About this excellent report about the predatory lending practices of the “payday loan” racket is that not only is it a truly outstanding piece of journalism, but that it appeared in the WSJ of all places. There really can be a great divide from the fact free zone known as the WSJ editorial pages and what appears in the rest of that paper.
By the way, one of the reasons people on the right don’t understand why people are feeling the pinch despite the “glowing” economic news of the previous few years is the number of ways the banking and credit card industry (with an assist from their partners in congress) have found to well and truly screw people on the lower end of the economic spectrum. I am not going to say that those in their position are totally innocent, as they are not (read the story about the woman who had NO business buying the computer that exacerbated her economic problems), but the system has them set up to fail (older posts on the subject can be found here and here).
And while we are at it, read Robert Reich’s depressing assessment in the NYT today:
WE’RE sliding into recession, or worse, and Washington is turning to the normal remedies for economic downturns. But the normal remedies are not likely to work this time, because this isn’t a normal downturn.
The problem lies deeper. It is the culmination of three decades during which American consumers have spent beyond their means. That era is now coming to an end. Consumers have run out of ways to keep the spending binge going.
I really think the economy is melting down. I hope I am wrong.
FDRLincoln
Unless real wages for the lower and middle income brackets start rising, we’re in for a long recessionary period, at least two years I guess and possibly longer. I don’t THINK we’ll tip into an outright depression…there will be quarters of sluggish growth….but some areas of the country are really going to get whacked.
As a small businessman who makes his living on people plopping down $30 of their discretionary income at a time, I must admit to being very worried.
We’re cutting back here…reducing unnecessary expenditures, paring down debt, putting more into savings. I imagine a lot of other people are doing the same thing…which of course will make the recession last longer. But what can you do?
The Other Steve
Rupert Murdoch intends on fixing that by putting a naked woman on Page 3.
chopper
it’s times like these when i point out to my friends who lionize their private sector jobs that there are distinct advantages to my government position. job security being the biggest of all.
The Moar You Know
You’re not wrong, John. We’ve spent the last thirty years gutting our manufacturing and sending it offshore.
Did everyone think that we could just resell shit to each other and that it would be OK?
I’ll never forget the first time I saw the percentage of “services” that comprised our economy. This was many years ago (the percentage is far higher now) but I still remember the feeling of abject terror I had even then; that there was NO WAY that an economy could keep running when that many people were involved in not producing anything.
Frankly, the game of musical chairs has gone on far longer than I thought it could, but then again, I wasn’t counting on the rest of the world stepping in and throwing buckets of money at us. I dread the day when we have to pay all that back.
Well, I’m still glad that I have woodworking skills, good ones. I’ll be one of the few who is sitting pretty after the apocalypse.
chopper
unfortunately, that naked woman is jeane kirkpatrick.
Tom Levenson
The Wall St. Journal is (or has been — we wait for the Rupertization factor) a great journalistic enterprise. Reporters their have a history of sticking with beats, developing some real expertise. The paper has historically given its people real time and resources to develop major stories as they come up. I’ve known a couple of folks on the journalism side of the paper, and while they shook their heads at the shenanigans in the rarified air of the ed board, they were very good at their jobs. The weirdness is simply that the ed board seems unwilling or unable to read and grasp what their more competent colleagues on honest-labor side of the paper are doing.
jenniebee
yes, we all know that poor people have no business getting their children educational tools.
The Other Steve
I want to highlight a practice that I find particularly troublesome.
TCF Bank. They’re a big player here in Minnesota, and I’m sure there are other banks much like them. They do offer some good services, they were the first bank to open up branches in grocery stores and then keep them open until 7pm, and on weekends.
They also offer checking accounts with no minimum balance, which is also I think a good thing.
But what is very bizarre, is that they are VERY aggressive in marketing their accounts. From their grocery store branches, they stand out by the front door to the building encouraging people to come open up an account with them. Already have a checking account? Already have a checking account at TCF Bank. No problem! you can open up a second one.
Why would they do this? Well, my girlfriend worked at a TCF branch in a grocery store. their major source of income was NSF fees. $50k/month is what they made from people overdrawing accounts.
I think we have a situation today, where we have an entire infrastructure set in place to make sure people cannot get ahead. Much of it is because people don’t know any better, and this infrastructure is intent on keeping them ignorant.
Caidence (fmr. Chris)
By the way, one of the reasons people on the right don’t understand why people are feeling the pinch is because they can’t feel pain to save their lives. These are the people that demonized and destroyed the estate tax, the primary purpose of which was to keep these simple people from getting owned by the upper-middle classes.
Like I keep saying: These people want to be owned. I’ll take a few hundred. I’ll teach them things like walking upright, good hygiene.
Probably not, but I think there’s enough new technology in the incubators that, if handled right, could easily make the difference between recession and depression.
Focus on getting the retard away from the government controls; getting adults to address this issue.
Bill H
When the well goes dry you can get water by digging it deeper. When the aquifer goes dry, no amount of digging will prevent you from dying of thirst.
chopper
heh. i’m not a ‘waiting for the shit to hit the fan’ type, but from time to time i’m glad i know how to do a bunch of stuff DIY.
JWeidner
Unfortunately, I believe this is true of just about every bank out there. They make a shitload of money off the fees they charge to the average consumer. It’s not uncommon to hear stories about $25 fee for a $.10 overdraw – truly they are gouging the customer in such a case for what can only be a minor error in their records.
cleek
if there is a recession, and i’m not saying there is, one thing’s for sure: it’s Pelosi’s recession
Anne Laurie
As someone who was looking for her first full-time job during Gerry Ford’s stagflation, may I point out that to the Republican crime families who’ve been running the country since then, reducing 85% of American families into financial peonage wasn’t a bug, but a feature? Dick Cheney retrieved his political career after Nixon fled town by promising the Bush League Republicans at the top of the financial pyramid that he and his political cronies would labor faithfully to reproduce the crony capitalism that Texas bidnismin like the Hunts so envied their Mexican and Brazillian compeers. And with the well-compensated help of snake-oil salesmen like Lee Atwater and Alan Greenspan, and the unwitting assistance of the “social conservatives” who’ve spent the last 30 years voting against their own interests in the forlorn hope of retreating to the 1950s, the Cheney Cabal can congratulate each other on their overwhelming success. The fact that gutting America’s manufacturing base, destroying its infrastructure, selling foreign governments whatever resources couldn’t be wasted on vanity wars, and turning the American health & educational systems into weapons of civil destruction has spiralled down to immament Armaggedon doesn’t worry these people — they, and their kids, will retreat to safe havens in Dubai, or Paraguay, or possibly some new mega-gated-kingdom sponsored by their longtime partners among Putin’s kleptocrats or Beijing’s princelings.
wasabi gasp
You are wrong. Or, rather, just looking at the wrong economy. Looky this.
cleek
holy fuck
Woodrow "asim" Jarvis Hill
I gotta go back and read some more about Reich under Clinton.
Right now, he seems to be about the only sane economist out there…
Caidence (fmr. Chris)
Thank god that’s Dubai, where they don’t jail you for having a face and being female at the same time.
They just look for stray poppy seeds on bagel-munching business travelers and jail them for 7 years.
4tehlulz
You think that’s impressive? Imagine the flood defenses they’ll have to build for all that in 20 or 30 yrs due to rising sea levels.
Zifnab
Correct me if I’m wrong, but as a computer programmer and IT manager, my job still falls under the “service” category. I produce spreadsheets and websites, write programs and reports that balance bank books, and develop apps that make my clients’ lives easier. Although I’d happily argue that I produce consumable goods, I’m still pretty sure I live in the “service” sector of the economy.
Likewise, if you take a product such as the Apple iPod or even the Exxon bucket-of-gasoline, how many people are employed in research, design, testing, shipping, accounting, banking, … people who are all required in the production of the product, but who all fall under the “service” category.
I’m not bothered by the fact that we’ve got so few people employed growing corn and so many people employed fixing tractors, so long as I’ve still got corn on the table. What bothers me is that when people stop buying corn, how many traitor fixers and irrigation engineers and corn-salesmen’s bank accountants lose their jobs.
Ultimately, though, I think this is going to be necessary. We need to see some of the monolithic corporate power structures get toppled, and that can’t happen in a spend-crazy economy. Ford, GM, Chevrolet? These companies just shouldn’t exist anymore given how they’ve been run the last eight years. Small businesses need room to grow and that means killing some of the big giants. I don’t see how we’ll ever see those giants laid low when everyone can keep pumping money into a broken and hemorrhaged system. Tax revenue needs to decline to the point that we can’t sustain a military budget of trillions of dollars a year. Medicare Plan D needs to become prohibitively expensive, not merely a bad idea. America needs to learn how to tighten its belt. A coming recession is the only thing I know of that will snap people back to fiscal reality.
jcricket
Yeah, the pay day industry is really the “leading light” of the libertarian/Republican economic freedom argument, isn’t it? Why shouldn’t capitalist companies be unfettered in their ability to (metaphorically?) rape the fuck out of economically disadvantaged and uneducated citizenry? Serves the lowlifes right if they’re in a virtual debtor’s prison forever.
New Republican Slogan: “It’s not enough for us to get richer, you also have to get poorer”.
And don’t even get me started on the strawman response – that there are poor people who are irresponsible. Of course there are. There are rich people who are irresponsible too. But when CEOs now earn 500x what the average worker makes, vs. 40x 20 years ago, and income levels have stagnated or fallen for every income bracket but the top 10%, something is wrong with our system. It’s not working (contrary to rosy Republican denials vis a vis trickle-down theory).
We don’t need to turn into a fully socialized state to fix this. As a great nation (I mean that), we just need to muster the collective will to say “The floor needs to be raised.” It’s no longer acceptable to have people one healthcare crisis away from bankruptcy, or a whole swath of people unable to pull themselves out of poverty, or the middle class unable to save for retirement. I find it unfathomable that we can’t just do the obvious to at least arrest the slide that’s put us in this position – simply raise income taxes in a progressive way (i.e. put the top rate back up to where it was under Clinton, end hedge-fund pay loopholes, reduce some deductions for the top tax bracket).
The rich will still be super rich. But maybe the poor and middle class might breathe a teensy bit easier.
TenguPhule
Unfortunately, you’re not.
We just have to make sure the Bush Junta can’t flee the country before the angry mobs get to them.
David Hunt
John,
I hope you’re wrong, too. Unfortunately, I think you’re right on the money. Speaking as someone who ran up the credit card balances in college, I can recognize that situation writ large in the actions of the U.S. Government. It’s going to be very ugly.
YellowJournalism
I have family members who own their own payday loan business. Their repeat customers (“the regulars”) are mostly welfare and social security recipients. Everything the WSJ article said about the interest eating up the borrowers next paycheck, therefore making it necessary for the borrower to take out yet another loan, is true. (And they don’t even charge as outrageous an interest rate as some companies.)
It’s a dirty business and my relatives raked in the money until recently when a bigger chain entered the picture. Now the payday loan market is getting too clogged up with competition. (Heh.) Of course, the more economically depressed the area is, the more payday loan operations you’re going to see. My old home town currently has ten payday loan stores with more on the way, I’m sure.
Rex
This is just a secular bear market. 20 years from now, things will be stable again. Of course, the boomers are going to expect to receive every dime of their entitlements and to hell with their children’s and grandchildren’s futures.
gypsy howell
May I remind you that the baby boomers were sold a bill of goods by the conservatives (Reagan and Greenspan) 30 years ago to build up a Social Security trust fund to pay for their retirement entitlements, and have been paying double to the SS fund for their entire stinking careers. And now, just when the boomers are getting ready to retire, these same conservatives come back around and tell them, ‘Oh sorry! All that while when you were not only paying for The Greatest Generation’s social security but also contributing upfront for your own, we were giving all that money away in tax cuts to our rich crony friends, and now we have to get rid of Social Security! Ha Ha! Joke’s on you!’
Don’t worry – the conservatives are going to screw ALL of us over, no matter what generation you were lucky or unlucky enough to be born in.
But beyond that, please don’t swallow rightwing swill about SS going broke.
pharniel
unfrounatly meltdowns and servearly disenfrnchised people are when revolutiosn happen, and i’m sure the cronies at the top of the current shit pile on the right would love a chance to ‘put down’ a ‘revolution’ so they coud tighten up.
Grumpy Code Monkey
Is it just me, or does the Burj al Alam look disturbingly like Isengard?
rumpole
It’s a big change, for sure. Consider:
1. Manufacturing gone. Those jobs disappeared and not likely to come back. What will fill that void?
2. Two consecutive bubbles–e.g., stocks to real estate. That capital was, in part foreign. Why is it going to be reinvested in the United States? There wa still a lot of money made in the real estate boom. Where is that money going to go? Why, to the extent that capital is fluid, will it come back here rather than flow to an emerging market such as india?
DragonScholar
I’ve been watching the economic news, and I think we are in a recession, but in many ways it was, is, and will be, VASTLY varied by region. I live in California and our job market has been slammed for six months – it only just seems to be recovering now. A friend in Ohio reports constant stagnation for years, etc.
Overall, I think it’s a recession, but in some places its probably been one for awhile. And the sum total won’t give you a good picture of the parts.
As for what that means? I have no idea except I expect there to be little consistent patterns from state to state.
Darkness
A few years back I wanted a new credit card, and heard that the way to get a good offer was to miss a payment. Well, i didn’t want to do that, since we pay down to zero every month so I paid the minimum balance instead. The offers just piled in. It was unreal. And credit cards are the worst. They’ll charge you a fee for having to charge you a fee. I can’t imagine spiraling down that drain. The system is really rigged. The people who need the prime loan rates are the ones that never get them. The people who need flexible credit because their livelihoods are unpredictable are the ones that get screwed with fees instead.
I paid my card down to zero one month online, before the statement date, and got a fee and interest anyway. I had made one more purchase before the statement came out, and better yet, they charged interest on the whole month–average balance, not just that little extra. What thieves. When I called to yell at them, they said, well, that payment didn’t count. What?? The woman on phone the claimed that it had to work that way because that’s how the law worked, and I said, you guys helped write the law that way, don’t give me that shit.
With banks, once you start to flounder, you can count on them to be there to push your head under.
bootlegger
Not to gush over Obama (I usually loath bandwagons and feel-good tripe) but in his speech yesterday he told Madison, WI, and by extension the rest of us, that we have to stop our current spending madness and start making real sacrifices for the sake of the next generation. Some of us will pay more taxes, youth will need to volunteer in communities for their college money, and if we want to fight a war then we all have to pitch in, not just GI Joe and Jane.
This is one reason I support the man, when was the last time a presidential candidate, or any politician for that matter, stood in front of the electorate and asked them to sacrifice…during a campaign no less!!
4tehlulz
Oh dear.
Darkness
Oh, the delicious Irony.
I’ve seen some of those pics. Palm Island WILL have to have the Dutch back in ten years, to build a giant dike.
Nero would’ve loved this place.
Barry
John Cole: “By the way, one of the reasons people on the right don’t understand why people are feeling the pinch despite the “glowing” economic news of the previous few years is the ”
fact that the top 10% have been doing well; the top 1% have been doing very, very well, and Life is Good for the top 0.1%. They don’t give a flying f*ck about the other 90%, unless and until it causes them problems that they can’t get out of with some minor payoffs.
Darkness
Oh, and while we’re on the topic of oil-rich, mine-is-bigger-than-yours silliness. To answer John’s question. Yes, Virginia, we are f__ked.
World oil production as of dec 07
Can you say depression with a dollop of hyperinflation? How this will play out remains to be seen. There is no good precedent for the barrel of the economic gun we are staring down right now.
The Other Steve
I guess I was thinking more that the situation with some banks now is that they are going out of their way to encourage customers to be in a position where they overdraft.
It used to be the overdraft charge was to discourage you from doing this. Now it’s more profitable for them if you do.
It’s bizarre.
Anne Laurie
Back in 1929, people knew the stock market crash was a bad thing for “speculators”, or even “investors”, and a small percentage of the population went from Donald-Trump-rich to sub-bankrupt (in a society where bankruptcy was a crippling blow, not a fiscal strategy) very quickly. What nobody expected was that the toxic spiral of banks going under, thus stopping capital investment, which put people out of work and caused more banks to go under, would start a worldwide chain of financial & personal destruction that would last for almost a generation. Only the national militarization of World War II really reduced the unemployment rate to ‘normal’ levels, and I believe the stock market didn’t reach its 1929 numbers until the mid-1950s. We have more safeguards in place this time around — like the FDIC, if/until *it* goes under — but we’ve also spent the last 30 years of Republican misrule eating America’s seedcorn (destroying infrastructure, hollowing out the manufacturing base, letting ideologues dictate what our offspring would not be permitted to learn). Happy times coming, kiddies!
mk
John, I strongly recommend you get the February copy of Harper’s and read the lead article on “bubbles.” Eric Janszen argues that bubbles have replaced the business cycle. You don’t need to understand the business cycle to see why recurring bubbles are a major big problem. Subscribe online, if you can’t find the magazine in the rack. If you don’t understand part of Janszen’s thesis, have someone to explain it to you. It’s really not that dense; likely all you need to understand is the current mortgage crisis to get a feel for the depth and scope of what he’s recounting from the past, reasserting for the present, and where he thinks we’re headed in the future. Hint: the coming bubble, which investors hope will save them from the current bubble, is in alternative energy. And, the major player in pushing that bubble is none other than our own government. It’s already in the works, and well underway.
Thepanzer
I remember doing some research awhile back on the percentages of work done in the country and at the time it was something like 20% manufacturing which equalled about 20% govt spending in the economy. I can’t even describe that initial feeling of horror realizing the govt pumps as much money into the economy as our manufacturing base does. Or another way to put it for every person actually making something there’s some dude at FEMA not doing his job. Madness. I can only imagine what the stats must look like now with the huge increase in federal spending for the DHS and ops in quagmirastahn.
Some good news though, I started buying gold bullion 3 years ago and have been quite the happy ducky ever since. : P Started buying at 450’ish and we’re at 900’ish now. 100% return over 3 years isn’t too shabby…
Conservatively Liberal
Wages are flat-lining or down, spending is down, debt load is high, housing has been exploited, the home ATM (HELOCs) is dry, banks were throwing money at anything that moved and wanted a house but are not now, our dollar is way down, oil is sky high, and endless other problems that are too many to list.
We spent ourselves into this hole, and we are not going to get out of it by spending our way out of it. Our government stood by, fiddling whole Rome burned. Those of us who were responsible, stayed out of debt and saved money are going to be the ones who get hurt the most. We are not part of the problem, but they are looking to us for the solution.
We are screwed blue and tattooed. It is going to be rough going forward, and it is not going to be pretty. All the while, we are throwing billions away every week in Iraq. The solution? Give everyone a few more dollars to spend.
It is like pouring dirt into an open wound. It will not work this time, the system is too screwed up.
Darkness
Pay no attention to the man behind the curtain!
economicindicators.gov
Read the top line in red and abandon hope all yee..
TenguPhule
Corrected.
The Republicans sold the stupid masses a shiny gold pony.
And they bought it hook, line and sink us all.