credit crisis/or doing the "Float"

Welcome to the credit crisis.It is the end of a long road that started in the good old days 1960-1970. It all started with the " Float ". The float was the period of time between when a bank borrowed money from the Federal Reserve and than paid it back . This normally a period of 30 days. So what ever money the bank could make in that 30 days was profit made from the " Float ". This what the IRS does with our tax refunds. The IRS keeps the excess tax it collects, Than gives it back later. The " Float works best when a big sum of money is used. That is when you can make a healthy profit. If done right with no risk.

Then came the Plastic age . The ordinary person could get a credit card and have 30 days to pay off the balance and pay no interest. It is a good deal if you can do it. finally the little guy could play the " Float " This worked especially well for small business. If they could buy merchandise and sell it with in 30 days they could pocket the profit. Like all good plans this has a flaw . It is called Reality.

The Reality that over the years Americans have become more dependent on the float for everyday living {gas and groceries}and has found it increasingly difficult to pay off the balance every month. So much for the " Float " . Our good Friends at Visa and Master charge are here to help. You can transfer your balance from the bad old high interest card to the new friendly low interest card. With Friends like these you do not need any enemies.

So it began transferring balances around never actually paying the balance off, always paying interest. Remember this easy wealth building trick. Make interest , do not pay interest, this really works ,at any income level. See it is easy to be a finical advisor . Some brokers will charge 300.00 for that kind of shrewed analysis. Anyway it is not a hard or complicated trick but, With the price of the afore mentioned gas and groceries going up at a dizzying rate. It will be even harder to pull off.

How did it get this way. Think about this, up until the 1980s most of the goods consumed in America were made in America. From industrial to personal goods, This kept a balance. We consumed about as many goods as we manufactured. By the end of the 1970s most corporations were planning on moving the manufacturing out of America, to places where labor was cheap and few if any annoying pollution laws.

The Exodus started and never stopped. helped along by President Clinton when he signed the NAFTA agreement. One can only surmise that Mr. Ross Perot has a hearing defect. That huge sucking sound he heard had been around since 1980. The sound he heard was corporate America rushing to the profit trough.

Long story short. This produced an excess of goods to be purchased. What to do, Americans still had the same amount of money. The path was clear give them more credit. Buy today , pay tomorrow. This has grown to buy now to pay next year. It resulted in people who should have never been given credit were given far to much. Home buyers were forced into paying way to much for homes. The value of the homes was based on a shortage of houses and the belief the price could only go up . So if you wanted in on this bubble you had pay ante up big time.

Well we all know how this whole credit and housing bubble is falling apart. This is one possible result. What if credit was frozen. This would be the great equalizer. Everyone from the lowest wage slave to the top 3% richest Americans depends on the " Float ". If everyone had to pay cash for everything it would slow consumption down and eventually it would come back into balance again. Remember the problem we have now it to many goods chasing to few dollars. This is called Deflation.

To base an economy on consumption was madness that the American government supported with our tax dollars. Corporate America knew this could not last forever, but they wanted to milk it for every nickle of profit possible. So the coming slowdown or depression is really just a leveler to put us back in balance. It is going to be hard . Let us hope we can learn from this and come out smarter. Could be bright new future if handled right. Who can do it McCain or Obama?