Thursday, June 30, 2011

Move it, Economy: Implications for Savers and Borrowers

We were told that interest rates would be keep rates low by Ben Bernanke. We were told that we might be seeing low mortgage yields in the nearby future. They talked, and we listened. But after the Fed kept speaking positively while the economy continued to worsen, it became clear that maybe we shouldn’t believe everything we hear.

But now, as the Cinderella clock strikes that it’s almost too late, the Fed is finally admitting that the economic recovery is proceeding more slowly than they had initially predicted. Hallelujah. 

But in a recent press conference, Bernanke conceded that “…part of the slowdown is temporary and part of it may be longer lasting.We do believe growth is going to pick up but we don’t have a precise read on why this slower rate of growth is persisting.” 

Well, Mr. Bernanke, there may not be any one clear-cut reason, but here are some probable ideas. 

Why is the economy lagging?
  • The U.S. budget is in shambles and this has created vast uncertainty and anxiety in the business and consumer worlds. It's hard to feel good and start spending when you hear that your government is going broke, regardless of whether it is true or not.
  • An aging population means that more of our money is going to healthcare, leaving less for consumption of other products and services.
  • Housing has not recovered from a once in a generation bubble; and it may not recover for years. Since houses were used ATM's over the last ten years, a vast source of spending has disappeared. Many people who still have their homes are paying more than they can afford or above market rates and this is sapping disposable income.
  • China, Vietnam, Brazil, etc. are competing hard. The U.S. no longer has a business monopoly on the world and jobs are American workers must compete internationally.
  • Energy prices are going up and will probably stay up. See the last point. A developing world is hungry for energy and since production and discovery is flat, prices go up.
What can we do to make the economy can start moving again?
  1. The Federal Government produces a credible long-term budget plan that reduces the debt using a mix of budget cuts and tax increases. The argument about keeping taxes low is specious. What's the point of low taxes if the pie is shrinking? People forget that it was after Clinton signed a bill raising taxes and balancing the budget that the economy took off in 2003.
  2. The housing market is allowed to naturally adjust and recover. This may take several more years. But trying to prop up the housing market will only prolong the pain.
  3. A viable, long-term energy policy is implemented. To some degree, the market will take care of this. Once the price of oil gets above $100, alternatives become much more attractive.
In the meantime, we are stuck with a low rate, low dollar policy. If nothing is done, short term rates may stay low but eventually long-term rates will move up, as the debt becomes an increasing problem.

Call Scam by ‘Tech Support’

Ring ring. It’s the telephone. You answer it.

 “We've detected rogue software on your computer. We can take care of it for you; we'll just need your credit card number,” says a voice. 
What do you do?
If you’re anything like one-fifth of the people who received this phony call, your response would sound something like: “Do you take Visa?” 
According to the Windows Security Blog, at least 1,000 Microsoft users received this sort of phone call from a “Tech Support Agent”. The agent, who said he was from Microsoft, said that he needed to remote access their PC to resolve the issue. 
Unfortunately for users, it was all a scam. The phone call, the agent, the ‘PC problems’ – none of it was legitimate. The Windows Security Blog said that this is the perfect way for hackers to access personal information. Often, users are even advised to install a remote access code so that scammers will have full access to the PC. 
Out of the 1,000 people, 234 people fell for the scam and 184 of them lost money. The average amount charged to each user’s credit card was $800.
In order to avoid such scams in the future, Microsoft is advising their customers to be more vigilant about giving out personal information over the phone. They also said that customers never receive legitimate phone calls from Microsoft where charges for automatic fixes will be applicable. 
Users were advised to never give control of your computer to a third party (unless you can confirm that it is a legitimate representative of a computer support team with whom you are already a customer.) Also, never give out your credit card or financial information to someone claiming to be from Microsoft tech. Microsoft rarely makes the first call if you did not initiate the call to them first. Also, be sure to ask upfront if you will have to purchase any software or pay a fee or subscription associated with the "service." If there is, Microsoft advises you to hang up.

Foursquare and Amex Check In to a Partnership

Foursquare announced a partnership with credit card company American Express on Thursday. Hoping to separate itself from the Facebook option of “checking in”, the Foursquare deal gives exclusive discounts to Amex cardholders at specific venues.

The discounts will begin at H&M, Sports Authority, and restaurants by the Union Square Hospitality Group. H&M will offer $10 back when you spend $75, and Sports Authority will offer $20 back when you spend $50, Blue Smoke, Union Square Cafe, Untitled, and The Modern are also having special deals.  

This isn’t the first time they’re launching this. According to, American Express tested a similar feature with Foursquare at the SxSW conference in Austin, Texas. Anytime cardholders spent at least $5 at a local Austin merchant, the company credited $5 back to their accounts.  They said that the response to the offer was said to be "overwhelmingly positive."

Why are they doing this? 

It seems that with the popularity of Facebook’s new “checking in” option, more and more people are dropping Foursquare. Discounts on checking into various locations may bring more customers home. Amex also told The New York Times that they felt these offers would to give consumers more incentive to spend.

What do you do to make this offer a reality? 

Users simply have to link together their Foursquare and credit card accounts. Then, simply click on the 'load-to-card' option when checking in to a participating location.  Once the purchase is made, a discount will appear on your monthly bill of the American Express card.

"The savings are automatically credited to your account within a few days," says Tristan Walker, Foursquare's director of business development told PCworld.

More deals are coming soon.