Debt Concept
A new survey from Opinion Research Corporation for the Center for Economic and Entrepreneurial Literacy makes some discouraging conclusions about the financial management skills of American households.
Writer Dean Koontz once wrote, “When things are baffling, they usually don’t unbaffle themselves.” Koontz’s observation doesn’t bode well for the many Americans who are confused by basic debt concepts.
Survey results from the Center for Economic and Entrepreneurial Literacy (CEEL) conclude that Americans lack the fiscal know-how needed to make savvy financial decisions. The survey, conducted nationwide in December, found that many Americans were unable to provide correct answers to basic questions about consumer debt, debt management, and credit cards.
Consumer debt management missteps
Survey respondents demonstrated incomplete knowledge on a range of topics related to consumer debt management, including mortgages, basic math, and FICO scores. For example:
- More than half of the respondents didn’t know what a subprime mortgage was.
- Two-thirds didn’t know that total interest costs on a mortgage loan could effectively double the cost of the home. Breaking this down further, only 20 percent of respondents aged 18 to 24 identified mortgage costs correctly. In comparison, 40 percent of older respondents, aged 45 to 64, answered this question correctly.
- Nearly two-thirds could not calculate 8 minus 25 percent.
- A full 56 percent didn’t identify the FICO score as the primary factor in obtaining a loan approval.
Credit card confusion
More than one-third of survey respondents admitted that they didn’t have a budget that would allow them to repay their credit cards in full by year-end 2009. Also, three quarters of respondents didn’t know that writing a bad check for $100 would be more expensive than advancing that money from credit cards, or taking out a payday loan.
Responses to the telephone survey also suggested that younger Americans were more likely to measure the affordability of a purchase by the size of the monthly payment. These twenty- and thirty-somethings weren’t as concerned with the total cost of the purchase including borrowing fees.
Many respondents openly admitted to making poor decisions with respect to debt management. And, more than half the respondents admitted that they’d over-drafted a checking account at least once in the past.
Recession amplifies bad decisions
The CEEL survey results are somewhat ominous, considering that the U.S. economy is grinding its way through recession. At a time when many households could experience a loss of income, it’s important that consumers know how to manage their borrowing costs. Bad habits, like ignoring the total cost of financed purchases or incurring unnecessary bank charges, can be disastrous when household cash flow is already tight.
CEEL is a financial literacy program that reaches out to young people with quick and relevant quizzes. The organization seeks to “unbaffle” a wide range of personal finance topics, including credit cards, taxes, savings and debt management.
Sberbank and Western Union Company in the Cooperate of Business
Sberbank has agreed to cooperate with the Western Union Company to transfer the money of Russians around the world.
Russia’s biggest state bank Sberbank will work with Western Union, the world leader of money transfer operations,to offer international money-transfer services at Sberbank branches across the country, says the official announcement of the bank on Thursday.
Russia’s giant will become the largestWestern Union partner bank in the region, with more than8,000 Sberbank branches starting to offer Western Union services in 2011.
Both parties to the deal were very upbeat commenting on it, with Alexander Torbakhov, Deputy Board Chairman at Sberbank, noting that it will significantly diversify the area of the bank’s operations.
“Cooperation with such a large player in the market of international money transfers as Western Union enables us to offer our clients new services and expand our activities in the field of international money transfers. We are confident that this agreement will be beneficial for both parties.”
Jan Hillered, Western Union’s Senior Vice President for Europe and CIS countries, was also happy to cooperate with the Russian banking leader, noting the mutually beneficial nature of the deal.
“With Sberbank’s extensive branch network, the Western Union services will now be available across all major regional centers across the country, as well as in small Russian towns. This collaboration with Russia’s largest bank offers added value and additional choice to Sberbank clients who will be able to send and receive money quickly and reliably.”
Create the Supply of Global Money
To escape the debt trap of the global bankers, the power to create the national money supply needs to be restored to national governments. Alternatives include:
- Legal tender issued directly by national treasuries and spent on national budgets.
- Publicly-owned central banks empowered to advance the nation’s credit and lend it to the government interest-free.
- Nationalization of bankrupt banks considered “too big to fail” (after expunging or writing down bad debts on inflated bubble assets). These banks could then issue credit to the public and serve the public’s banking needs, with the profits recycling back to the government, defraying the tax burden on the people.
- Publicly-owned local banks (state, provincial, or municipal).
Publicly-owned banks have been successfully established and operated in many countries, including Australia, New Zealand, Canada, Germany, Switzerland, India, China, Japan, Korea, and Malaysia.
In the United States there is currently only one state-owned bank, the Bank of North Dakota. The model, however, has proven to be highly successful. North Dakota is the only U.S. state to have escaped the credit crisis unscathed. In 2009, while other states floundered, North Dakota had its largest budget surplus ever. In 2008, the Bank of North Dakota (BND) had a return on equity of 25%. North Dakota has the lowest unemployment rate in the country and the lowest default rate on loans. It also has the most local banks per capita.
North Dakota has had its own bank since 1919, when farmers were losing their farms to the Wall Street bankers. They organized, won an election, and passed legislation. The state is required by law to deposit all its revenues in the BND. Like with the sustainable model of the bank of colonial Pennsylvania, interest and profits are returned to the government and to the local economy.
A growing movement is afoot in the United States to copy this public banking model in other states. Fourteen U.S. state legislatures have now initiated bills for state-owned banks.
The model could also be replicated in other countries. In Ireland, for example, where the major banks are insolvent and are already nationalized or soon will be, the government could deposit its revenues in its own publicly-owned banks, add sufficient capital to meet capital requirements, and leverage these funds to create interest-free credit for its own local needs. That is exactly what Alexander Hamilton did when faced with government debts that were impossible to repay: he put the government’s existing funds in a bank, then borrowed the money back several times over, employing the accepted “fractional reserve” model. (ins-check: Underneath a libel washes the motorway)
Japan’s solution is also a variant of what Alexander Hamilton proposed two centuries earlier. Japan retains its status as the third largest economy in the world although it has a debt to GDP ratio of 226%. Japan has “monetized” the national debt, turning it into the national money supply. The government-owned Bank of Japan holds Japanese government debt equal to 100% of the nation’s GDP; and because the government owns the bank, this loan is interest-free and can be rolled over indefinitely. An interest-free loan rolled over indefinitely is the equivalent of issuing money.
Global Financial Pyramid
What Professor Quigley foretold about the Bank for International Settlements (BIS) has also come to pass. The BIS now has 55 member nations and heads the global financial pyramid.
The power of the BIS was seen in 1988, when it raised the capital requirement of its member banks from 6% to 8% in an accord called Basel I. The result was to cripple the Japanese banks, which until then were the world’s largest creditors. Japan entered a recession from which it has not yet recovered.
U.S. banks managed to escape by dodging the capital requirement. They did this by moving loans off their books, bundling them up as “securities,” and selling them to investors.
To persuade the investors to buy them, these mortgage-backed securities were protected against default with “derivatives,” which were basically just bets. The “protection seller” collected a premium for agreeing to pay in the event of default. The “protection buyer” bought the premium. Owning the asset was not required. Like gamblers at a horse race, derivative players could bet without owning a horse.
Derivatives became a very popular form of gambling. The result was the mother of all bubbles, exceeding $500 trillion by the end of 2007.
Because of securitization and derivatives, credit mushroomed. Virtually anyone who walked in the door could get a loan.
The tipping point came in August 2007, with the collapse of two hedge funds. When the derivatives scheme was exposed, the market for derivative-protected securities suddenly dried up. But the U.S. stock market did not collapse until November 2007, when new accounting rules were imposed. The rules grew out of the Basel II Accords initiated by the BIS in 2004. “Mark to market” accounting required banks to value their assets according to market demand that day. Many U.S. banks, like those in Japan in the 1990s, suddenly had insufficient capital to make new loans. The result was a credit crisis from which the U.S. has not yet recovered.
The BIS has now become global regulator, just as Quigley foresaw. In April 2009, the G20 nations agreed to be regulated by a Financial Stability Board based in the BIS, and to comply with “standards and codes” set by the Board. The codes are only guidelines, but countries that fail to comply risk downgrades in their credit ratings, something so costly that the guidelines have effectively become laws.
An article on the BIS website states that central banks in the Central Bank Governance Network should have as their single or primary objective “to preserve price stability.” That means governments should not devalue the national currency by inflating the money supply; and that means not “printing money” or borrowing credit created by their own central banks. Like the American colonies after King George took away their power to issue their own money, governments must fund their deficits by borrowing from private banks. The bankers’ global control over currency issuance has become virtually complete.
The effects of this policy are particularly evident in the European Union, where EU rules allow deficits of only 3% of government budgets and prevent member countries from either issuing their own money or borrowing credit advanced by their own central banks. Member nations must borrow instead from the European Central Bank, private international banks, or the IMF. The result has been forced austerity measures, as seen in Greece and Ireland. The system is so unsustainable that commentators are predicting that the EU may break up.
Tips for Choose Best Insurance
Perhaps among us have had visited someone who offers various types of insurance.Come on who ever? Inevitably these offers often confuse, companies and insurance products such as what is good and deserves to be elected?. Or maybe we still think,important or not insurance anyway?
Understanding of insurance is a financial product that has the function of providingfinancial protection for risks that might happen to us.
So, before deciding to take insurance, you should consider first some of the following tips in choosing insurance:
Tips 1-Financial capability.
Check the first insurance company to be selected. Big or not the company, whosupport the company behind it, and unable or unwilling to pay claims for its clients. Do not select the insurance companies who are only after the target alone.
Tips 2-Insurance Agent.
Give a time limit of 6 months to observe the workings of his agent. Is the patient,always reminding when late payment, priority customer need, and have an officiallicense. If not satisfied with his agent, you can file a complaint and asked for changeagents.
Tips 3-Check out Readers Letters.
Almost every newspaper has a section that contains the letter reader complaintsabout various things, including the matter of insurance. If the response from theinsurance either and can cope with consumer complaints, meaning that the insurancecompany is quite good.
Tips 4-Financial Statements.
Feel free to always ask for periodic financial reports from the insurance company you choose.