The Lunatic Fringe in the Middle | ramblings on modern life

Finances, Schminances – Part 2

Part Two: The Monster Grows

So, all of our financial companies hit the Wall Street Casino with our collective cash from all our monthly payments, and it’s not going well. There’re way too many people betting on the same things and driving up the bets. Everyone has to raise their rates to make sure they keep their value and salaries and still have enough to play with. Their increased values force big companies that make the stuff we all use to raise their prices to keep their stock values competitive.

Higher financial prices propel rents higher and higher, pushing the limits for the majority of the population. The government makes more money to alleviate the pressure, but it backfires. Financiers just raise their rates to take up the slack. So, the Fed lowers the interest banks pay. That should help.

It does. The banks use the increased profit margin to bolster their stock value. More chips for the Casino.

Oh, and rates go up again.

This idiocy has grown into an unfathomable money monster, killing Americans dollar by dollar, day by day.

The sheer fact that an insurance company asked for and got $180 billion dollars from the government says something is horribly awry.

This company’s been paid billions of dollars by customers of their various insurance programs. How do you lose that much money when your only administrative costs are claims, staff, facility, and communications? Surely the nation’s largest insurer would have to see 50% of its customers drop or default to be in this kind of jam.

Um, no.

Remember, they figured out the minimum cash needed to sustain normal claims, expenses, salaries, and bonuses. The rest went – you guessed!

You see, if you have $100, the Wall Street Casino will lend you $500 and you can bet it all. If you win, cool. If not, you deduct your loss from your taxes and add the payments to your rates.

Free money to gamble with!!!

It’s very simple math, folks – if people can’t pay what you charge, you need to lower your rates. You don’t restore cashflow by charging more! You accommodate the market by lowering your rate and expanding your terms if that’s what it takes.

You certainly don’t pay anyone millions of dollars when the company is losing money, do you? And you surely don’t take risks like the stock market when your bottom line is in trouble — But, they did. And they are still. And it all goes on like before except they have $180 billion in free chips for the Casino.

You see, in all these cases, from apples to insurance, the one governing rule of capitalism is that you can’t charge more than the market will bear.

The current foreclosure rate in the US is graphic proof that this rule has been left in the dust.

Lots of people blame consumers for buying past their means, causing prices to go up.

No. Not even close.

There is a real evil at work. The one that wrought its way through the money belt and out into every form of commerce.

Margining.

Maintaining and increasing profit margin is the driving force in modern business. Lowering cost and increasing sales lead to bigger profit. That’s the theory, anyway.

That’s just not good enough for today’s financial honchos. They want more. Not just being profitable. Not just growing as a business, but by growing limitlessly through lower costs, more sales, and higher prices.

Everything is margined to the hilt. You’re supposed to charge double or more what it cost you. Period. You’re supposed to get that margin from everyone, everywhere, all the time.

Why would so many buy into this idea of raising prices and pushing margins to the edge?

It gets the company more chip credits in the Wall Street Casino.

To them, this is how it works. What it’s all about. Being up on the big board, in the game. The rise and fall of the stock prices, the thrill of the deal. The sweet smell of victory.

Sounds more like Vegas than Wall Street, doesn’t it?

This is where the controlling eschelons of finance live. This is how they see the world. Not in terms of how strong the foundation, but how tall the castle. The price per share is what it’s all about. That’s the bottom line to them.

But, the realities of capitalism say “no”.

It’s given public opinion that finance is thought to be in the hands of the richest 5% of the population. While this may or may not be accurate, it’s sure that the rich are a minority and that many wealthy people have gotten there through control of or profit from the Wall Street Casino.

Any market will bear what the bottom 50% can afford, or the controlling top 5% have to eat the balance to maintain stability, or risk assets and equity by losing customers. It’s supposed to be in their best interest to suffer the margin in favor of continued positive cashflow.

Current practices have no patience for bumps in the road. They want the maximum price, the widest margin, right now. They want all the money you have.

And, they get it. Your mortgage straps you and you have to put the refrigerator on a card. So you get one with a 5% introductory interest rate (going up to 17% in 30 days). You buy the fridge and make the minimum payments for 2 months, and suddenly the interest is 23%, and the finance charge has put you over your limit, earning you a $35 fee as well.

While there are people who just spend too much on credit cards when they shouldn’t, or get too many and max them all out frivolously, there are now far more people using credit just to get by. Emergencies like a new fridge or an unexpected dentist bill can be crippling. There are hundreds of new, rising costs facing consumers everyday. It’s common for people to be buying even groceries and gas on credit cards.

And the card companies eat it up. They don’t care if you’re strapped to the limit. They just keep piling it on, increasing your burden in fees and interest far, far past the amount of your purchases, all the while raising those rates and fees.

They want people to spend the max, pay the max interest, go over limit, pay fees, and catch up again – over and over and over.

Their margin-model is based on it.

And what do they do with that huge margin?

Yup.

They hit the Wall Street Casino again.

 
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Read Part 3: They Get Us Where We Live
 


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The Lunatic Fringe in the Middle | ramblings on modern life says:
08/05/2009

[...] Read Part Two: The Monster Grows   View blog reactions Tags: banking / business ethics / editorial / ethics / finances / [...]

The Lunatic Fringe in the Middle | ramblings on modern life says:
08/05/2009

[...] Finances, Schminances – Part 2 [...]

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