rant

In my travels last week, I came across the inevitable road construction that one finds every year at this time.  One thing that stood out for me was the effort that was made to ensure that you knew the project at hand was funded by the American Recovery and Reinvestment Act of 2009 (ARRA).  Something else stood out for me about those projects, though.

ARRA Waste?

Now, I’ve mentioned before that I’m no botanist.  For today’s message, I’ll point out that I’m also no civil engineer (nor a boorish engineer, for that matter).  But as I was driving alongside a resurfacing project, I noticed what seemed to me like an awful lot of asphalt being applied – as in, nearly a foot of asphalt.  So much that it was being applied in multiple passes.

Perhaps this much asphalt is appropriate when the road is unlevel or low – but this particular stretch of highway was relatively flat, with lowered shoulders.   And the incredible layers of asphalt went on for miles and miles.  I’d just chalk it up to a strange thing if I only saw it once in my travels, but I saw three or four extended construction projects, all attributed to ARRA, that used similar amounts of layered asphalt.

Again, not an engineer here, nor am I someone who has ever built or resurfaced a road, but it seems to me like this is overkill, perhaps a way to squeeze more money out of a project that likely didn’t need to be done in the first place.

Has anyone else noticed this?

I hope someone can correct my impression.

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In last month’s Atlantic Monthly there was an article by Simon Johnson entitled The Quiet Coup.  What I found especially intriguing about this article is the strong case that Johnson, a former chief economist at the International Monetary Fund, makes in comparing the US, with our recent economic difficulties, to emerging economies.  Johnson should know what an emerging economy looks like, in his job at the IMF he was continuously being asked to bail out the likes of South Korea, Malaysia, Russia, and Argentina from frighteningly similar circumstances.

The most troubling aspect is the intertwined involvement of the financial giants with our government.  As Johnson relates, this could be equated to the organized crime syndicates or drug kingpins of a third world country having the politicians in their breast pocket.  Wall Street has developed into a breeding ground for politicos, and much of the bailout activity has reflected that, given the friendly terms being received by the huge banks and insurance companies.

Johnson argues that the only effective way to deal with the situation is exactly the same way the IMF has dealt with the same thing time after time:  nationalize the troubled banks and break them up as necessary.  Unfortunately, it looks like we’ll continue on the present track of pussy-footing around with the banks, offering bailouts, watering down regulation updates, and generally not admitting to the scope of the problem.  

And that’s just the first step – the second is to subvert the present influence that these financial giants have over public policy.  The root of the problem is that these institutions have been allowed to become “too big to fail” – we need to build into our regulatory system methods to keep the size issue from becoming a global economic threat.  

Very interesting and sobering read, indeed.  What do you think?

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By now you’ve likely heard about the reforms planned for the credit card industry.  Mr. Obama has come in and saved the day for us poor, disheveled credit card users.  Why, we’re all going to benefit from these changes… right?

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Wrong (or at least that’s how I’m reading it).

So here are the major tenets of this legislation:

• cc companies must give 45 days’ notice before increasing rates on an account
• new limits on the penalties and fees that the cc company can charge
• an account must be 60 days behind in payments before the cc company can increase rates
• after 6 months at an increased rate (due to late or non-payment) if the account has maintained good standing, the rate can be reduced

What’s not said in this legislation is how the cc companies are going to pay for this imposed largesse.  How about:

• new, higher annual fees just to have an account
• reduced “grace period” – possibly even eliminated, meaning that if you use a credit card, you are charged interest from the date of purchase, rather than the date of the bill
• other unknown ways to spread the cost of credit from the users abusers of credit to the folks who pay their bill in full each month

Now, I guess this isn’t necessarily wrong or bad business.  After all, the folks that pay their credit card bill in full every month have been the beneficiaries of a “float” – that is, essentially you’ve got free money to work with for 28 to 30 days.  So, even though we’ll experience relative depravation when this goes away, it’s not like it’s a God-given right of ours to have free short-term financing.

Maybe I’m just cynical, but I expect this legislation to cause more folks to stop using credit cards and begin using cash and/or debit cards, at least until the fees start moving to those items as well.  Cash is more costly (in the long run) to handle, so the trickle-down effect will be an increase in overhead, more than likely.

What do you think?  Leave a comment!

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