Tuesday, September 29, 2009

Why you can't bitch and moan about your credit card debt

It's a sad fact of reality that using credit cards to finance above-your-earning-capability lifestyles has become much too prevalent in our society. If someone wants a new TV they don't wait until they have the money saved up (something which would probably only take them a few months), they just stick it on the credit card. Some people don't like carrying cash, so they stick everything from groceries to lunch at McDonald's on their credit cards. 

The "learned" elders in our society (baby-boomers) tend to keep a credit card around for "emergencies". The last thing you want in an emergency is to stick a couple of thousand dollars on a high interest credit card. The real learned elders (the ones who grew up during the depression) know the importance of not financing your goals, and that you should pay with cash whenever possible. 

I saw a story on CNN about a woman who's Bank of America credit card's interest rate was raised from 12.99% to 30%. This angered her so she made a Youtube video about the audacity of them doing such a thing. 

Here are some of the things that she listed as being wrong:

  1. Raising her interest rate without prior notice
  2. Not being willing to negotiate a return to the previous rate
  3. The bailout going to banks who charge large interest rates for loans
  4. The banks charging high interest rates when their interest rate with the Fed is 0%
I agree with her point about the bailout. We never should've passed it. But her other points are utter rubbish.

Here's a congealed list of what people hate about credit cards. 

  1. The high interest rates
  2. The changes in interest rates without notice
  3. The changes in minimum payment percentages
  4. It's too easy to build large amounts of debt
Here's the scoop. When you get a home mortgage you can get low interest rates if you qualify. Rates of 5% aren't uncommon. When you get a car loan you can get a rate lower than 5% if your credit is good enough. You can get these lower rates because the loan is collateralized. Your mortgage is collateralized by the house, and your car loan is collateralized by your car. If you stop paying on the loan, the bank has something to recoup some of their lost capital. Banks aren't boogeymen for taking a house that collateralized a loan that was never paid. The people are boogymen for not paying the loan. Contrary to popular belief banks will work with you if you're going through a hardship. 

Credit cards are unsecured debt. They are not collateralized by anything. If you loaned a friend $300 for a new Playstation 3, wouldn't you want to have the PS3 as collateral? If your friend stopped paying you, you could just take back the PS3. But if you let them borrow the money without a clause that said you would get the game system, wouldn't you want a little extra for the risk you're bearing? Maybe an extra $25 dollars for your trouble. That's why it's okay for credit card companies to charge you more in interest. 

The credit card issuers will put in the contract booklet you receive before you activate your card a clause that will state that they can raise the interest rates whenever they want without warning. If you don't like that rule, don't activate the card. 

When a bank raises the minimum payment percentage it really can hurt people, but only the people who are dumb enough to have a big balance and to only pay the minimum every month. If you're carrying $10,000 on your card and the minimum monthly payment is 2% of the balance, you'd pay $200. Banks have been known to raise that to rates such as 4-5%, so that would mean that you'd be paying $400-500 per month without notice. Now, there should be some notice of this, I'm in agreeance there. But again, it's unsecured debt. You're the risky party. 

It is easy to build up a large bunch of debt with credit cards, but that's not the bank's problem. That's a problem of personal responsibility. If someone can't trust themselves with a credit card, they should not apply for one. It's not the bank's fault you reached your credit limit by with beer, a new flat-screen, and a gaggle of internet porn charges. 

Not there are some reforms that need to happen in the credit card industry. Universal default is an evil tool of the devil. Universal default is when the issuing bank learns that you were late on a payment (could be an old car loan, student loan, etc.) so they raise your rate. Keep in mind that these late payments had absolutely nothing to do with your ability to pay your current credit card. The missed payments in question could've been over ten years ago, and they could've been settled. 

There's been some talk lately about raising the age at which you can acquire a credit card to 21. I think that's a horrible idea. If people aren't ever allowed to make their mistakes then they can never learn the valuable lessons that come with it. 

Bank fees are out of control also. There are so many that it's hard to keep straight. They sneak them in for the most ridiculous reasons. I'd love to see some reform in this area. 

Moral of the story, if you have credit card debt, don't whine about it. If you have credit card debt from an emergency, I feel for you, but that's why we have emergency funds. If your bank just raised your interest rate, consider it an opportunity to pay off the balance, instead of sitting there with you arms crossed, sniveling about it and calling them names. 

Aye, the moral of the story is personal responsibility. 

Friday, September 25, 2009

Obama sucks at economics.

He must have flunked it. Or he's been taught by someone subscribing to the Keynesian school of thought. Either way, he lacks knowledge.

I'm not speaking broadly about his handling of the economy, I'm speaking of his actual ability to comprehend the laws of economics. 

Take his healthcare proposal. 

Logic dictates that when a heavily subsidized option for anything undercuts the other free-market options in that particular market, it will create an unfair advantage. He says his plan will "increase competition". That's a blatant lie. His plan will push people out of private insurance and into the public plan. Give people a cheaper alternative and they'll take it. This will create an oligopoly, and eventually a government monopoly on the health insurance market. 

It also won't "lower the cost of healthcare for everyone". 

After everyone goes to the monopolized public option the massive demand and subsequent cost of that option means that it will need to cut costs or increase funding. This is where the healthcare rationing "scare tactic" (as the left calls it) comes into play. It's not a boogyman scenario. When things get that bad something will have to be done, and rationing is the simplest way to achieve control over costs. We'll have to wait for both routine and critical care. It's not a rightist propaganda tool, it really does happen in Canada and the UK. 

My second example of his monkey-with-a-learning-disability economics intellect would be his "green jobs" plan. 

He wants to increase regulation and funnel money into green energy investments, thereby "creating" green jobs. 

This is what's called a broken window fallacy

Say you intentionally break a window with the intent that it will "create" a job for someone to do. The work that it takes to fix the window will have to be done by someone willing to clean up the glass and someone willing to replace the window pane. But this isn't creating jobs at all. All it does is divert capital from more constructive things. The money spent on cleanup and replacement would have been spent elsewhere had the window not been broken. It would've been invested, or spent on goods that stimulate private business. 

The exact same thing will happen when he tries to divert funds away from one thing and into another. No jobs will be created, they will just be moved from other sectors of the economy, and it certainly won't be the same people who just lost their jobs being moved. They'll have to find another job. 

In order to solve our "healthcare crisis", we need to do three big things.

1) Medical Tort Reform

I'm not a fan of tort reform. I'm really not. But I REALLY FUCKING HATE AMBULANCE CHASING TRIAL LAWYERS (you know, like John Edwards, that cheating bag of retarded-monkey shit). 

But tort reform isn't good for the individual. I don't need some bureaucratic twat telling me how much I can get from my lawsuit award. I do, however, understand both sides of the matter. 

People who rally against reform say it's hurting people's right to fair compensation and lowering the incentive to not produce shoddy products. The proponents of reform say that the amount of lawsuits for silly things are clogging up the legal system and keeping the meaningful cases from being heard in a reasonable amount of time. 

They're both right. But there are ways to make everyone happy.

a) Make the losing party pay the other side's legal expenses: This would make sure that lawsuits are only filed when the plaintiff thinks they have a legitimate claim against the defendant. Because if their case is lost, they'll be in a world of financial hurt.

b) Enact commonsense medical malpractice tort reform: Don't limit what we can get when we get hit by a negligent driver, but do limit what we can get for negligent doctors (of which there are few). Doctors build in the cost of their immense amounts of malpractice insurance into their services, as do medical supply companies. Pacemakers are about $1000-2000 more expensive than they need to be because the manufacturers need a ton of malpractice insurance to cover their asses. Doctors are also less likely to perform unnecessary tests on their patients. They do this because it's both 1) paid for by the insurance or medicare and 2) used as a hedge in making sure they can prove they did everything possible if they get taken to court.

c) Enact laws against trial lawyers advertising on TV about how they'll get those evil bastards that gave you mesothelioma and cancer and a broken arm and a workplace  injury and denied disability: (See: Jeff Martin and Binder and Binder).

2) Go back to cash-based doctor visits and major medical insurance with high deductibles, and health savings accounts.

Back in the good ol' days before health plans, there was just health insurance. Anyone in need of a vaccination, checkup, or physical went to their family doctor and paid cash. It's ridiculous that it's gotten to the point where we pay a copay for a fucking checkup.

People who use the method above save money in an HSA (health savings account), which is available to people in high-deductible health insurance plans. Funds put into this account are not subject to an income tax, and the money in the account rolls over into the next year. 

When people have HMOs they get lazy. HMOs negotiate with doctors on prices. One insurance company will pay a doctor less than another based on negotiations. It's also a big financial burden for physicians. They must hire on additional workers to deal with health insurance payments. It's not a fun situation. 

Doctors will likely give you a discount if you're paying with cash. When their patients pay with cash, they get the money up front, instead of waiting for the HMO to pay up (often this takes over a month). 

Another benefit of paying for regular is that it forces consumers to shop around for the best price. Imagine if your grocery purchases were paid for my someone else. You wouldn't worry about getting store brand items. You'd want name brands. You wouldn't get the crappy beef, you'd go for the prime. You would and you know you would. But you of course don't do that when you're shopping with your own money. The same thing applies to healthcare. If you're using your own money it behooves you to shop around for the best prices. If you have insurance paying for regular visits you get into the "well, I'm not really paying for the test so let's do it" mindset. It's wasteful. 

If you end up in a bad wreck or with cancer, the major medical insurance kicks in. After you pay the deductible with untaxed dollars from you HSA, insurance does pay for things. 

3) Stop listening to the media's bias

I'm talking about both sides. CNN, Fox, MSNBC, Glenn Beck, Keith Olbermann, Michael Moore, etc.. Sicko is full of misquotes and misinformation. If you really, truly believe the Cuban healthcare system is better than ours and that the Cuban government didn't take the film crew to the hospital for the "haves", then go here. For God's sake look at the pictures of those poor people. The Cuban healthcare system is atrocious, and believing it's better than the American system is damned foolishness. 

4) Take a look at what the Federal Reserve has done to our money

Our money is worth squat. It's been inflated by interest rate cuts. The Fed prints money out of thin air. It's never been audited. By decreasing the value of the money we currently have earned, it essentially has used our savings to bail out big businesses. It's goal is to sooth the ups and down of the market, but it causes as many bubbles as it aims to fix.

If we did those four things, we'd be so much better off in the long run. We'd retain our freedom. We'd not be told but some buearucrat fuck-nut in Washington that we have to purchase healthcare or face a fine. We'd have sound money. We'd have more money left in our pockets. 

We'd all be happier, and our medical innovations wouldn't be stifled by undue regulation. 

If you still support Obama's healthcare plan after listening to common sense arguments such as the one I just laid out, then I guess there's no changing your mind. 

Tuesday, September 15, 2009

Media Sensationalism

Media sensationalism is a big problem in today's society. Americans rely so heavily on the news to help them form their opinions about certain issues. Among the hotly contested subjects that the media frequently misreports on are dangers to children, healthcare, and firearms.  

I was perusing the internet, minding my own business when I came across the term "cop killer" bullets. 

Let's explore this.  

When the media (or a special interest group) uses the phrase "cop killer", it's meant to play to our emotions. In the very early nineties Winchester released a new type of ammunition specializing in personal defense, for both law enforcement officers and civilians. They called it Black Talon. The "black" came from the oxidized Lubalox coating and the "talon" probably came from the fact that the rounds were hollow-point bullets. The Lubalox coating was to protect the rifling in a gun's barrel.  

Hollow-point bullets are designed for self-defense use. Full metal jacket bullets are not as easily stopped by a body, and are therefor much more likely to exit the body and cause potential harm to people or things behind the target. The way hollow-point bullets work is when they hit a soft target the metal petals expand, slowing the bullet's travel (to keep it from exiting through the back of the target), causing a greater area of damage (to better stop the threat), and to create hydrostatic shock (more important in more powerful cartridges).  

Now for the media sensationalism. It can affect anyone. I've fallen for it before. Everyone does. Even the LEO that taught my concealed carry class fell for it.  

"All armor-piercing ammunition is illegal, including Black Talon ammo and every other bullet coated with Teflon. No cop-killing ammo is allowed."  

There are a few things wrong with what he said.  

1. If you're wearing a bullet-proof vest for protection, you're much better off being hit with a hollow-point round. The energy is much easer dissipated because of the expanding pedals. FMJs are the bullets you don't want to get hit with.  

2. Black Talon ammunition wasn't coated with Teflon. Like I said above, the coating is called Lubalox. It's meant to not harm gun barrels.  

3. No Black Talon ammunition was released in FMJ. It was all HP. There goes the "cop-killer" excuse.  

4. Simply coating a bullet with Teflon WILL NOT increase its penetration ability. It won't do anything except rub off on whatever it hits.  

5. Black Talon bullets were simply jacketed hollow-point bullets, just like most other self-defense round, including the Speer Gold Dot HP bullets I carry in my gun.  

But how could a 20-year police veteran who's teaching a class on self-defense and the law fall for such things? Because sometimes the media like to do this little thing called lie.  

Back in 1996 some maniac shot up a train full of people, killed six people, and used Black Talon bullets to do it. A lawsuit was filed against the manufacturer (which oddly enough was thrown out because the judge decided that the ammo "performed as was intended"), and Winchester stopped production of the Black Talons. Fueling this outrage was the media's portrayal of the ammunition as being "cop-killers", "armor piercing", "coated with Teflon", and having "spiky metal petals" (which is a byproduct of any HP bullet). This bullet was singled out because of media sensationalism. It was no different than any other defense round on the market except for the black coating, which is now actually found on several high quality defense rounds. The media lied about the coating, its ballistics, and its purpose, and special interests perpetuated the lies.  

So, by getting Winchester to stop production of the bullets, those opposed to it kept no one from dying. If maniacs are going to shoot people they're going to use whatever they can get their hands on.  

The media is full of liars, both on the left and on the right.  

I guess my point is to make your own damn decisions and form your own damn opinions. Don't let some dork with nice hair and a know-it-all attitude on the boob-tube sway you.