Tag Archives: Banks

The Banking Meltdown Is Just A Symptom Of A Much Larger Problem

They’re comparing this week’s financial events in the United States with those that led to the start of the Great Depression. But make no mistake, the United States’ economy has been headed for disaster for years now. The loss of decent-paying jobs, the record number of home foreclosures and the depressed real estate market are all symptoms of a far greater problem. The near-collapse of the American banking system may be linked to the mortgage crisis, but look for a root cause elsewhere.

The looming failures of financial giants including Lehman Brothers and Merrill Lynch, and insurance companies such as AIG, have created shock waves felt from Wall Street to Main Street. For the first time in memory, people were concerned that the money in their bank accounts, money market accounts and retirement plans was at risk. A 1929-style run on the banks appeared to be imminent. Indeed, people started pulling their money out of money market accounts at an unprecedented rate. Even investment professionals are running scared. Putnam Investments was so rattled by recent events, that they suddenly decided to close and liquidate their $12.3 billion institutional Putnam Prime Money Market Fund, which had experienced a run of redemptions last Wednesday. (Read about money market funds “breaking the buck” in this cnn.com article, or in this blogger’s posting.) In the seven days ending this past Thursday, Americans collectively pulled a quarter of a trillion dollars out of their money market accounts, an indication that people are frightened. This has led to the government announcing that money market mutual funds will now be insured in much the same way that FDIC insurance protects bank deposits, although the insurance coverage is currently planned for only the next year (we think you can bet your bottom dollar (pun intended) that this insurance will become permanent).

Within the space of just a few days, the government’s $75 billion bailout of AIG grew into a proposed $700 billion bailout of the entire mortgage mess. (Didn’t something like that happen in the movie “The Blob That Ate Pittsburgh”?) The government certainly has the ability to print as much money as it needs to put out these brushfires, but it’s foolish to believe that the federal government throwing money at the problem will make it go away for any length of time.

The economists here at Routing By Rumor point to two very basic problems that the country’s economic woes can be directly attributed to. The first problem is that America is sending about half of it’s cash to the Middle East to buy oil. The second problem is that the rest of America’s cash is being sent to the Far East, mainly to China, to pay for just about everything else we consume. Unless this situation changes, the U.S. economy will never recover, and the current round of federal bailouts are just the beginning.

America has made little progress towards energy independence, despite 35 years having elapsed since the oil crisis of the early 1970’s gripped the nation. A second oil crisis in the late 70’s, as well as dramatic increases in the price of oil in the recent past have done nothing to break our dependence on foreign oil.

America has become dependent on China for almost all consumer goods. This is not only foolish from an economic perspective, it also presents a grave risk to America’s national security. We manufacture almost nothing domestically any more. We’ve said this before, and we’ll repeat it again… God help America if we ever go to war with China, because if that should ever happen, you might as well just go ahead and hang a picture of Chairman Mao in your living room. Now take a look at Walmart, the largest retailer in the United States. According to wakeupwalmart.com, more than 70% of the goods on Walmart’s shelves are made in China. To be fair, that’s probably no different than any other American retailer, but in our mind, Walmart is little more than a sales agent for China, Inc.

Just how bad have things gotten ? According to this CNN article, the United States Department of Agriculture says that 50 percent of the apple juice imported into the United States comes from China (an estimated 161,000 tons of apple juice compared to the 110,000 tons produced in the United States). If we’re reading those numbers correctly, that means the United States only produces 25% of all the apple juice it consumes.

Apple juice !!! What the hell is happening to our country ?

People, there’s something very, very wrong with the U.S. economy, if we can’t even grow our own apples in this country anymore. We’re in deep, deep trouble if we’ve even become dependent on China for apple juice.

They better come up with a new saying, because “As American as apple pie” doesn’t hold true any more.

When the presidential candidates show up for their next press conference or debate, in addition to the standard questions about abortion, the death penalty, Iraq and tax reform, perhaps someone can ask them to take off their shoes and tell us where they were made, and whether they see that as a problem. Or, ask them to remove all of their clothing that was NOT made in the U.S.A. That should be quite revealing.

Then there’s the U.S. banking industry, which to us, resembles nothing so much as legalized loan sharking. Banks are, on the one hand, paying minuscule interest rates to depositors, with regular savings accounts and interest-bearing checking accounts paying perhaps 1% or so, and in many cases, just a fraction of one percent APR or APY (the switch from quoting interest rates paid as APY, instead of APR is a scam onto itself, but we’re digressing). On the other hand, banks are charging 15% or 20% interest on credit card balances, and in some cases, as much as 35% or 40% APR for their less credit worthy customers. Did you know that federal law places no limit on the interest rate a bank can charge ? And while some states do so, there are states which do not cap interest rates. That’s why it’s likely that when you mail your monthly credit card payment, the address on the envelope is usually in South Dakota or Delaware, where, as far as credit card interest rates are concerned, the sky’s the limit.

Take a look at the off-the-wall late fees and other penalty charges that banks are getting away with, since a 1996 Supreme Court ruling removed limits on such fees. Today, typical credit card late fees are as high as $40, and continuing to go up. In fact, if there’s one thing that amazes us, it’s the way that banks continually come up with new ways of putting the squeeze on credit card holders. That’s why you continually get notices from card issuers, announcing changes in your account terms. It’s surprising to us that none of those notices have yet advised us that a late payment will result in a guy named Guido paying us a visit around midnight, to negotiate a repayment schedule using his Louisville Slugger.

We think most American’s have lost any trust they might have had in that cesspool called Wall Street, where, it seems to us, the average investor doesn’t stand a chance. Maybe Eliot Spitzer was on the right track after all, with his aggressive investigations. The well publicized scandals, insider trading and other illegal activities involving Wall Street firms and the companies that trade their stock there have eroded investor confidence. And while we don’t think it’s fair to single out any one individual, just take a look at the Dick Grasso case. How do you think the average American who is struggling to pay their mortgage or feed their family, feels about a situation like that one ? And yet, despite the current financial crisis in the United States, don’t expect CEO compensation to decrease much, even at companies that have to be bailed out with federal money.

So while the billions of dollars that Washington is throwing at the financial crisis will probably stabilize things in the short term, don’t start singing “Happy Days Are Here Again” just yet. They are not.

If you want to hear what it will sound like if happy days ever do get here again, check this out.

– Routing By Rumor

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Filed under Business, China, Consumerism, Employment, Energy, Energy costs, Food, Jobs, Labor, Money, News, Politics, Retail, Retailers, Routing by Rumor, Scams, Shopping, Stock Markets, The Economy, Walmart, Your Money

What’s In That Little Blue Packet? Sweet Deception !

We’ve written at length about how companies are employing Deception Engineering to try to fool consumers. It’s usually related to a manufacturer’s attempt to camouflage the fact that you are paying more and getting less.

But the newest deception that the bloodhounds at RoutingByRumor have just picked up the scent of takes the art to a whole new level. Now, it seems to us that manufacturers such as Domino Foods, Inc. are playing games that might affect your health, if not your peace-of-mind. This is where we draw a line in the sand, and say enough is enough.

We used to be one of 7-Eleven‘s best customers. We spent a lot of money on 7-Eleven coffee. Then we discovered Quick Chek. They operate more than 100 convenience stores in New York and New Jersey. We believe Quick Chek offers much better value than 7-Eleven or just about any other convenience store. They also have many more coffee flavors than 7-Eleven offers, and a slew of goodies to let you fix your cup of coffee just the way you like it. There’s also other goodies at Quick Chek stores, like totally fee-free ATMs, where you can get cash without worrying about paying exhorbitant fees to the bank that operates their ATMs. (Of course, if your own bank really sucks, they might still hit you up with a fee for having the audacity to use another bank’s ATM. In that case, it may be time to switch banks.)

Now, if you will, let’s talk about color.

Perhaps the best way to instantly communicate is with color.

Yellow means CAUTION. Green means GO. Red means STOP.

You know that a baby dressed in blue is a BOY, and one dressed in pink is a GIRL.

In most big cities, you know to look for a yellow car when you need a TAXI CAB.

Most POLICE OFFICERS wear blue uniforms.

FIRE ALARMS are always painted red.

MONEY is green (well at least it used to be… U.S. currency has started to look tooty-fruity lately.)

MOURNERS wear black.

BRIDES wear white.

SUGAR (remember that? It’s the natural stuff) comes in white packets.

…some people will only use sugar, choosing to avoid all artificial sweeteners. But if you’re trying to limit your intake of calories, trying to avoid a sugar “rush”, or you are diabetic, there are several artificial sweeteners to choose from…

SPLENDA (or generic sucralose) comes in yellow packets.

and as the back of the packet indicates…

Splenda is made with the artificial sweetener sucralose, and distributed by McNeil Nutritionals, LLC, a division of Johnson & Johnson, in Fort Washington, PA. Splenda is suitable for people with diabetes.

SWEET N LOW (or generic saccharin) comes in pink packets…

and as the back of the Sweet N Low packet indicates…

Sweet N Low contains saccharin, and comes to you from Cumberland Packing Corp, Brooklyn, NY. Since it doesn’t say that it’s suitable for diabetics, we’ll assume that it’s not.

EQUAL (or generic aspartame) comes in blue packets…

and as the back of the Equal packet indicates…

Equal is “distributed” by Merisant US, Inc, Chicago. IL (does that mean they manufacture it also?). Equal brand sweetener (and similar products) contains the artificial sweetener aspartame. Aspartame, which is a bazillion times sweeter than sugar, gets metabolized by the body into several compounds, including phenylalanine. People who have the genetic disorder phenylketonuria or “PKU” (they are called “phenylketonurics”) must not consume Equal (or any other sweeteners made with aspartame). That is why, in the United States, at least, products containing phenylalanine must carry the warning “PHENYLKETONURICS: CONTAINS PHENYLALANINE“.

The above packet colors are recognized by just about every coffee and tea drinker in the world that have eyes in their head. Those packet colors are as God intended them to be. Anything else would be blasphemy. If you have PKU, using the wrong colored packet could be deadly. If you are allergic to cancer, you might likewise wish to avoid certain colored packets. Of course, there is a school of thought that says everything that is man-made causes cancer. Perhaps, but life is a mine field, full of choices, and you have to make the best choices you can, based on the available information. A little dose of common sense goes a long way, too. Here’s an excellent article about artificial sweeteners and cancer risk from the National Cancer Institute (cancer.gov) of the U.S. National Institutes of Health (NIH).

With the aforementioned knowledge firmly in your grasp, you know immediately, for instance, that this packet…

…contains saccharin, since it is pink. If you want to check, flip the packet over…

…and sure enough, it contains saccharin, just like Sweet N Low. That’s why the packet is pink.

Now if you pick up this packet…

…you’d be lead to believe it contains aspartame. Flip it over to check…

…yup, it’s aspartame, the same stuff that’s in Equal brand sweetener. That’s why this packet is blue.

But Quick Chek’s little blue packets have looked a little different lately, for instance…

…but hey, it’s still blue, so it must be aspartame. Let’s flip it over just to be safe…

Thought we wouldn’t notice, did ya? There’s no aspartame in THIS little blue packet. It contains saccharin. That’s pretty sneaky, don’t you think? And it raises the following question: Why is this packet blue?

So Quick Chek’s little pink packets, as well as their little blue packets, both now contain saccharin. That sucks, pure and simple. We don’t know if the decision to put saccharin into blue packets was Quick Chek’s idea, Domino Sugar’s (Domino Foods) idea, or a joint decision. At this writing, we also do not know if this practice is more widespread than just Domino or Quick Chek.

Why on Earth would they do something like that? Could it be an honest mistake? Giving them the benefit of the doubt, perhaps they used the wrong color paper to make the packets. You don’t think this may be a case of Deception Engineering, do you? I mean, why in the world would the nice people at Quick Chek (or at Domino Foods) try to fool you about what’s in those little blue packets?  Aren’t these businesses concerned that they are destroying consumer’s trust in their brands… or does the profit motive blind them to any ethical considerations?

Just thinking out loud for a second, could it be because saccharin is a fraction of the cost of aspartame? For instance, Sweet N Low brand sweetener has always been much less expensive than Equal brand or Splenda brand sweeteners, and the same holds true for the generic versions of saccharin versus aspartame. (We don’t believe there’s a generic version of Splenda on the market, since we’ve never seen generic yellow packets of Splenda-like sweetener.)

This is about much more than which sweetener tastes better. There are many consumers who avoid using saccharin because of concerns that it may be a carcinogen. The fact is that from 1981 thru 2000, saccharin was listed by the U.S. government as a possible carcinogen. Products containing saccharin were required to carry the following warning: “Use of this product may be hazardous to your health. This product contains saccharin, which has been determined to cause cancer in laboratory animals.” Saccharin was removed from the carcinogen list after further research failed to confirm any link to cancer, but many people, including this author, avoid all foods containing saccharin. We are not amused with the fact that Domino Foods, Quick Check, and probably other manufacturers and retailers, are apparently trying to slip saccharin past us, no doubt in an effort to save money. If you wish to avoid products containing saccharin, read our related article, “What’s In That Cup Of Diet Soda?“.

We suspect that this article will elicit a lot of comments from readers who are as outraged as we were to discover this deception.

– Routing By Rumor

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Filed under Business, Consumerism, Deception Engineering, Food, Health, Life, Money, News, Personal, Retailers, Routing by Rumor, Scams, Shopping, Shrinking Products, Your Health, Your Money

What’s Next, Mr. Bernanke… Free Money?

The Federal Reserve surprised a lot of people today, including us, here at RoutingByRumor.

They announced another cut to the target federal funds rate, this time it was 50 basis points, or 1/2% (read the Fed’s announcement, here). That is on top of the 75 basis point or 3/4% emergency cut announced eight days ago. This brings the overnight bank rate down 125 basis points in the past week, to 3.00%. The only member of the Federal Reserve’s Open Market Committee to vote against the latest rate cut was Richard W. Fisher. There’s a black sheep in every herd.

The Fed must be very, very concerned about the economy. But they can’t repeat these tricks forever. Eventually, they will run out of string, and “eventually” is sooner than you may think. Just think about it… Another two cuts like those in the past week, and money will almost be free.

Have you ever come across a vending machine that was set up to dispense product without having to insert any money? You can find these machines in some company cafeterias. I can still remember the time that I accompanied my father on a trip to a company he did business with. I must have been seven or eight years old at the time. That company had such a soda machine. Like any young child, I would push the buttons on every machine I’d come across, trying to get free gumballs, candy, soda or whatever. And don’t forget to check the coin return for some free money. Of course, I had to press every button on this soda machine, too. Every time I’d hit a button, another can of soda would be dispensed. I thought I hit the jackpot. The man who had to put all those soda cans back into the machine was not as amused as I was.

Now, if the Fed keeps lowering the funds rate, we figure that pretty soon, the banks might set up their ATMs to dispense free cash. It would make the kid in me very happy. I could just stand there all day, pressing buttons.

What’s next, banks giving away free toasters, blenders and TV sets? I remember those days too. Actually, I could use a new television, since in February 2009, when broadcasters stop transmitting analog signals, my current televisions will no longer work (at least not without a digital-to-analog converter box). Gee, Mr. Bernanke, maybe this was a great idea after all.

Then again, maybe not.

In fact, maybe black isn’t such a bad color after all. I like black better than red. Black goes with everything.

Maybe following the herd just leads you to the butcher sometimes.

So, they’re making money cheap, which should encourage people to start buying homes again… and cars, and televisions, and computers, and everything else we don’t make here any more.

Who will be hurt the most by these aggressive rate cuts by the Fed?  People on fixed incomes and retirees.  You can’t depend on the stock market these days.  Putting your nestegg into stocks, even if diversified,  is just slightly less dangerous than playing Russian roulette.  Inflation was already outstripping anything you might hope to earn from a bank CD or insured money market account.

With the rate cuts in the past week, bank rates have fallen through the floorboards.  I just checked Bank of America’s website… Putting $10,000.00  into a 1-year CD or a money market account will currently get you an APR of slightly more than 2%.  To add insult to injury, if by some miracle you manage to earn a few dollars in interest, it’s taxable income.  That dismal rate of return is sure to go even lower over the next few weeks and months, especially if there’s another Fed rate cut.  Just a few months ago, 1-year CD rates of 5% were commonplace.

Make no mistake about it.  The faltering stock market and  plummeting interest rates on instruments such as certificates of deposit,  are very bad news indeed.  You will see increasing numbers of elderly Americans, who thought their golden years would be reasonably secure, now faced with loss of their homes, or worse.

Time to start stuffing the mattresses.

bush-at-state-of-union-address-1-28-2008.jpg
President Bush delivering his final State of the Union Address on 1/28/2008

In his State of the Union Address two nights ago (read the full text here), President Bush touched on the need to increase exports. Funny, but I didn’t catch him mentioning the need to limit imports. In fact, President Bush never mentioned the phrases “trade deficit” or “imports” even once during his State of the Union Address. Rather, he said “we are pursuing opportunities to open up new markets by passing free trade agreements“. That’s wonderful. Just what America needs. More jobs going overseas. More cheap imports flooding the U.S. More unemployed American workers. The imbalance between U.S. salaries and those in most foreign countries is so great that we will never be on the winning side of any free trade agreements. Have any free trade agreements we’ve signed in the past resulted in a trade surplus (I think that’s what you’d call the opposite of a trade deficit, but since we never hear the term, I’m not sure that’s correct). Have they ever even resulted in balanced trade?

Thank God for term limits. Could you imagine four more years of this? Our trade deficit is already so lopsided, that unless we put limits on imports, we can never hope to make a dent in the trade deficit.

Cheap money will allow very few people who are at risk to avoid foreclosure on their homes.  For the few it might benefit, our advice is to postpone the celebration, because  cheap money won’t last forever. Maybe until the next election. Then what? Americans who can’t find decent paying jobs will use cheap credit to increase their spending and their debt. Then, when interest rates inevitably rise again, look out. If you think things are bad now, you ain’t seen nothing yet. Pity all those families who are convinced that lower interest rates mean that this is now the perfect time to buy a home. If you think there have been a lot of foreclosures recently, just wait a while and see what happens.

We’ve said this before, and we’ll say it again… If America continues to be flooded with cheap imports that are sucking good paying jobs out of this country, our economy will continue to get worse, no matter how many interest rate cuts the Fed delivers. Can you say “quick fix”?

Wal-Mart might be the biggest employer in America, but they can’t employ all of us. And even if they did, we couldn’t afford to shop there. Minimum wage doesn’t go very far. Especially when you need medical care, and your employer doesn’t provide health coverage.

So thank you, Mr. Bernanke. It was very gracious of you and the Federal Open Market Committee to give America this latest gift. We don’t want to seem ungrateful, but could we exchange the gift for something we really need? Perhaps the creation of good jobs that pay decent wages. Imagine being able to go shopping and actually finding products that say “Made In USA” once again, not to mention having the money to buy those products without going into debt. How quaint.

Thank You.

– Sincerely,

RoutingByRumor

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