27 August 2018 FT — Articles to Read

27 August 2018


Question: According to MSN:Money, what 8-step plan do financial planners recommend for paying off credit card debt?


Price of Trump’s tariff war likely to be paid by consumers, warn Fed chiefs – Pg. 1

–          Moves by US companies to shift the cost of President Donald Trump’s tariffs to their customers risk complicating monetary policy decisions as the Federal Reserve seeks to keep inflation steady,…


Tinkering at the edges will not deliver a stronger euro – Pg. 9

–          …idea of establishing a competitor to the Society for Worldwide Interbank Financial Telecommunication – the global payments and financial information system better known as Swift

–          Since it began operating in 1977, Swift has provided a vastly more efficient cross-border payment infrastructure than the previous system based on communication by telegraph messages.  A modern competitor to Swift may or may not be useful, …

–          The Russian central bank has already set up an alternative, for domestic use mainly

–          The reason why European companies are vulnerable to US sanctions has nothing to do with Swift

–          Swift is based in Belgium and subject to Belgian law.  The US exercises no formal control over its governance

–          …the true source of US power lies in the global role of the US dollar and the predominance of the American financial system

–          The Trump administration is also in the position to cut foreigners out of US financial markets, or stop them from travelling to the US if they continue to do business with Iran.  These are known as secondary sanctions…

–          The euro is the world’s second largest currency, but is trailing the dollar on all important metrics by wide margins: for central reserves, cross-border payments and investments; for foreign exchange; and in debt and loan markets

–          It does not seem possible for the euro to strengthen its global role without a single safe asset – a Eurobond.  Modern financial markets require the presence of risk-free securities to function effectively


Burden of knowledge/US student debt surges – Pg. 13

–          The US student loan burden has swelled past $1.5tn, despite lending volumes falling for more than half a decade, as graduates fall behind on payment plans and debt relief programmes fail to offer sufficiety succor

–          The overall size of US student loan debt has grown by $500bn since the 2010-11 academic year, ….but the credit rating agency notes that loan origination has declined every year since then

–          The student loan delinquency rate – how many loan balances are overdue by 30 days or more that were not delinquent the previous quarter – fell to a 12-year low of 8.8% in the second quarter of 2018,…

–          The unemployment rate for graduates with a bachelors degree or higher stands at just 2.2%, compared with 5.1% for those with less than a high-school degree.  Nonetheless, student debt remains the worst-performing area of consumer credit

–          (Prof Note: How can young people possibly understand the ramifications and consequences of this crushing debt when I (sorry if this is perceived as arrogant…not meant to be) when my own thoughts (I am well into my 40s) are still maturing on amortization and debt?!  One things I say in class, “Debt <> Debt”.  That is true but also very complicated to understand and I am still maturing in my understanding an defining.)


Answer: (1) Change your spending patters (Prof Note: Track Starbucks to the penny); (2) Figure out what you owe (Prof Note: Identify, Quantify, Fix); (3) Roll your balances into a new form, such as a lower APR card; (4) Tap into your assets (Prof Note: Be careful with tax consequences when selling the bonds Aunt Ida left you in her estate.  Be prudent); (5) Choose your debt paydown strategy (Prof Note: Speak with several advisors/experts.  You must learn!); (6) Focus on one card at a time (Prof Note: Small battles, lead to bigger, lead to winning the war); (7) Break down big paying-off-debt goals into smaller ones (Prof Note: I call this making it palatable.  Get a calendar, build an income statement with budget, and plan.  I still do this with projects today.  It is never as scary when written down with a plan.); (8) Promise yourself to never carry a credit card balance again (Prof Note: I learned from attorneys to never make “absolute” statements.  Promise yourself that without a medical emergency, etc, you will never…)