Government's New Enemy: Credit Cards

So, in an effort to make people that can't read or pay bills less responsible for their actions, Obama leads credit card reform.

Let me begin by throwing this out there. In addition to buying a house that I can afford with a mortgage that I understand (and maintain a self created amortization spreadsheet), I am also supplementing my income by manipulating credit card rewards. This year, I may be able to make more than $1000 through cash back, bonus deals, and overall fancy footwork. My fiance at the time, bought my engagement TV at 0% for 6 months by signing up for a new card. I helped save over $1500 on my honeymoon by getting and using the Priority Club credit card to boost my hotel points. I also get to track all of my spending and easily manage my cash flow by having only a few monthly payments rather than daily. All of this has come at zero cost because I can read and I can pay my bills. Needless to say, I don't see credit cards as the enemy, they are actually pretty badass.

I think my favorite lines in this article are:
“We stood up for consumers and stood up to abusive credit card companies,” - Harry Reid
“this bill fundamentally changes the entire business model of credit cards by restricting the ability to price credit for risk." -Edward L. Yingling (Don't get me started on Yuengling)

So, the government is standing up to the big-bad credit card companies that charge people higher interest if they are high risk. This is just like when they stood up to the big-bad mortgage companies that wouldn't loan money to people that have bad credit (ironically, also a high risk). That worked out great. Luckily, there's a big difference between credit card companies and mortgage companies. Mainly, the flexibility that credit card companies have (or had).

Anyhow, here's where I expose how much I know or do not know. Credit card companies make money two different ways:

A) Charging transaction fees for the use of the card, paid by the merchant
B) Charging interest on overdue balances and late fees on late payments by 'bad customers' or annual fees

So, the government is restricting the amount credit card companies are allowed to charge 'bad customers' that do not pay on time and cause cash flow issues and finance charges to the company. All else being equal, which is a fair assumption since shareholders will want to keep revenue growth and profit rates the same, this has to result in one or both of the following:

A) Increased transaction fees
B) Increased cost to 'good customers'

Increased transaction fees would result in the overall increase in cost of all goods and services across the board. The only merchants able to avoid this would be cash only merchants (Speedi Pig BBQ in Fayetteville, Ga), unless they offer credit pricing separate from cash pricing. Gas stations used to do this before they realized that cash customers would pay the credit price. So, if merchants offer cash only pricing, that means two things:

A) Decreased revenue for credit card companies
B) Individuals with the ability to pay cash pay less for goods and services

Clearly, the government is not concerned with the revenue of credit card companies, so this is not an issue. However, in hard times, the people that require the use of credit cards will be those who do not have cash on hand. So, you will be giving the wealthy, or at least the responsible, a visible price advantage over those relying on credit cards.

So, based on what I know about our new government, it is their responsibility to ensure that credit cards do not increase transaction fees so as not to 'tax the poor'. That leaves credit cards with the only option: increase cost to 'good customers'. Increased interest rates won't work, because I don't pay finance charges for carrying a balance. So, either my purchases will begin accruing charges before I am billed or I will start paying annual fees and not receiving cash back.

Needless to say, I sold my Visa stock and kind of felt good knowing that the loss I realized will be tax deductible.

Hal Davis for Foresight Czar

Since no one else in Washington is willing, I am throwing my name in the hat to be appointed to the post of Foresight Czar. Does no one think forward or criticize decisions before they are made?

Yesterday, the FAA flew a photo op mission over Manhattan. A low altitude flyby over the Statue of Liberty, which requires a Air Force One to buzz the tower. I'm sure there were tons of unreported coffee spills in addition to all the reports of buildings being evacuated, shaken nerves at least, and basically a reminder of the last thing this country needs.





So, how many people saw this and thought that it would not be an issue? Based on how I think the Federal Government runs, I'd say at least 50 people knew about this. They say that they told local authorities, but local authorities say they weren't notified or were told on Thursday and directed not to release to the public. Why would this not be distributed to the public? What possible advantage does that give the photo opportunity? Let's get some risk analysis going in Washington. Maybe even a copy of photoshop and save the tens to hundreds of thousands of dollars that this exercise cost, not to mention avoiding the general looking stupid as a government.

I guess we'll find out if it is actually possible to get fired from a government job.

Anti-Piracy Plan

I did some thinking about the best way to deter pirates from attaching US ships. Since the crews are not allowed to be armed in order to be allowed to port, I say we bookend the Gulf of Aden with the USS Bainbridge and a similar destroyer. Let a 4 or 6 man Navy SEAL team board the ships as they enter the gulf. If there's an attack, the crew attempts to stop the pirates and if the pirates board the ship, the crew hides in the engine room, per protocol. Then, the SEALs do their thing, and disembark on the other side. There's got to be about the same number of ships coming as going and I'm sure that other countries wouldn't mind giving a group of Navy Seals a ride back across if it gets too lopsided.

So, 2 ships, maybe 60 SEALs, and maybe we contract them out on the rides back across the gulf. Its pretty decent training for SEALs since this is right up their alley and I don't know how long it takes to cross, but I'd guess three to four weeks. These pirates are 14 to 25 years old, it shouldn't take long to make an impact. If Somali pirates are going to target US Ships, then its time to get proactive instead of waiting for an attack and speeding to the rescue. I guess this is still somewhat reactive, but if we're worried about the US looking like the bad guy, Shock & Awe II: The College Years, is out of the question.

Why Texas Shouldn't be Messed With

I've always been a fan of Texas. I like the fact that Texans are proud to be from Texas. I like that (allegedly) Colt McCoy's dad put a shoe-box full of Texas dirt underneath the New Mexico hospital bed when he was born so that he would be born over Texas soil. I like the fact that on Survivor: Australian Outback they let everyone bring one item and Colby brought a giant Texas flag.

I read the Russian economist's theory on the collapse of the US. Of the options available, I'd move to the the Texas Republic. It would have a good port in Houston, oil, farm land, coal, and people that love independence (and guns). I don't see Texas as being enveloped by Mexico, but protecting it borders and creating a solid Tex-Mex relationship. As much as I love Georgia, I don't think I could enjoy living in a Euro-Liberal east coast society.




So, to further my appreciation for Texas, they come out and claim their sovereignty in protest to an oppressive and unconstitutional federal government under the 10th amendment. I was wondering when someone was going to point out that the Constitution does not state that the President can fire the CEO of a major company, purchase toxic assets with taxpayer funds, or manipulate private lending practices. The states have been slowly losing power to the federal government and I suppose it is about time that they begin to claw back. The Federal government's ability to withhold federal funding pending the passage of state legislation basically makes each state subject to the will of the controlling party in Washington.

America was founded on not putting up with bullshit. It was originally inhabited by people sick of religious persecution, established by people tired of being told what to do by an oppressive and distant government, and purposely created a society where you are not stuck in the class that you are born into. Finally, somebody stepped up and said they were sick of the bullshit, luckily it is Texas and they aren't the type to be content with delegation and may actually get some action.

Untrained Dolphins Succeed Where USA Fails?

Thousands of dolphins prevent a pirate hijacking, something that America could not do. The dolphins, immune to UN Sanctions and communicating with sonar, were actually able organize a moving sand bar in order to prevent pirates in john boats from hijacking Chinese merchant ships. As far as I can tell, this is the most successful attempt to prevent a pirate attack.

Maybe I am just patriotic, but I think that the United States of America, who has the strongest Navy in the world and over 200 years of experience and thousands of years of knowledge to draw from, should be able to outperform a couple thousand dolphins who do not comprehend the consequences of their actions. Ever since they have been sailing, there have been pirates. How is it possible that pirates, with john boats, AK-47's, and maybe an RPG can hijack a huge ocean freighter? That is like me being mugged by an unarmed 5 year old girl... Everyday, unless a pack of hamsters happened to get in between us.

My Thoughts on a Rasmussen Poll

So, Rasmussen polled Americans to see what their opinion is regarding capitalism vs. socialism. Here's the results as reported in the article:

Overall
53% of Americans prefer Capitalism over Socialism.
20% of Americans prefer Socialism over Capitalism.
27% are unsure.

I don't see how you can know the difference between Capitalism and Socialism and World history and not be sure which is better.

I think that 50% of the population do not know the difference, straight up. So, about half of those people picked 'unsure' and the other folks just picked one.

So, assuming that half of the people that don't know the difference voted for capitalism and socialism equally, the recalibrated poll comes out like this:

Filtered Poll
41% prefer Capitalism
9% prefer Socialism
50% don't know the difference

I like to think this is much closer to reality.

A Tax Increase I Kind of Agree With

Well, just to show that I'm not completely anti-everything, here's something the government is doing that I kind of agree with. This month the federal excise tax on cigarettes will nearly double, from 62 cents to $1.01. This is a huge increase and is probably necessary due to a decrease in tax revenue based on a decrease in cigarette sales. Instead of cutting the programs funded by this tax, government increases taxes.

You would think that I'd be against this because I don't want the government telling me what to do. But I'll tell you what makes this different that me being forced to wear my seat belt. Smoking doesn't merely affect the smoker and it could legitimately be argued that it infringes on the inalienable rights of others. If you believe in second hand smoking, which I consider more believable than stopping global warming, then there's a right to life issue. In my unending pursuit of happiness, I avoid making my clothes and hair smell like a trashcan, so there's two of the big three. I'd also say that 10% of the time my asthma kicks in, its because of a whiff of cigarette smoke.

In addition, I would consider smoking to be a luxury, so a sort of luxury tax is in order. Its just ironic that there's a higher percentage of low income smokers, so this is essentially a luxury tax on the poor. So, I like this for two reasons.

First, since poor people (and illegal immigrants) pay little or no income tax, at least the government can collect some from these groups. This is the same reason I like the lottery. I get to scratch off lottery tickets when I want to, maybe win some money, but I got to go to college for free and Georgia schools have benefited largely due to voluntary taxation through the lottery. You don't have to play the lottery and you don't have to buy cigarettes, but I'm betting if you are hooked on one, then you are hooked on the other.

Second, since poor people (and illegal immigrants) rely on social welfare programs to pay medical bills. The resulting reduction in smoking (or increase in revenue) may save on federal health costs in the long run. If you smoke a pack-a-day for a year, that $365 isn't going to go far when its time for lung cancer treatment. But, if your disposable income stays the same and you cut the number of cigs, then you may actually see some reduction in healthcare costs.

While I think it is a mistake to significantly raise a tax on an industry in this economic environment, the tobacco industry has been a punching bag for the government for years. Also, it isn't taxation without representation since they've got their lobbyists and the Carolinas, Tennessee, Kentucky, Virginia, and Georgia got to vote which represent 93% of tobacco farms in the US and 20% of the Senate and 12% of the house.

As an aside, I can't wait for federal healthcare. Eventually the federal government will tax everything bad for you that I love(chocolate, alcohol, laziness, etc) because they will have a reason to. Maybe that is just my paranoid republican coming out, but investing in the banking industry has allowed them to think they can dictate salaries and hire and fire employees. When they control healthcare costs, who knows what 'rights' will be granted to the government. But that's a whole different story.