Well that year of amusement has come and gone, and so I will be paying that "debt" off completely come the next year.... But let us put some numbers into the Generic Mold to show the basic idea in play, and then address the BIG FEAR!!!!
- Round Figure at $20K
- Money Market Return 5% APY
- Earn abbout $1k in money market fund
- Average pay down $400 per month, debt down some $4.8K
- Ballon Payment of $15.2K at end game.
The other variation on this game is the one I am seeing more these days, 0% APR On Purchases, which again requires a bit of fiscal discipline. In this game, one knows that one is going to spend a given amount of money on various things - Food, Gas, Books, Nuclear Weapons, Special Aluminum Foil Hats for Controlling the Iranian Flying Saucers - so why not put those generic expenses onto the 0% Card - and pay the
Minimum off each month.
The Discipline Part is that one BANKS the money that would otherwise have been spent. Thus IF one would have spent say $600 a month on Food, Fuel And Fancies - and one pays say the $20 Minimum on the outstanding debt, then one MUST put at least $580 away in the bank - preferably in one's Money Market Fund, where one will be getting that nice 5% APY.
The challenge of course is to stay on the Straight And Narrow - and not buy anything EXTRA that was not already budgetted for... And when the Bill Comes Due, at the end of the Cycle, one pays it off completely!!!!! In this way one has earned the marginal interest rate on the funds saved, and has spent no additional sums on the purchases by way of Interest Payment...
In both of these games the Consumer, if playing a prudent hand, would of course get the "free intererst" that was being handed to them.... One of my friends was thinking about the 27% his $35K credit card would charge him to take a Cash Advance - and rightly resolved that would be a NUTTY IDEA!!!! and he is correct!!! Since there is an UGLY in the 'interest gag' that is anything above ZERO since in many cases, they will start the whole "revolving credit game" - in which IF one has any outstanding purchases when the bill comes due, one will still not be 'out of debt' and back into the 'grace period' - since the "Payment In Full" will be applied to the current FULL BILL, rather than merely the monthly due portion, and as such, one will still go on paying the installment gambit...
I will attack the Installment Gambit at another time.
What WORRIES ME in all of this is that it was SOOOOOOO Scary a fiscal policy, A YEAR AGO, to concieve that there was a NEED to pump up the Money Supply In This Way - but of course, we were all watching the whole Houseing Bubble start to deal with it's excesses. That we are STILL pumping up the Volume on the Money Supply in this way seems to indicate that the Financial Markets are STILL not happy with the currernt Economic Policies of the Current Klique of Klintonesta in the White House and Congress, who have yet to sober up and deal with sound fiscal policy.
More and More of the Banking Firms have started to move their variations on the basic gag, but to places where they are willing to do the short term bet at 1.99% and their long term (for the life of the debt) at 4.98% - that is mostly kinda sorta moving in the general right direction.... Notice, if you will, that this is the right slope for interest rates. Unlike, say the Fed Rate relative to the Treasury Bills And Notes...
At which point we could get really UGLY HERE and say nasty things about 'and the commitment of the ideologs to the Moral Superiority Of The Market Place is What Again?????' but it is still not clear if such an attack on the Failed Fiscal Policy of The TreeHuggerInChief is still the Crime of TREASON for not supporting the special powers of a war president.... Or would it be merely Piling ON after the failed efforts to Find the Iraqi Star Gate that was the clear and compelling reason for so many american GI's to get Killed, Maimed, and Wounded so that we could restore the wetlands and all that jazz....
If a preponderance of Banking Firms are moving towards a More Realistic Model of Fiscal Policy, and away from the Bubble Queen Allen Greenspan's Failed Serial Bubbling, does this indicate that the economy is more likely to reallign to economic Realism in 2007??? Or that most of the same banking firms are still whistling past the grave yard, hoping that at the critical moment, the Great Leader will not flinch away from Nuclear Merchantilism to defend the American Dollar Hegomony....
Ah Yes, one really does have to wonder which way things are going...