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GCFLASH
Hot Off the Press!
Tuesday, January 22, 2008 - Edition #438
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Weekly Spotlight
Applying for a Mortgage, Home Equity Line of Credit, or a Consumer Loan with GCF is as easy as visiting our website. Applications are at your fingertips. Just click on the Online Banking Center menu from any page of our Web site!
1st Flash:
INFLATION UNMASKED
The economic crisis has surpassed the War in Iraq as the top priority facing our nation today. While in truth it's a global issue, we'll focus on what it means to us here at home. Economists have been bouncing the "R" (recession) word around as if it were a hot potato, striking fear of a downturn into investors. Wall Street has responded with stocks tumbling in anticipation of sinking even further. A recession is not necessarily a bad thing. Basically, it corrects a market that's spiraling out of control. Recession is a short-term period where industry slows just enough to rein costs and inventory back in line with market demands. Inflation is another matter altogether. When prices surge, they rarely return to previous levels. Your pocketbook feels the pinch long-term. The "American Heritage Dictionary of the English Language" defines inflation as "A persistent increase in the level of consumer prices or a persistent decline in the purchasing power of money caused by an increase in available currency and credit beyond the proportion of available goods and services." While higher prices are the effect of inflation, they're not the cause. Prices rise as the value of money decreases. When the Fed prints more money to counter the national debt, or credit made easily available without proper backing, the value of money goes down. True cost of goods remains the same, causing prices to rise in order to keep pace. So if the annual inflation rate hovers around 3%, why doesn't your annual salary increase offset the pinch in your weekly budget? The answer is simple. The inflation rate is calculated as a national average. And who among us is considered average? Your personal inflation rate is likely much higher when you consider all the variables. Prices vary by geographic region. The cost of living in Houston and Galveston is flat compared with a year ago according to www.kiplinger.com. But in Miami-Fort Lauderdale, prices are up almost 4%. In the Philadelphia metropolitan area, including Wilmington, DE and Atlantic City, NJ, the over price index for all consumer items rose 3.5% over the previous year. Fuel costs drove transportation to the largest increase at 5.8% with the other index components right around the average. A detailed report released by the Bureau of Labor Statistics is available online. The consumer price index (CPI) encompasses products available to folks in all walks of life. The cost of medical care is stated as an average, but only affects the sick using such service to a greater degree. Healthy folks won't feel the same pinch. The cost of food and beverages is lumped into one category, rising at 4.4% annually. Yet dairy prices have risen 13% with milk alone at 26%. Meat prices are up 6%. Your personal inflation rate will differ according to your diet and drinking habits. Prices are actually falling for many consumer items. Ladies clothing is down about 3%. Technology, computers and TVs are all considerably lower than last year. If these items make up a larger percentage of your annual spending than the national average, your personal inflation rate may be lower as well. You can calculate your personal inflation rate at Kiplinger.com. 2nd Flash:
DUMB LAWS
You're driving down the interstate in the outside lane, minding the speed limit, when someone in the left lane starts honking their horn. You watch as they overtake and eventually pass your car. You don't recognize them, why did they honk? Were they drawing your attention to a road hazard? Were they trying to get you to pull over so they could rob you? Maybe they were simply adhering to NJ Law 39:4-85 which states "The driver of an overtaking motor vehicle not within a business or residence district shall give audible warning with his horn or other warning device before passing or attempting to pass a vehicle proceeding in the same direction." The law goes on to dictate the honking must also occur when passing a bicyclist, skater and even a skateboarder. None of which are usually found outside of a residential district, but consider fair warning given here. It's not worth the risk, honk at every skater you pass on the interstate. Listen up if you're committing a murder. Better not get caught wearing a bullet-proof vest at the time or you'll add a second degree infraction to your list of charges. The penalty isn't spelled out in the full text of law 2C:39-13 but it can't be pretty. Are you willing to add to the life sentence you're already facing? New Jersey doesn't hold the title to dumb laws. That honor may well go to Alabama, where you can't wrestle a bear, possess confetti or silly string, spit fruit peels on the sidewalk, play dominoes on Sunday or operate a vehicle while blindfolded. But you can marry your cousin. Incestuous marriages are legal. In California, no vehicle without a driver may exceed 60 miles per hour. The law makes no mention of a speed limit for vehicles under someone's control. In Florida, if an elephant, goat or alligator is left tied to a parking meter, the parking fee has to be paid just as it would for a vehicle. You could have ridden into town on that elephant or goat. But the alligator? I'd like to watch someone actually try to tie one to a parking meter. In Montana, it is illegal to have a sheep in the cab of your truck without a chaperone. I find this one confusing. It doesn't distinguish whether the truck driver needs the chaperone or the sheep. In Oregon, a door on a car may not be left open longer than necessary. This law should apply everywhere. Leave the door open and heat escapes. Imagine the impact on global warming. In Tennessee, it is illegal to shoot any game other than whales from a moving automobile. Make sure you pull over to the side of the road before attempting to shoot a shark or bass. If you're ever stuck overnight in Pennsylvania and can't find lodging, remember it is illegal to sleep on top of a refrigerator outdoors. If you're driving along a country road at night, you must stop every mile and send up a rocket signal, wait 10 minutes for livestock to clear the road and only then may you proceed. But if a team of horses is coming toward you, pull well off the road and cover your car with a blanket that blends with the countryside until the horses pass. Don't want the roar of that red Lamborghini to scare the poor beasts! Many of the dumb laws on the books today were written over a hundred years ago and never removed. But even today new ones appear that leave us wondering if their civic value can remotely match their entertainment value. Find these and many more here. Financial News
What an early morning surprise we had with a three-quarter point drop in the federal funds rate to 3.5% and the discount rate to 4%! The surprise is two-fold. First, the expected rate cut was widely predicted at a half point, making this the largest cut since 1990. Second, Fed Chair Bernanke made the change between meetings, something that hasn't been done since 2001! This change was after the Hong-Kong and London stock market continued to fall yesterday and in response to increasing U.S. recession indications. Wall Street responded by freefalling 465 points on the Dow Jones Industrials, but ending up with a loss of 79 points at the time of this article. Clearly, the market hopes this change will provide the lower cost of borrowing needed to stimulate investing and the economy. This decrease in the borrowing rate meets the drop for the entire year predicted by many economists. Then again, there are those that expect the decrease to be a full 2% in a year. (FTN Financial Capital Markets made a recent prediction of 3.25% in the first quarter of 2008 and then down to 2.25% by the third quarter of 2008.) Lawmakers responded by indicating that they hope to quickly pass a tax rebate designed to put spending dollars back into the economy. The hope is that the majority of a cash influx will be used to increase consumer spending, warding off or reducing the length of a recession. A rebate can be used to pay down debt, helping to keep potential bankruptcy or foreclosures at bay as well. Most of us won't turn a rebate down regardless of how we put those dollars to work! Today's National Market Rates
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In This Issue... 1st Flash: INFLATION UNMASKED 2nd Flash: DUMB LAWS Today's Market Rates On the World Wide Web Tip of the Week Financial News Past issues of GCFlash: January 15, 2008 Edition #437 January 8, 2008 Edition #436 December 18, 2007 Edition #435 December 11, 2007 Edition #434 Looking for articles from a past issue of GCFlash not listed above? Find them in our Knowledge Base!
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