Why Max Out Your Credit Card?

It may be necessary to take down the maximum amount your credit card permits, but it does not help your credit score. Therefore, do so only in an emergency. It’s nice to know that your credit permits you a certain liberty, but don’t take extreme spending binges.

                       

Of course, if you don’t use your card at all, or only occasionally, you may be dropped or the maximum available credit may be reduced.

                       

That’s because credit card companies are getting more sensitive about account activity. Despite public misinformation, credit card companies are not doing that well. They have written off lots of bad debt. So, use credit cards intelligently. (See the Earl J. Weinreb NewsHole® comments and @BusinesNewshole at Twitter.)

Why Buy Managed Mutual Funds?

Don’t bother looking for the best mutual fund managers. You will be

wasting your time. Experience and research show that the “best” in any year are achieved mostly by chance.

                       

In any category of mutual funds, only a small percentage of active managers beat the performance of indexes or un-managed funds.

Furthermore, those who distinguish themselves in any one year, generally cannot repeat their performance the next, or on any consistent basis.

                       

A very isolated few managers can outperform indexes over the years, and if they do, it’s pure luck. (See the Earl J. Weinreb NewsHole® comments and @BusinesNewshole at Twitter.)

Teaching Consumer Finance to the Public

                       

The  Dodd-Frank , or Wall Street Reform and Consumer Protection Act law covers consumer protection. Many parts that involve consumers are not yet clearly set, about three years after its enactment,  so it isn’t yet clear how the consumer will benefit.

                       

Consumer education was a major consideration but the question is still how Dodd-Frank will do this.

                       

The board's chief function involves financial educational

programs, and collecting, investigating and responding to consumer complaints. It’s to research consumer financial markets that affect consumers.

                       

Also included is the mortgage disclosure form from a combination of suggestions from the Real Estate Settlement Procedures Act and the Truth in Lending Act, and existing laws.

                       

True, consumers need help. From my experience, too many consumers are ignorant of basic finance, including the role of interest costs.

                       

But I cannot see how this can be accomplished by consumer-oriented documents alone. It can be taught in schools early on. Creating more informed consumers cannot be practically accomplished by regulators. (See the Earl J. Weinreb NewsHole® comments and @BusinesNewshole at Twitter.)

Futile Stimulus Actions

Why haven’t government stimulus programs worked? We know it has not produced needed jobs.

                           

It has also done havoc to interest rates because of meddling. When left alone, interest rates usually adjust to supply and demand forces and adjust economic events. However, when government imposes stimulus proposals to raise credit and lift the economy, the system is disturbed and distorted.

                       

This unbalances the economy and does the exact opposite of what has been intended.

                       

Ludwig von Mises wrote fully about the phenomenon in the 1920s. However, the fashionable economist during the 1930s recession was John Maynard Keynes. He became the poster child of that recovery movement.

                       

The Keynes government pump-priming thesis that employed prolonged stimuli actually deepened, and helped induce the Great Depression. Nevertheless, it is the premise of the administration’s failed current policy.(See the Earl J. Weinreb NewsHole® comments and @BusinesNewshole at Twitter.)

How Politics Affects Bank Credit

    

Banks are not making sufficient loans to small business, even when they have the ability to do so. They make more money these days by borrowing cheaply from the Federal Reserve and investing in government bonds.

           

Also, there is political meddling and too strict bank supervision adding to the bank lending confused picture.

           

Some banking groups are now complaining that they have the money to lend, but with few takers because of the recession.

           

Yes, commerce is in a slump. But many viable, thriving businesses, especially commercial real estate operations, are genuinely seeking loans from banks who have funds.

           

Yet, too many lenders are hesitant about extending loans they once more readily made. A solution? Clearer tax laws would help. (See the Earl J. Weinreb NewsHole® comments and @BusinesNewshole at Twitter.)

The Federal Reserve’s Ability

We make a habit of thinking Federal Reserve actions as responsible, even though they are often proven wrong. This has been proven by the decisions we have gotten in the past couple of years

           

We have to remember that economists are fallible, even when they direct the Federal Reserve.

           

In the more distant past as well, those in the Fed worried we may have deflation and therefore inflated the economy, and added too much currency. In fact the Fed, almost automatically, has been on the side of abetting inflation, in an attempt to prevent deflation.

           

Thus, the Fed has been the chief culprit causing the bubbles which invariably lead to busts and eventual recessions.(See the Earl J. Weinreb NewsHole® comments and @BusinesNewshole at Twitter.)

Shortage of Bank Credit for Small Business

 Many smaller banks don’t have the sound loans on their books as bank

examiners would like to see. They are, therefore, under constant pressure to clean up their financials and/or add to basic capital.

                       

Unfortunately, politicians in their area are putting pressure on bank

                       

examiners to allow these banks with questionable standing to make loans which ordinarily should not be made.

                       

Unfortunately, banks are not making sufficient loans to small business even if they have the ability to do so, The truth is, they make more money these

days by borrowing cheaply from the Federal Reserve and investing in government bonds.

                       

So, there is a constant small business credit shortage.

                       

This unhealthy environment is perfect for the likes of meddling politicians in

 Washington whose influence is being made in the wrong place, in the wrong manner.

                       

One solution: Supervise banks gingerly but independently of politics. Secondly, permit banks to make riskier small business loans and restrict their tendency to borrow cheaply and invest in government bonds.

                       

It is also time to raise the cost of Fed money to banks, so the latter do what they are in business to do.(See the Earl J. Weinreb NewsHole® comments and @BusinesNewshole at Twitter.)