(Edit note, a couple of weeks after the writing of this article comes a powerful article from Asia Times that basically concurs with a few of the major points made below. ASIA Times on the Global Economy.)
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Since I started my Daily-Protest against Chase Bank and the credit card industry, my television viewing time has dropped. Very very early this morning, while I was revamping Daily-Protest.com, I had the overnight news on.
The CBS overnight news kept replaying a story that the worst was behind us, that inventories had depleted, and that sometime this year the economy would pick-up. The only way the economy will pick up this year is if the CREDIT CARD INDUSTRY does EXACTLY THE OPPOSITE of what they are presently doing!
Lets add up middle america economic indicators, the real indicators, the ones that matter. Joblessness, continues to rise. Home prices continue to drop. Rising home sales are from forclosures. Car Dealerships, going out of business too fast to count. Credit Card debt, rising.
Funding two wars halfway around the world, priceless.
If the world's net worth has dropped by 1/2 over the past year or two, but the world's unsecured debt has remained the same, then that means that the worlds unsecured debt has actually doubled when comparing the numbers!
Factor in that the Credit card companies have actually raised interest rates, stolen frequent flyer miles from their best customers, are labeling anybody a with low interest rate on their unsecured debt as a toxic asset, and are assessing huge, 100% to 400% increases in the interest rates whenever a customer is late on a payment, and we can actually safely state that the credit card industry's percent of the world wide wealth has increased by at least another 100% on top of that doubling!
But wait, it is even worse than that. After a person is late on just one credit card payment, the other credit card companies can also raise that person's credit card interest rate to around 30%. Eventually people give up trying to pay down a debt at 30 percent interest rate. However, before the debt is given up on by the credit card company, it keeps growing by obscene amounts every month. 30% unpaid interest can increase one's debt by 50% or more every year!
The overly inflated credit debt keeps racking up higher and higher debt. Then it goes into default. The entire debt, that has been first outrageously inflated by 50 to 100%, is then sold to a bill collection agency for a portion of the total debt due. When the banks sell the defaulted debt, it might be 60 cents on the dollar, 40 cents on the dollar or even just 25 cents on the dollar. However, because of how the debt was so rapidly inflated at that 30% interest rate, the bank actually doesn't lose any money, even if they sell the debt at 25 to 30 cents on the dollar!
Here is where it gets really ugly. The bank is able to then write off the ENTIRE overly inflated debt that caused the debtor to eventually give up trying to pay it off. Imagine if you could being keep all of the money you earned in a years time while legally claiming that you lost an additional 50% and are owed a rebate, or bailout money from the government!
But wait, it's even worse than that! Not only do the banks get this huge credit card default write off on their 30% interest credit card debt, they then can receive new bailout monies from the government to help mitigate phantom credit card loan losses that don't actually exist!
But wait, it's even worse than that. The banks hold on to the new bailout money, refusing to circulate the very money the government has allocated them. By not releasing this new bailout money and not using it to lower credit card interest rates to the consumer, tens of millions of americans continue to create more and more debt on their credit cards, and the entire credit card debt cycle mentioned above repeats again!
But wait it's even worse than that. The banks then squeeze those who relying their credit card debt and home equity line debt to get through these bad economic times by REDUCING their credit lines, sometimes to BELOW what they owe! Now factor in those who have missed a payment for a medical emergency, job layoff, even an electronic billing mistake that can easily happen when a credit card company CHANGES THE DATE on a bill without informing the customer! All of these are reasons for the credit card company to raise the interest rate to 30%!
Yet many of these law abiding citizens fight to salvage their credit score, resulting in additional huge profits for the banks from those who believe a debt is a debt that must be repaid, even at 30% interest. Unfortunately, a 30% interest rate is so high that unless one can make at least 3 times the monthly minimum due, or pay the debt off in full right away, the debt may never go down fast enough.
If one gives up trying to pay a 30% interest rate card, the banks make huge profits from several different sources. If a customer continues to pay 30% interest, the banks are happy because the customer is just stalling the inevitable, in essence creating additional wealth for the banks before the customer eventually defaults. The banks win no matter what the indentured credit card borrower does once the interest rate is raised to 30%.
The banks are winning every which way even as the FDIC "clamps down" on the banks for not having enough cash reserves.
So, going back to our percentage analysis of unsecured debt and how much it has increased when compared to the world's actual wealth, we can safely add another layer of gross profiting by the credit card industry at the worlds misery. Credit Card debt may have actually increased by over 400% when it is compared to the amount of perceived wealth that still remains in the world's economy.
Credit Card debt at 30% interest IS the additional hidden tax being perpetuated on the world's economy.
But wait, it may be even worse than everything stated above. What if the bankers, upon classifying a credit card loan at 30% that the consumer has given up trying to pay back, a "toxic asset", sells that "bad" credit card loan to another company that is run by a friend, a relative, a lover, a drug cartel? If the banker is in anyway connected with the new buyer of the debt they have resold, that means the banker has found an additional way to profit from the same piece of debt, also known as insider trading or collusion.
So, going back to our percentage analysis of unsecured debt, we can safely add another layer of gross profiting at the worlds misery.
Over the past two years, Credit Card debt may have actually increased over 500% when compared to the amount of perceived wealth that remains in the world's economy. I don't have to know what the actual two numbers are to make an estimate at the percentage amount. A 500% percent increase in credit card debt as compared to the world's perceived economic value cannot be a good thing, can it?
And if I am correct, then there is NO WAY THE eCONomy can recover, unless some of these usurious interest rates are made to disappear.
So what do the credit card companies do in this time of worldwide crisis? They raise the interest rates on all of their credit cards while trying to destroy the credit rating of their best customers by raising the monthly minimum payment on these always on time paying customers by 250%.
