Debt worries, low birth rate ring alarm bells

TWO important bits of seemingly unrelated news came out last week. One got more attention than the other.

You probably heard that the birth rate in the US hit a 32-year low in 2018. There were only 3.788 million babies born, a decline of 2 percent from the year before.

The US is not producing enough babies to stabilize the population. And that will become a financial problem soon for this country. I’ll explain shortly.

The other bit of news has to do with credit cards: Americans are now paying the highest interest rates ever on their credit cards. The average 17 percent rate being charged today by banks is probably the reason consumers are suddenly spending less this spring.

And it could also be among the reasons people are having fewer kids.

Let’s assume people aren’t losing their interest in sex. Let’s also assume that people have heard that

kids are expensive to raise.

Sure, there is other debt that’s not on credit cards: student loans, car payments and mortgages.

But all of those are loans that someone spent time thinking about. Credit card payments are something that creeps up on people. And the creep is made even creepier when card companies are charging usurious interest rates.

People could cut back on spending but that’s not often feasible. Or, instead, they could stop putting themselves in the position where they will inevitably have to spend more for two decades: They can stop having kids.

I’m not saying that a lower credit card rate will create a population boom. But without credit card debt, the population might not bust as quickly.

I’m also wondering why credit card companies see fit to gouge when bank profits are high; when they are paying savers so little; when the economy is doing well, and when borrowing costs in other segments of the economy are still low.

This is my long way of saying that banks should stop being greedy. Bankers like to portray themselves as looking out for the public good. Some heads of major banks even go out of their way to preach about how to make our country and the world a better place.

Well, I think they can start by cutting their outrageous interest rates on credit cards. Maybe then people will be able to afford to have more babies.

And if you really don’t care about America’s declining birth rate, consider this: Unless people start having more babies, then Social Security, which is nothing more than a pyramid scheme where more people have to pay into the system than get payments, will topple.

Then you aren’t going to be able to retire comfortably.

H&R Block has figured out what happened to peoples’ tax cuts last year.

The company said overall tax liability was down 24.9 percent. Wow, that’s great! But how come people didn’t feel 24.9 percent richer?

That’s because the IRS changed the withholding tables and people got that extra money in dribs and drabs in their regular paychecks. So tax refunds, according to Block, were only 1.4 percent higher despite the tax cut.

You just can’t take your money a little bit at a time every payday and still expect a big refund.

And, by the way, this is a better way to handle the family budget. Getting a big refund only means you lent Uncle Sam money interest free for the tax year.

Despite the nicer spring weather, the US economy is getting off to a slow start in the second quarter of this year.

As of its latest reading, the Federal Reserve Bank of Atlanta says the nation’s economy, as measured by the gross domestic product is expanding at only a 1.2 percent annual pace.

That’s much lower than the 3.2 percent annual growth recorded in the first three months of 2019. That’s mostly because residential expenditures are lagging.

If you want to look on the bright side, the Atlanta Fed was very pessimistic in the first quarter as well and that period ended up being a blockbuster.

I wrote in my last column that bitcoin is really a bitcon. I’ve been telling you this since the price of this “investment” collapsed from around $20,000 to $4,000 last year.

Mario Draghi, head of the European Central Bank, echoed a similar view last week but didn’t do it quite as colorfully.

Last Thursday night, bitcoin crashed by about $1,000, to around $7,000.

Bitcoin will soon be worth zero. But until then criminals will still be able to use it and other digital currency to move money around the world without being caught. China’s holdings of US government securities are now the lowest they’ve been in two years at just $1.13 trillion. The Chinese have been selling treasuries that they own and not buying. Theoretically that should hurt the US bond market and cause interest rates to go up. But, so far, it hasn’t happened. Why? Right now there seem to be other investors around the world who want to buy our bonds as the Chinese are selling. And that’s a good thing. Plus, the Chinese haven’t been unloading our bonds en masse. There’s no telling if there would be enough buyers for all $1.13 trillion of the remaining bonds. China’s problem is: What would it do with the receipts from those sold bonds? Could the Chinese government find a safer place for its assets than in the US?