15 August 2009

Dreaming of Recovery?

They said this recession would see "the poor get poorer and the rich get richer." If you're watching at all, the truth of that statement is becoming more and more apparent.
In the past month, we've seen some banks (Goldman Sachs, for starters) giving back the bailout money they were given earlier by the government. In the case of several banks, they would not have accepted the money but were forced to in order to protect the reputations of all the banks so that the American people couldn't immediately ascertain which banks were troubled, and start a run on any or all of those banks. Congrats, boys, it worked.
But in reality, some of these banks were more than just a little healthy. They were robust. Which is why the current round of "little notices" tucked in your credit card bills don't make any sense.
Credit cards make money when they are used. The issuing companies each extract a certain cut of the business being done every time a transaction takes place. The card company gets a percentage point. Or three. That's why some businesses don't accept American Express; because the percentage that AmEx wants is higher than the rest.
The companies also make money when a consumer carries a balance. Considering that going into this recession, the average American was carrying $8000 in credit card debt every month, those banks weren't hurting. They were making money coming... and going.
But this month, yes, I did get a little notice in my monthly statement telling me that the interest rates are increasing, as are late fees. Fascinating. The banks are hurrying to institute their new fees because government rules regulating predatory practices among credit card companies go into effect soon. They printed those little notices and got them into the mail as fast as they could get the ink to dry.
And yes, government reports say that our economy is starting to come out of the recession. But sadly enough for the family down the street, unemployment is still sky-high. In some places, unemployment has hit double-digits and shows no sign of coming back down. Government economists admit that "unemployment will lag behind other indicators." That's a bloodless description of deep suffering, don't you agree?
Meantime, housing sales are starting to climb back up again. The American worker is still living in a recessionary mindset (and may be for some years to come, if any good is to come of the past 18 months worth of agony) but home sales and more importantly, prices are starting to come back up.
The bottomline is that for many Americans, the dream of owning their own home is now further away than ever before. If you spread out the unemployment, lost wages, foreclosures, bankruptcies and other lost wealth of this downturn, it equals a lot of stolen dreams and for many, those dreams will never come again.

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