They made the necessary adjustments.

Preston Chrysler Jeep is not closing their doors because they are not a good dealership.  They are not closing their doors because they were in trouble financially.  They are closing their business of 42 years because the Car CZAR has spoken.  Chrysler gave them and 800 plus other dealerships the pink slip and said we no longer have a contract with you.  There were no calls from any Chrysler representatives to Scott’s dealership.  There was a UPS letter delivered to the back door of the parts department.   

This is a healthy small business with no debt that was forced to shut down because the only product that they sell and service was taken from them due to Government direction through “structured” bankruptcy.  Preston Chrysler Jeep is not the reason that Chrysler and the rest of the automotive industry is in trouble.  This dealership was nothing more than a small business participating in the American Dream. 

The Government is destroying capitalism in a methodical fashion.  There was a reason that Chrysler and GM didn’t go bankrupt in December (before we threw billions of dollars of taxpayer dollars down the toilet).  Think about it for just a minute.  If Chrysler or GM would have gone through bankruptcy in December, there wouldn’t have been as much Government involvement.  Instead, the Car CZAR continued to pump billions of taxpayer dollars into these failing companies in order to keep the lights on.  This gave the Car CZAR ultimate control.  The Government controls the destiny of these automotive companies.  Now who answers to who?   Just look at what they are doing to the banking system.   

You know when you borrow money from a loan shark you give your life away.  There is no difference here.  So, the Car CZAR has spoken and Scott and the rest of the employees at the dealership that have served this area faithfully were simply on the wrong side of the Washington power grid and out of luck.  So much for the American Dream. 

So, who is this Car CZAR?  Well let’s look past the man, Steve Rattner, who was appointed to head of the task force.  Instead, let’s take a look at who makes up the task force. 

Members (according to Wikipedia)

·     Co-chairs:

o    Treasury Secretary, Tim Geithner

o    National Economic Council Director, Larry Summers

·     Secretary of Transportation

·     Secretary of Commerce

·     Secretary of Labor

·     Secretary of Energy

·     Chair of the President’s Council of Economic Advisers, Christina Romer

·     Director of the Office of Management and Budget, Peter R. Orszag

·     Environmental Protection Agency Administrator

·     Director of the White House Office of Energy and Climate Change

·     Senior Advisor on Auto Issues at the Treasury Department, Ron Bloom

You really just need to stop with the first name to see where the power lies.  It seems that Tim Geithner remains the man behind the curtain.

Tags: automotive companies, Bob Brooks, Car CZAR, Chair of the President's Council of Economic Advisers, Christina Romer, Chrysler, Chrysler Bankruptcy, Deceptive Money, financial crisis, Government, loan shark, Peter R. Orszag, Preston Chrysler Jeep, Prudent Money, Ron Bloom, Scott Lau, Secretary of Commerce, Secretary of Energy, Secretary of Labor, Secretary of Transportation, task force, Treasury Secretary Tim Geithner, Washington

As President Obama and the rest of the politicians in Washington ambiguously spend trillions of dollars in their attempt to completely change everything in one shot, there lies an enormous future liability that gets very little press amongst the march towards socialism.  Yes, that nightmare called the Social Security and Medicare fund becomes more and more of a problem.  Here are a few excerpts from the annual report just released:

A MESSAGE TO THE PUBLIC:

The financial condition of the Social Security and Medicare programs remains challenging. Projected long run program costs are not sustainable under current program parameters. Social Security’s annual surpluses of tax income over expenditures are expected to fall sharply this year and to stay about constant in 2010 because of the economic recession, and to rise only briefly before declining and turning to cash flow deficits beginning in 2016 that grow as the baby boom generation retires. The deficits will be made up by redeeming trust fund assets until reserves are exhausted in 2037, at which point tax income would be sufficient to pay about three fourths of scheduled benefits through 2083.

Medicare’s financial status is much worse. As was true in 2008, Medicare’s Hospital Insurance (HI) Trust Fund is expected to pay out more in hospital benefits and other expenditures this year than it receives in taxes and other dedicated revenues. The difference will be made up by redeeming trust fund assets. Growing annual deficits are projected to exhaust HI reserves in 2017, after which the percentage of scheduled benefits payable from tax income would decline from 81 percent in 2017 to about 50 percent in 2035 and 30 percent in 2080. In addition, the Medicare Supplementary Medical Insurance (SMI) Trust Fund that pays for physician services and the prescription drug benefit will continue to require general revenue financing and charges on beneficiaries that grow substantially faster than the economy and beneficiary incomes over time.

The drawdown of Social Security and HI Trust Fund reserves and the general revenue transfers into SMI will result in mounting pressure on the Federal budget. In fact, pressure is already evident. For the third consecutive year, a “Medicare funding warning” is being triggered, signaling that non-dedicated sources of revenues—primarily general revenues—will soon account for more than 45 percent of Medicare’s outlays. A Presidential proposal will be needed in response to the latest warning.

The financial challenges facing Social Security and especially Medicare need to be addressed soon. If action is taken sooner rather than later, more options will be available, with more time to phase in changes and for those affected to plan for changes.

BOTTOM LINE

This is a huge problem facing the Obama Administration and nothing is really being done to fix it.  The focus is on other things that I would argue are not as important as the current liabilities that we are already face.  The solution will be higher taxes for EVERYONE.  This is not rocket science but common sense. You cannot spend trillions of dollars and face future trillions of dollars without the necessary tax revenue to pay for it.  This will not be the burden of all of the ”rich” people in the upper tax brackets.  Everyone will be forced to pick up the bill for the past, current, and future irresponsibility of our politicians.

Tags: annual report, Bob Brooks, cash flow deficits, Deceptive Money, economic recession, Federal budget, Medicare, Medicare's Hospital Insurance Trust Fund, Obama Administration, politicians, President Obama, Prudent Money, reserves, Social Security, socialism, tax brackets, tax income, taxes, trust fund assets, Washington

Last Thursday was a sad day for me.  On Thursday, a friend of mine learned that his family dealership of over 42 years was being forced to shut down due to the Chrysler bankruptcy.  Earlier that morning, I had talked with my friend Scott Lau who is co-owner and GM of the dealership.  Scott felt pretty confident that they would not be a part of the casualty list.  Owning a dealership is an entrepreneurial venture.  The dealership is a small business and they choose to sell Chrysler products.  Unfortunately, we live in a world where capitalism is a dying breed.  We live in a world where our Government can pick and choose who stay in business.  Don’t make any mistake about it.  This could have gone much differently.

Preston Chrysler Jeep isn’t forced to shut their doors because of poor business practices.  It is being forced to shut its doors because of a broken system that continues to shatter as each day passes.  Scott is being forced to sell over 100 cars both used and new as quickly as possible.  He has until June 9th to liquidate his entire inventory.  If you are in the market for a new car, you could get an incredible deal because of this situation. 

For those of you who have followed my writing through the years, you know that I am extremely particular and careful concerning who I endorse.  This is especially true in an industry where there are more questionable activities than good honest dealings.  Without question, I know that Scott and his dealership represent what is good about the industry and there could never be a better time to get a great deal on a car.  So, if you are in the market for a new or used car, I hope that you would consider going over to Preston Chrysler Jeep and talk to Scott.  Not only will you get a great deal, you will be helping out someone in an unfortunate situation. 

If you get a chance to listen, I am going to interview Scott on the program on Tuesday.  He is going to reveal what really goes on in dealerships during the sales process.  This is information that most dealers would never talk about to the public.

Dealership Information:

Scott Lau

Co-Owner/GM

Preston Chrysler Jeep

13439 Preston Rd.

Dallas, TX 75240

972-387-3900

Tags: Bob Brooks, capitalism, Chrysler, Chrysler Bankruptcy, Deceptive Money, Preston Chrysler Jeep, Prudent Money, Scott Lau

I had the opportunity to interview Dr. Richard Ebeling on my program yesterday.  It was a real treat for me.  Dr. Ebeling is a Senior Fellow at the American Institute for Economic Research.  He has a very impressive resume.  He also is well versed in Austrian economics.

If you get a chance, the show is worth listening to.

The topic of discussion was the pension plans for the GM workers.  There is a great deal of retirement money that is already pledged to the GM workforce and is a current liability for GM. When (not if) they go through bankruptcy, they will probably be relieved of some of those liabilities.  Typically that is not a problem because of the Pension Benefit Guaranty Corporation.  This Governmental agency is set up to cover the short-fall when a company goes into bankruptcy and cannot cover their pension obligation.

Well, like most Governmental agencies, they are broke.  One of their investment managers thought it would be a good idea to invest their fund into the stock market back in October 2008 (right before the crash).  As you can imagine, that did not work out too well.

So, the bottom line is that millions of people in America who don’t get a pension of any kind will be forced to pick up the tab and pay for the pensions of GM workers.  This is just another mess that the politicians are presiding over.

I asked him what happens if GM cannot ever get back on its feet?  He said that the biggest problem politicians have is admitting they made a mistake.  Thus, they will never do what is inevitable – let it go under.

I guess that means we will probably prop it up forever by throwing good money after bad.  

Chrysler announced yesterday that they will be closing down around 800 dealerships.  The sad thing is that they chose to close down probably one of the best run dealerships in Texas.  I know the owners personally and know that they run an incredible business.  It just doesn’t seem like anyone is making good decisions.

Tags: America, American Institute for Economic Research, bankruptcy, Bob Brooks, Chrysler, Deceptive Money. Dr. Richard Ebeling, GM, Pension Benefit guaranty Corporation, Prudent Money

 (This is Part II of my new series on debt solution companies)

I was reading an article written by a TIME magazine writer entitled, “The Real Problem with Credit Cards:  The Cardholders.”  This writer basically states that it is the people in debt that are the problem.   I really had to take a step back and think through the content of the article to determine where I stood.

She writes, “There are piles of evidence that people are bad decision makers when it comes to how they use credit cards. Even when presented with full and fair information, they often make decisions that are not in their own economic best interest.”

She says that “the seeming solution would be to make clear to consumers exactly how much their credit cards are costing them.”

Although I agree that we all need to take personal responsibility with credit cards and the choices we make, I don’t think that her thesis flies.  It is true that no one stuck a gun to your head and made you buy the big screen TV at Circuit City (Oh, I miss Circuit City).  The blame clearly lies on an industry that sets the consumer up to fail. 

There is a reason that cocaine is illegal.  There is a reason that there are laws prohibiting excessive speed on highways.  There are reasons that laws are in place.  They are written to offer a layer of protection for the American citizen.  In my book Deceptive Money, I fully document how crooked the credit card industry has been through the years.  The consumer never had a chance.  There is no other consumer contract in existence to where one party can change the terms and conditions at will.  Credit card companies can change anything that they want after the consumer signs on the dotted line.

The problem is not fixed by telling people the fees and how much they are spending.  If you are going to rack up debt, you are going to do it whether or not the fine print is in big bold letters or not.  The solution is passing laws that state credit card companies cannot practice abusive tactics anymore.  That is the solution.  Another problem is the politicians that big businesses elect and put in office.  They have protected the credit industry for years and are only reluctantly pseudo doing something about it now. 

Yes, we all have to take personal responsibility. At the same time, the system has failed America because the politicians enabled it to do so.  It is a crooked system that should have been regulated by good laws a long time ago.  Had that been the case, we would not have the problem we have today.

Tags: Bob Brooks, credit cards, Debt, Deceptive Money, laws, Prudent Money, TIME magazine

My buddy Bryan sent over an article to me today entitled, “Obama Halves Chrysler’s Planned Marketing Budget”.  His comment was that the Government doesn’t understand the importance of marketing.  Although that is true and I have some opinions about that decision, that is not what was so disturbing.  What’s disturbing id the fact that the Government is telling Chrysler what they can and cannot do. 

Socialism – Any of various theories or systems of social organization in which the means of producing and distributing goods is owned collectively or by a centralized government that often plans and controls the economy.  This is socialism by definition.  If you look at everything the Obama Administration is doing right now, it is completely obvious. 

I think that anyone could have come to the conclusions that both GM and Chrysler should have gone bankrupt last year.  Now after billions of dollars have been thrown down the toilet, they are doing what they should have already done.  However, that wouldn’t have given the Government what they wanted.  By going this route, they accomplish two things.  First, the Government now for the most part owns and controls the automotive industry.  Second, Obama protected the unions.  Had GM and Chrysler gone through bankruptcy, the unions would have been decimated.  Those poor $40 an hour plus benefits workers might have had to lose some of their luxury package. 

Obama has saved the unions and taken one more step towards socialism.  Let me say one more remark.  I realize that there are many people who listen to Prudent Money that aren’t too happy with my continual writing about the Obama Administration.  I know that some of you support him.  This isn’t about President Obama.  This is about what he is doing to America.  America needs to open her eyes.  If you support Obama and socialism, then that is fine. If you support Obama and just don’t understand his agenda, then I want you to be informed. 

The following link is an excellent article written by analyst Vitaliy N. Katsenelson.  I would encourage you to read more.

Here are Vitaliy’s opening remarks -

On May 1, the United States took a drastic step toward becoming Russia.  Not Russia at its best, not the motherland of Dostoevsky, Tolstoy, Rachmaninoff… 

Instead, Russia at its worst, the one that in 1917 took from the bourgeois and gave to the working class; the one that signed contracts with western oil companies in the 1990s when oil prices were low and then — in 2007 when oil prices skyrocketed – blatantly and unilaterally “renegotiated” those contracts.    

Wielding the public’s empathy as a weapon, President Obama took Chrysler from its rightful owners: secured loan holders (a.k.a. TARP-tainted banks, the “evil” hedge funds, faceless pension funds).  And he gave it to struggling, very sympathetic, $40-an-hour earning (including benefits, this is not a typo), blue collar workers — Chrysler’s employees and the United Auto Workers union.  Chrysler, simply, was stolen from its rightful owners. 

Tags: Bob Brooks, Chrysler, Deceptive Money, GM, Government, Obama, Obama Administration, Prudent Money, socialism, Vitaliy n. Katsenelson

When I talk about the economy or post charts, there is the tendency to automatically think that it will be hard to understand.  This concept is not too difficult to understand and I encourage you to try.  It is important.

The Government states that unemployment is 8.9%.  Of course, that doesn’t count everyone.  There are many who fall out of the system and are not counted.  The Bureau of Labor Statistics gets a little more precise.  They estimate that 15.8% are unemployed.  The guys at www.shadowstatistics.com do an excellent job of staying on top of what is really happening. 

What concerns me is the ultimate effects on investments and your money.  The Government is working over-time to create the illussion that the economy isn’t as bad as one would think.  The Great Depression saw 25% unemployment and it appears we might be getting close to that number.   Take a look at this chart originally posted on www.shadowstats.com.

unemployment

The bottom red line on the chart is what the Government reports.  The top blue line on the chart is what www.shadowstats.com reports. 

If you consider that Shadowstats’ analysis could be off even a little, there is a shocking difference in the two numbers.  The chart reads 20% of the country is unemployed!!  (Based on the chart and not their official reading to the decimal point)

I have said all along that the economy won’t recover unless you fix the unemployment problem.  As I wrote yesterday, making up jobs out of thin air is not a solution.  The real concern is what happens to consumer confidence when this illusion shatters.

Tags: Bob Brooks, Bureau of Labor Statistics, Deceptive Money, economy, Government, Great Depression, investments, Prudent Money, stress test, Unemployment, unemployment numbers

It wasn’t 2 months ago that President Obama sounded the dire warning concerning the economy.  Listening to him you would have thought that the world was coming to an end.  All of the sudden, we are on our way to recovery.  I wrote a week ago that I felt the unemployment report would be taken as a positive. It is almost as if the Government is doing everything in their power to make the once dire economic situation that we faced not even two months ago look like everything is OK again.  

A few weeks ago, the consumer confidence number reportedly increased by 50% in one month.  Right before the banks reported their earnings numbers, the government changed the accounting system enabling the banks to hide many of their losses.  Citibank, who was on the verge of going under not even a few months ago, is in all of the sudden in great shape and making profits.  Then there is the unemployment report. 

I am hard pressed to find any news outlet that is not reporting that employment is recovering based on Friday’s report.  

The Worst May Be Over – Job Losses slow to six-month low, raising hopes – Dallas Morning News Front Page 5/9/09

 They point to the ”not as bad” as expected employment numbers are starting to look pretty good.   Well, they should when you consider how much the Government tinkered with this set of data. 

Each month the Department of Labor “estimates” how many jobs were created or lost by businesses that the unemployment numbers didn’t reflect.   It is called the birth/death ratio.  Well, imagine that, the Department of Labor showed the largest number of imaginary jobs reported in over a year.  I looked at the data back to April 01, and this last “estimate” was the fourth highest during that time period.

They ”estimated” (out of thin air) that the US economy created 226,000 jobs last month.  Wow, just like that, we did better than expected.  It is Obama magic.  Meanwhile, people are still losing jobs by the 100,000’s and besides the 66,000 Government jobs created last month in order to take the consensus next year, the Obama administration is doing nothing to create jobs.

My favorite part of the birth/death “estimates” are the sectors that showed job growth.  This time around there were 75,000 jobs created in the leisure and hospitality sector.  I didn’t realize that there was such a demand for jobs in this sector.  I guess they are thinking about all of the spending that will result from all of the disposible income that consumers have lying around.  

It also doesn’t seem to matter that the past two months unemployment numbers were revised showing 66,000 more jobs lost than previously reported. Don’t be fooled by these numbers.  This is the world that the Government wants you to believe is real.  The Government is playing a dangerous game that could possibly destroy ALL confidence when it is all said and done.

Bob is out of the office today, but Monday May 11, 2009 he will cover in full detail the results of the stress test and the unemployment numbers.

Tags: Bob Brooks, Deceptive Money, Prudent Money, stress test, unemployment numbers