Category Archives: Business

The 'Democratization Of Credit': Is It Over?

Affirmative Action, Business, Debt, Democracy, Federal Reserve Bank

WSJ: “The democratization of credit began decades ago. Federal legislation in the late 1970s required banks to avoid discriminatory lending and meet the needs of local communities, spawning a wave of home buying and entrepreneurship in lower-income neighborhoods. The rate of homeownership in families with incomes in the bottom two-fifths rose to nearly 49% by 2001 from below 44% in 1989, according to Fed data analyzed by Mr. Mann at Columbia.”

[This is not what that ignoramus Michael Moore claims. The sad thing about the man’s propaganda is that nobody among the so-called conservative MSM can refute it with reference to First Principles.]

“But the financial crisis and recession have reversed … the ‘democratization of credit,’ forcing a tough adjustment on both low-income families and the businesses that serve them.”

‘We saw an extension of credit to a much deeper socioeconomic level, and they got access to the same credit instruments as middle-class and mainstream Americans,’ says Ronald Mann, a Columbia University law professor. Now, ‘it will be harder for families at the bottom of the income ladder to get credit cards,’ he says.

The financial crisis has forced lenders to be especially cautious with the riskiest borrowers, a category that low-income families often fall into because their debt tends to be higher relative to income and assets. The ratio of credit-card debt to income is 50% higher for the lowest two-fifths of Americans by income than for the top two-fifths, Federal Reserve data show.”

[SNIP]

The following aside is beside the point, but my guess is that if a multiple regression analysis were conducted, IQ would be the underlying variable that would stubbornly crop up to account for this alarming, yet ostensibly unintuitive, ratio of debt to income in low-income individuals.

IN ANY CASE, do you agree that the democratization of credit is on the wane? I find that a dubious statement. The latest legislation described has not eliminated the imperative to lend to risky entities and individuals, so much as it has created, as ever, unintended consequences. These contingencies have, so far, caused banks to twist like pretzels in order to find legal ways around eliminating risky borrowers.

The Price Of The Parasitical Class

Business, Debt, Government, Labor, Politics, Regulation, Socialism, Taxation, The State

Maybe the following sobering statistics will penetrate the thick skulls of those who crave the creation of new government departments filled with workers who are free to pay themselves very generous packages, out of tax dollars, while looking forward to retiring a decade sooner than the stiffs who support them; and providing, in return, that stellar service for which the US Postal Service has become famous. Ah, for a government job!

The obscene numbers come courtesy of the “The Free Enterprise Nation”:

• When wages and benefits are combined, federal civilian workers averaged $119,982 in 2008, twice the average compensation of $59,909 for private sector workers.
• A State of California retiree gets an annual pension of $500,000
• A driver’s education teacher in Illinois gets a $170,000 annual salary and $120,000 annual pension.
• In New York, some city workers amass more than $100,000 in overtime during their last year before retirement to create a monthly pension higher than their salary.
• 420 of Illinois’s physical education teachers, 332 English teachers and 94 driver’s education teachers make more than $100,000 a year, with salaries for each position topping out at more than $160,000 a year.
• A senior citizen in Houston, Texas would find their number of police officers has remained the same for six years running, despite a 40 percent budget increase to cover higher salaries, pension and healthcare benefits.
• A small business receiving an IOU in California might be surprised to learn that in 2008, 40 percent of Vallejo’s 613 employees had salaries greater than $100,000 a year, the same year the city filed for bankruptcy.
• In Fort Worth, Texas, one police chief recently retired at age 55 with a guaranteed annual pension of $188,692. His successor retired at age 52 with an annual pension of $113,614. In the Northeast, two University of Connecticut professors are currently collecting six-figure pensions while simultaneously collecting a six-figure salary.

There are 115 million workers in the private sector, a portion of whom carry 20 million of these pampered parasites on their backs. (Yes, Republicans: Your beloved police and military are numbered among them!)

ANY PUNDIT WHO preaches, as MSNBC’s Rachel Maddow does nightly, more bureaucracies, should have to hear from YOU. Flood their miserable cable station with indignant letters.

“The Free Enterprise Nation” “is beginning a national effort to unite more than 5 million businesses with 115 million employees and everyday citizens to fight excessive government spending on a bureaucracy too big to sustain.”

The Free Enterprise Nation represents the economic interests of the businesses and employees who are taxed to provide government and public education employees higher wages and pension benefits, 10 to 25 years sooner, than can be provided in the private sector. The effort launched today with a full-page ad in the Wall Street Journal to be followed by full-page ads in Inc., FORTUNE Small Business, Forbes, and Fast Co.

Happy Days Are Here Again … La, La, La

Business, Debt, Economy, Labor

The economic experts who’ve got a lot riding on the recovery ass, now measure recovery by the slowing rate of job losses. Employers laid off fewer workers in July—247,000 as opposed to 443,000 in June. “The jobless rate dipped for the first time in 15 months to 9.4 percent in July, from 9.5 percent the previous month, and workers’ hours and pay edged upward,” reports the AP.

But, “the main reason the unemployment rate declined last month was not an inspiring one.” What that ass with ears Obama doesn’t divulge is this:

Hundreds of thousands of people, some discouraged by their failed job searches, left the labor force. The labor force includes only those who are either employed or are looking for work.

If laid-off workers who have given up looking for new jobs or have settled for part-time work are included the unemployment rate would have been 16.3 percent in July. All told, 14.5 million were out of work in July.

Job-seekers are finding it harder to get work because there are so few openings. A record 4.97 million people had been unemployed six months or longer in July. And the average length of unemployment grew to 25.1 weeks, also a record.

Recovery cannot commence until the government stops cold turkey the reckless, unconstitutional, immoral measures that are worsening the economy.

What are those? No great mystery there; they are the exact actions that would worsen your personal finances were you to indulge as the government does: Digging yourself deeper into to debt by spending yourself into oblivion. Bailing out debtors, restructuring their mortgages, reducing their payments, forestalling foreclosures, making borrowing artificially even cheaper when it should be expensive, penalizing banks for trying to lend conservatively, creating more and more government-sector jobs, which are supported by taxpayers, are a drain on the economy and create no economic value whatsoever—all the stuff the Obama Administration is championing as a matter of policy, all the while printing money non-stop.

There’s one good sign that Americans have parted company from the government in cultivating more frugal habits: “consumers paid down credit cards and reduced other debt in June for the fifth straight month.”

Updated: Israel Is Doing Just Fine Financially (& On Illegal Immigration)

Business, Economy, Israel, Technology

“The Med’s Best Kept Secret”: “Israel today has become a vibrant, functioning jewel of a nation tucked into the eastern flank of the Mediterranean. Tel Aviv looks more like San Diego or Barcelona than Baghdad or Kabul.” … it maintains “a stable macroeconomic structure and a strong high-tech sector.” …

“What’s the secret? Ayelet Nir, chief economist at IBI, an Israeli investment firm, lists six major reasons Israel’s economy has done well of late:

A very conservative banking system–without most of the complex and problematic financial instruments found in the United States.

No mortgage crisis in a country where putting 50 percent down isn’t unusual, and banks often ask for guarantors.

A current account surplus since 2003.

Negligible inflation.

Prudent governmental fiscal policy.

Healthy integration into the world economy.

“Israeli technology has certainly been a big part of the Internet age. The cell phone? Developed in Israel. Ditto for most of the Windows NT operating system and for voice mail technology. Pentium MMX Chip technology? Designed in Israel. AOL Instant Messenger? Developed in Israel. The list goes on. Firewall security software originated in Israel. The latest breakthrough is the “PillCam,” a video camera that can be swallowed and aids physicians in diagnosing intestinal cancer.”…

How has Israel managed to do so well in high-tech? Every Israeli high-tech player can recite the national data like a bleacher bum spitting out baseball statistics:

Israel produces more science papers per capita than any other country.

Israel lags behind only the United States in number of companies listed on NASDAQ.

Twenty-four percent of Israel’s workforce has a university degree; only the United States and Holland have a higher number.

Israel leads the world in scientists and technicians per capita.”

Read the complete article.

Update: Israel is doing something else right: deporting illegal immigrants without much fuss.