Category Archives: Money

The Letter of the Law vs. The Spirit of the Law

In the wake of the “Affordable Healthcare Act” there appears to have been quite a few people whose “current” healthcare coverage was canceled by their providers citing the fact that the coverage they currently have does not comply with the new law.  In place of their old coverage they are offered new coverage at 3 to 4 times the cost of the old coverage.

Now unless you’ve been hiking the Himalayas for the last year and your “sat phone” battery was dead you have probably heard the President say many times that “if we like our current health care coverage then we can keep it”.  Well, apparently that is not quite true. Many stories are surfacing where people had their “current” coverage cancelled.  How could this happen?  After all, The President of the United States and leader of the free world promised this would not happen.  As always there is more than one way to look at something.

The Letter of the Law

The well funded insurance company gets a battery of lawyers to scour the large and necessarily complex affordable healthcare law in search of loop holes through which they can increase their revenue by canceling existing coverage that is less profitable under the cover of the new law.  They immediately send cancellation notices to these policy holders.

The Spirit of the Law

In this somewhat fantastical version of the same story, once the loopholes are found the CEO of the company says, “Wait a minute, I just heard the President say people can keep their coverage if they like it.  Don’t cancel their policies until I contact the White House and tell them about this so they can close this loophole.”

Based on mercenary considerations and political persuasions could we have predicted the actual outcome?  Come on folks, let’s all start pulling the cart in the same direction.    I’m just saying!

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The Fiscal Cliff

Daniel Flower / Foter / CC BY

Is there anyone besides me who is tired of the government using movie disaster metaphors in an attempt scare the s**t out of us.  How about a spread sheet or a business plan and if they’re afraid we might not be able to read them maybe they should teach us.  This is another example of the dumbing of America.  It’s an affront to me and should be to you that the government uses sound bites like “The Fiscal Cliff” to describe what happens if you spend more than what you have for decades.  It’s about the same as the airlines describing a plane crashing into the ocean as a “water landing”.  Let’s start calling things by their real names.

Fleecing of America

Stunt of the Litter / Foter / CC BY-NC-ND

I haven’t posted for a while so I thought I would start off with something simple.  This is another example of something that appears to simplify our lives but in fact is pilfering money from our pockets.  What am I talking about?  Propane cylinder exchange.  There was a time where we would take our 20# barbecue cylinder to a gas station to be refilled when we felt they were getting low.  We would then pay for the amount of propane that was required to fill the tank.  What do we do now?  We bring the tank that is low to a propane exchange where we exchange it for one that is full.  But wait a minute, the tank we bring in is not always empty so what happens to the extra fuel? Do we get credit for the LP gas remaining in the tank, which could be easily measured by weighing the tank.  Of course not.  Instead we give them a partially filled tank and pay full price for the filled tank we receive in exchange.  This is the equivalent of bringing your car to the gas station, completely draining your tank into the stations bulk tank and then refilling the car where part of the fuel is the same stuff you just donated to the station for free.  I’m just saying!

Here’s todays conundrum   Are we saving too…

Here’s todays conundrum.  Are we saving too much or spending too much?  Depending on which talking head you listen to the answer could go either way.  One head says we should save like our grandparents and pay cash for everything.  Another head says that we are now saving to much and smothering the economy.  After all 70% of our economy is driven by consumer spending.  In the halcyon days of the early 2000’s we were racking up mortgage and credit card debt, spending money we didn’t have like we would never have to pay it all back.  Oops, we were wrong.  I don’t have to rehash the mortgage meltdown or the upcoming credit card and student loan fiasco.  It’s sufficient to say that as a society we have lost our financial way.  It’s popular to blame big banks, but we were the ones buying the houses we could not afford and we knew we couldn’t.  We were the ones swiping our credit cards for our morning cappuccino.  It’s time to take responsibility for our own behavior.  Remember, there would have been no mortgage meltdown if we would have all behaved responsibly.  Let’s all think twice before we buy the next dodad or trinket we really don’t need. 

 

Wealth Transfer!

Monday, November 7, 2011

A few days ago a loyal reader of my blog brought up an interesting point, what about credit card users who pay their balance on-time each month.  If you have a card that gives cash rewards, airline miles or any other form of incentive you actually benefit from the use of the card if you pay on time and in full each month.

In my original post I was talking about the use of credit cards in general and how they increase the price of the goods that we purchase.  What I did not consider or mention in that post was the price of goods goes up for everyone including the cash buyers.  But because the cash buyers do not benefit from the credit card incentives there is an implicit transfer of money from the cash users to the credit card users.  The subject is covered nicely in this white paper from the Federal Reserve Bank of Boston.

Good Eye Amy and keep those cards and letters coming.  More on actual fees in a future post.

Credit Card Anathema

Anybody who keeps paying attention to this blog will know how I feel about credit cards. They are anathema to me and they should be to you as well.
Recently, Visa has been trying to appeal to our heart strings by announcing that they are giving a percentage of their fees to cancer research. Certainly a laudable gesture. But wait a minute! Whose money is this? Who gets the tax deduction? You? I don’t think so. Visa is announcing that they are doing something they probably do already, getting mileage from that and maybe making us feel a little better about ourselves.
Is there a better way to do it. I think so but first a confession. Although I no longer carry a balance, which was not always the case, I do use a credit card simply because the current financial system makes it the most viable and in some cases the only way to buy stuff both online and at store fronts.
And if you think debit cards are any better, think again. The same onerous fees are charged the merchant, who then passes them on to you, each time you use the card. Imagine that, charging you a fee to remove your money from your bank account. And this is where the lines blur. If you have overdraft protection on your account the bank will loan you incremental amounts of money automatically, for a fee and then charge you usurious interest rates. Sounds a lot like a credit card, doesn’t it.
In the past I have fallen prey to the seductive advertising of buy now pay later, but as I have and many of you know waiting until you can actually afford something is a far more gratifying than piling on debt. Those of you who do not know this feeling have a pleasant surprise in store for you.
I always hear that we are a consumer oriented society. We need these credit and debit cards to fuel the growth of our economy. Is this news to anyone, that we’re a consumer oriented society? We’ve been this way since Henry Ford gave us the Model T and we got our first Sears Roebuck Catalog. The difference is that we used to pay for the stuff that we bought when we bought it. Does anyone who is reading this remember the expression “lay away”. This is when we went shopping at a merchant and made a down payment on an item we wanted, they stored it away until we came back the next payday and paid in full. At that point we were given our merchandise.
Is there a better way? The answer is yes. We simply don’t buy things until we can pay for them. Then we can be giving directly to cancer research or whatever our favorite charities are and get the tax deduction. Like anything, it isn’t easy at first but as time goes you will appreciate doing business this way. Imagine waking up one morning and having no unmanageable debt. Ask anyone who has just made their last mortgage payment or their last car payment.

Bank/Wall Street regulation

The only people who profit from an unregulated financial system are the people who run the system.  As a comparison let’s use our favorite shade tree mechanic as an example.  Most people know nothing about the cars they drive beyond what they can see from behind the wheel.  As a result when there is a problem we must depend on the mechanic to be honest.  Does that always work?  No, that’s why we have the consumer protection agency.  Regulators are always looking over the shoulder of manufacturers to make sure they are not taking advantage of the consumer.

Financial oversight is a much more difficult problem because the people who would appoint regulators (elected officials) are in the pockets financially speaking of the wall street bankers.

Deregulation of the banking industry was tantamount to giving the highway patrol their walking papers and then hoping that everyone would behave like full grown adults on the highway.

Like the people who are marching in the streets as I write this you can tell that I am very upset about this.  We are going to look back at the Greenspan era as some of the darkest days in our history.  More to come on this in the future when I learn more about it myself.