That is actually one of my favorite April Wine albums, but unfortunately it is also the message the C.D. Howe Institute is pushing for Interest Rate increases this year in their report How Soon? How Fast? Interest Rates and Other Monetary Policy Decisions in 2010.
The report itself is a very interesting read on how and why things have happened in terms of credit and interest rates, however, there is a nasty little recommendation that is in it:
When the overnight rate does begin to rise, the changes must be as aggressive as the rate cuts of 2008 and 2009 with increases of 50 basis points at every announcement date until mid-2011 not seeming unrealistic.
Remember how quick and dramatic the rate cuts were last year? There may be an equal and opposite reaction in terms of speed and rate increase this summer and into 2011, which will cause a tightening of credit and tumult in the bond markets too.
Were you planning on renewing your mortgage, or getting a new one? Might be time to lock into whatever rate you can find now, if you need to, since it seems we are in for a bumpier ride in the interest rate world.
Yes there were 10’s of entrants to get the free copies of Quicktax, and the winners are:
I will be contacting you via e-mail on how you would like to receive your free software. Congrats to all entrants.
There will be more giveaways soon (as soon as someone gives me more stuff to give away).
It has been pointed out that my post yesterday about a Real Service for Chronic Over Spenders is at best naive at worst unlikely to ever happen. Why wouldn’t a bank run a service like this? The answer is simple, it does not make them any money.
Banks make money on:
This is an interesting paradigm for the Banks.
They must portray themselves as being helpful, trustworthy and someone who wants you to succeed in your financial journey, when in fact anyone who does succeed, does not make the bank a lot of money. I have friends who have paid off their mortgages in 5 years instead of 25 years, saving themselves tens of thousands of dollars (but in turn costing the bank tens of thousands of dollars in lost interest earnings), yet the bank must publicly say that this is a good customer, even though they are bad for their business.
A good bank customer makes minimum payments on their debts (especially their credit cards), incurs many service fees (or penalties) and rarely if ever talks to anyone in the bank about their issues. Reading that sentence it seems to be an oxymoron, in that it seems to be a description for a bad client, but if all you look at is the bottom line banks will fight over getting these customers.
How do they fight over them? They offer interest free credit cards (for the first six months), and lower interest rates on loans (for the first year), and other interesting marketing gimmicks (free iPods even). These customers make banks much more money than someone who is careful about their debt load, and that keep meticulous records of every purchase and pay things off quickly.
This week I have let my imagination run a little wild, on the problem of how to help people who spend too much or that are chronically in debt, but at the end of it the answers are evident:
God helps those that helps themselves –Anonymous
The banks will help you, but be careful of the help you get –Big Cajun Man
It is kind of like the guns don’t kill people, people kill people argument the NRA uses, in an obtuse way of thinking. People get into debt trouble because they can’t control their spending, and try to fix their spending issues with more debt, which the bank gladly obliges, and the financial death spiral (TM) begins.
Final conclusion:Getting out of debt is hard work, choose your tools to get out of debt carefully (unless you would like to try out a prototype Financial Shock Collar, then contact me).
I have had some fun with a few over the top ideas for folks who cannot control their spending (i.e. their internal shock collars seem to have gone off line), but I have thought about a service that banks might offer that would be worth their exorbitant monthly service charges.
Think of a system that:
If a bank offered this or a service similar to this, I might view that as a good use of my money if I had to pay for the service. I don’t think I’d use this service (although I might try it out for a while), but this might be what some folks might need, almost a Financial Nanny or Money Conscience concept (both terms copyrighted by me).
Do most people need these kind of services? Maybe not, but it is evident that some folks might benefit from this kind of helpful concept.
Some banks already offer parts of the service, by giving their customers access to cheaper or free copies of Quicken to help track their spending, but the financial feedback loop needs to be much tighter than the control that Quicken puts out (and maybe needs to be a little more severe in it’s ramifications as well).
Is this kind of interventionist methodology needed? My opinion is, in some instances, yes because there is a shocking lack of financial training for consumers. Money and manipulating it is one of the top skills any adult needs to survive in this world, yet the amount of training given to teenagers and young adults is negligible.
I guess I got on a bit of a rant on the concept of Chutzpah this week, so I will leave you with one more post on some of the things in my life that I view as chutzpah that I run into in the financial world of today:
Anybody else wishing to chime in with their own private financial chutzpah examples, please feel free to comment!
For those of you who still don’t get the concept of chutzpah the best explanation I can find is from Leo Rostein (author of the Joys of Yiddish ), who stated:
“…that quality enshrined in a man who, having killed his mother and father, throws himself on the mercy of the court because he is an orphan.”
Now that is chutzpah!
Do you feel lucky? Well do you punk?
After yesterday’s parting comment about “See if you can find a lower rate somewhere else, we dare you!” caused a good reaction, I figured I’d keep going with a snarky remark theme (with proper reverence to Clint Eastwood/Dirty Harry).
Most banks these days are banking (pun intended) on you not willing to change banks, thus they treat you like cattle (don’t the waiting lines at the bank branches that are still open not remind you of lines in a slaughter house?). I have talked about this topic ad nauseum, but in case new readers are unaware, your bank does not own you, nor do they own your money, thus you should not feel obligated to stay with a bank, especially if they treat you badly, or give you bad service. This is actually true of all service providing firms (Telephone companies, Restaurants, Grocery stores, etc.,), but acutely more so with banks.
I have changed banks 3 times so far, and have accounts at a few others just in case I feel like changing again, and I have made this approach abundantly clear to my current bank every time I talk with them about a new service, or how they screwed up something else in my financial life.
As I wrote yesterday, TD has decided that they can mess with me, by changing the interest rate on my Line of Credit from being “Prime” plus 0.5% to “Prime” plus 1.0% where they effectively have said, “See if you can find a lower rate somewhere else, we dare you!”. I am pretty sure that if I walked into the BMO branch closer to my house (or the RBC branch even closer), I might get something close if not better (at least in the short term), but am I willing to roll the dice, and change?
Given the dawn of new web sites that allegedly compare different insurance offerings or cell phone plans, this might be a money making idea for someone to set up. Have a user input some simple “service needs” statement from a set of menus and then have all the different banks reply with their best offers (might even be funny to make sure the bank they are currently use, knows this customer is looking around). How hard could this be? What would even be more interesting is if someone like PC Financial or ING did this kind of service so that you could see how much you might save using their services?
Anybody who wants to try this, I will gladly kibitz for them (I am not a consultant only a Kibitzer).
Remember, you read this idea here first!