Silent Archimedes

Posts Tagged ‘credit cards’

A Letter to America

Posted by silentarchimedes on November 3, 2008

Dear Fellow Americans,

The land of the free and the home of the brave...

The land of the free and the home of the brave...

Tomorrow is one of the most important days in recent American history. It is a day that will affect the short term prospects of America and the standing of America in the world for the next century. The events and actions of the past eight years have accelerated the damaging path the country has embarked on for the past thirty years. The irresponsible actions have left America crippled economically, politically, morally and psychologically. Both parties have been hijacked by the special interests of corporations, ideological groups and personal interests. The values in which America was founded on have been distorted. The decision made by America tomorrow will go a long way in determining if we continue this egregious path of self-destruction.

The debt at the national, local and consumer levels are not only due to the actions of the past eight years. The decision by the Supreme Court in 1978 (Marquette National Bank of Minneapolis vs. First of Omaha Service Corp.) to deregulate interest rate caps at the state level was the precursor to the inundation of credit cards and the mortgaging of personal futures for the present. Although Reaganomics has been credited with bringing the country out of the vitriolic stagflation of the late 1970s, it has had a long term effect that has eaten away at the fiscal responsibility of the federal government. At the core of Reaganomics was reducing tax rates by reducing government spending which in turn was achieved by reducing costs associated with regulation and social programs. However,  unexpected costs from the burgeoning Cold War resulted in large trade and federal budget deficits. In order to cover such deficits, the government began borrowing heavily both domestically and abroad. This decision to mortgage the future of the country for the present instilled a belief that debt is good, even to other countries, such as China, Japan and India. America became a borrower nation instead of a loaner nation, which it had been for decades during its prominence.

The deregulation of these two critical issues are the main causes of the current economic problems. It instilled bad habits at all levels of society. Although quality of life continued to increase the past thirty years, it was mostly at the cost of the future. Both politicians and individuals began feeling entitled to such luxuries and expected it to last forever. However, as analyzed by Pulitzer Prize winner Jared Diamond (Collapse: How Societies Choose to Fail or Succeed), it is this infectious mindset that causes great societies to fail. This country is at that critical juncture. Do we reinstate the values, sacrifices and hard work that made this country great or do we continue down this destructive path?

In addition to the present economic and ideological problems that endanger the quality of life of America, there are many massive elephants in the near future that can derail any sense of comfort in the nation. A fundamental restructuring of social programs like Social Security, Medicare and Medicaid is required in the next one or two presidencies before the effects of the baby boomer population cripple the flow of aid from the system. The high quality of life has left Americans lazy, fat and indifferent, and the medical costs associated with treating related diseases and health issues threaten to destroy the already broken health-care system. The super-highway system that supported the rise of American power is also the bane of the country’s dependence on foreign oil and its lavish automobile lifestyle. Furthermore, the infrastructure of America is crumbling and poses a danger to the lifeblood of a large country like America. A massive government infrastructure initiative is required within the next twenty years. The only question will be where does all the money come from? As globalization continues to redistribute the wealth and power of the world, the education system and America’s ability to compete are also being tested. American children  continue to fall behind other countries at all levels of education, from middle school to college to graduate school. This country has been able to sustain its technological competitiveness partly through the immigration of top-level students from countries such as China and India. However, the current backlash on immigration coupled with the increasing prestige of other countries’ higher education systems, begs the question of how America will sustain its technological edge? Corporations and special interest groups as super-humans continue to eat away at the fabric of America. Their selfish narrow-minded view of profit and ideology permeate all levels of society, from individuals to the government. Ideology has especially polarized the country into two hardened stances, secularity versus ideology. The effects of this has left the country fearful and suspicious of each other. Finally, the effects of the internet and other entertainment-related technologies cannot be understated. Although they have created luxuries beyond anyone’s belief and increased the free flow of information, they have also created a schizophrenic society of 24 hour media frenzy and questionable freedoms of morality. The neutrality of journalism and the mental well-being  of society are at stake. Coupled with the constraints of global warming and moral responsibility, the above problems must be faced responsibly.

These problems will definitely be difficult to face and resolve. Most of these have been simmering for years, but have been effectively ignored. However, what has always made America great has been its ability to come together as a country and sacrifice for the greater good of the country and the world. The sacrifices by this country during the Civil War and World War II for the greater good cannot be forgotten. Although society was simpler and less polarized then, the country must come together once again to face the unprecedented wave of issues that threaten to send America down the road of self-destruction.

Tomorrow begins that choice. Tomorrow the country decides which path to take, one of sacrifice for the greater good or one of continued wantonness. Tomorrow begins the day where America can begin reinstating the values that made this country so great. A country of uniqueness not found anywhere else in the world. A melting pot that protects individual rights and helps others at times of need. A constitution so strong that the thought of a revolution is unfathomable. The land of opportunity and openness. A land of thousands of parks and natural resources. The separation of church and state and the freedom of religion. The land of the best medical care and higher education system. A land of tolerance and hope. And the land of the free and the home of the brave…

Whomever you vote for tomorrow, please think openly and clearly. Without any bias of age, race, religion, and fear, think who will be better for America. Who will lead America towards a path of redemption and strength. A path that requires sacrifice but cherishes American freedoms. A candidate that realizes that what America needs now is a problem solver with pragmatism and humility, and not one fixated on idealism, intolerance and fear mongering. Look closely at your choice, and know that when you go home afterwards, there will be a better America tomorrow. A better America for yourself and your family, and also for its great citizens of today and tomorrow.

America’s tomorrow begins now…

Thank you.

Silent Archimedes

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Modern credit cards and personal debt the result of deregulation of state usury laws

Posted by silentarchimedes on October 9, 2008

Time line of the history of credit cards

1887 – The term “credit card” is first coined by utopian author Edward Bellamy in his 1887 book Looking Backward.

1920s – The Great Depression introduces the credit card model to the general public.

1950sDiners Club evolves into the first credit card company.

1978 –  Marquette National Bank of Minneapolis vs. First of Omaha Service Corp. –  Supreme Court rules that companies can export their state interest rates on loans to customers in other states. In essence, deregulating long usury laws that regulated the ceiling on interest rates.

Early 1980s – Sioux Falls and South Dakota remove long usury laws regulating interest rates on all types of loans.

Early 1980s – Citibank moves credit card headquarters in New York City to Sioux Falls because NYC had a 12% limit on loan interest rates. Sioux Falls soon becomes the credit card capital of the West.

Early 1980s – Delaware copies South Dakota and relaxes many state usury laws. Wilmington soon becomes the credit card capital of the East.

Credit Card Mania

Credit Card Mania

The rest is history. With further deregulation approved by the Reagan administration and their belief that debt is good, the general public began accepting credit cards as a major alternative to already earned money. Competition increased and customers were issued credit cards with minimal background credit checks. Banks began lowering rates to risky customers because they can cover their defaults and risks  by spreading the costs to their new base of stable customers. This is similar to how insurance companies work.  Credit bureaus began collecting tons of data on consumers and banks would analyze them to target specific consumers. Credit cards became the most profitable section of the banking industry with $30 billion in profits in 2003.

Personal debts skyrocketed. Other forms of credit cards were freely issued. Stores began issuing them. To stay competitive, banks began offering cash back and rewards programs. In essence, the entire profit of the credit card industry was based on taking money from the future livelihoods of consumers. For the first time ever, the savings rate of Americans became negative.

Before credit cards, Americans were known to be good savers. Since the deregulation of interest rates, Americans have less money than ever. They have mortgaged their futures to support their current exorbitant living standards.

Deregulating NYC Rents

Consequences of deregulating NYC Rents

COMMENTARY

Not all regulation is bad, and not all regulation is good. It has to be done carefully and with plenty of oversight. There has been or is regulation everywhere in our lives. When we were kids, our parents and teachers regulated what we ate, how much money we had, and how to spend our time. When we are at work, companies and labor laws regulate our actions.  When we are in public places, there are laws and regulations. It has been shown that people as an entity are not responsible and disciplined enough to regulate all their individual needs. When most of us don’t know how credit cards work or how mortgages work or how our health care works, is this really the time to deregulate more? As our daily lives become more complicated, the last thing that people want to worry about is monitoring their 401k everyday, deciding which health plan to buy  and wondering which mortgage to get. Some things we want the government to do for us, and to look out for us, and to make things easier in our lives. We don’t always want to make decisions and tough choices. Look at the obesity rate in this country. You think most people can take care of themselves? There needs to be a balance of both. There has been too much deregulation the past 30+ years and it has led to many of the major problems in this country right now.

Don’t think deregulation is always in the interest of consumers either. Yes, there is usually more competition which leads to lower prices, but you have to remember, that these super-humans…err.. corporations still need to make a profit. At the end of the day, they will find a way to pass that cost onto you, either by cutting corners (airlines), or charging for non-necessities. Have more faith in our government that it can still do the right thing. Bring more faith to the government by voting in people that actually are practical and look out for the interests of middle class America.

Watch The Secret History of Credit Cards online at PBS!

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