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11 July 2008


Payday Loan Advocate

Last Thursday, September 25, Washington Mutual willingly filed for Chapter 11 bankruptcy protection. The struggling savings and loan’s assets were seized by the Federal Deposit Insurance Corporation. Therefore, the company went into receivership. This could have been a disastrous turn of events for America’s economy. Threatening warning signs still remains after J.P. Morgan Chase came in to buy the “Consumer watchdogs” (who hound payday cash advance lenders) out at zero hour. Will more banks fall short? Imagine what might have happened if J.P. Morgan Chase hadn’t bought WaMu and the FDIC had had to pay customers back. Many who take part in the financial system fear that such bailout would have dried at least half of the FDIC’s assets, which would be even worse if more banks fail. Much of this has happened because too many banks are too profound into the depths of the subprime home lending market, not to mention their indecent greed. While some fear this problem will only worsen, others insensibly believe the problem will fix itself. Payday loans are a smarter alternative in times like these. It’s a reliable resource for consumers in search of short-term relief that banks can’t provide.

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While there are clearly supply considerations in the rapidly growing developing world of BRIC - Brazil, Russia, India and China which grows at a rate of 10% per annum, one must remember that oil is a dollar denominated product and its fortunes are tied to the dollar's relative strength. As such, it is easy to see why evil speculators, which include foreign entities especially, would purchase oil futures as a hedge against the fall in the value of the dollar relative to their domestic currency. As a consequence, increased regulation in the trading of oil futures would have the effect of driving the value of the dollar down relative to other currencies thereby further increasing, not decreasing, the price of oil. Thus, those that argue against domestic drilling for oil as having no economic impact fail to grasp the basic economic argument. That is, every barrel of foreign oil consumption we can replace with domestic consumption, and lack of oil consumption in the place domestic energy alternatives for that matter, will have the effect of driving down our balance of payments and increasing the value of the dollar relative to other currencies thereby lowering the cost of oil futures. This assumes even that demand growth equals any new supply growth. Whether that happens immediately or gradually over time is debatable. Even if it were to happen gradually however, the notion that we will not need to burn fossil fuel to power our economy in the time that it would take to develop additional domestic oil consumption is ludicrous. Finally, I would caution those that abhor speculation to see what is going in today's credit markets. As a result of the current turmoil, there is very little speculation in today's credit markets and what speculation does occur is being priced at exorbitant premiums. The result is that kids are having a hard time obtaining student loans, and prospective homeowners and corporations are paying extraordinarily high rates for home mortgages and business debt despite the fact that Federal Reserve is pricing overnight loans at 2%. Is this the kind of market we really want to see for pricing one of the world's most precious commodities?

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