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I work for a company that I believe will file bankruptcy soon. We are on a 4 year union contract. Dose the company legally have the right to renegotiate our wages before the contract is up?

Is it my imagination, or did I hear somebody out there complaining about real estate commissions?

Anyone who complains about real estate commissions now, is not going to be thrilled if banks have their way and are allowed to sell real estate, something that the American Bankers Association (ABA) has been tried to do by lobbying, pressuring Congress – and paying millions of dollars in the process by way of special contributions – for the past seven years. And it does not matter if banks are not allowed to share commissions. All banks simply need to do, once they are permitted to step into real estate, is to buy brokerage firms and they can share all the commissions in the world without ever once breaking the law. They do not even need real estate licences.

In fact, since we are on the subject of commissions sharing, let?s do a little numbers crunching to find out the ?commissions? banks are charging consumers today. They do not call them ?commissions? ? they call them ?interest charges?, but fact of the matter is that a fee computed on a percentage basis in payment for a service is a commission. So therefore, the user?s fee charged by a bank to a borrower on a percent basis for the use of a certain sum of capital is nothing other than ? a commission.

Banks base mortgage rates on a variety of indexes. Among the most common indexes are the rates on one-, three-, or five-year Treasury securities. Another common index is the national or regional average cost of funds to savings and loan associations. A few lenders use their own cost of funds as an index, which gives them more control than using other indexes. To determine the interest rate on a mortgage, bankers add to the index rate a few percentage points, cumulatively referred to as the ?margin?. The amount of margin may differ from one lender to another, but it is usually constant over the life of the loan. The formula therefore, is: Index Rate Margin = Mortgage Interest Rate. Most banks use a 2 percent margin minimum. When they offer ?special packages? to consumers, they typically apply a 3 percent margin, and then offer a 1 percent ?special? discount or rebate.

But let?s take the 2 percent typical margin. To all those readers who think that 2 percent sounds better than the 6 percent commission commonly charged by real estate brokerage firms, let me point out that the 2 percent margin charged by the banks is per year! So, if it is true that the average consumer keeps his property for seven years, the ?commission? charged by the banks is really 14 percent. The only difference is that the margin applies to the principal of the mortgage, i.e. the amount borrowed as opposed to the real estate brokerage commission, which applies on the full sale price. But this is of little solace if one considers that almost fifty percent of all mortgage transactions involve 95 percent financing.

Banks have come to the realization that the U.S. real estate brokerage market amounts to some $61 billions, a sum that, if attached to a single firm, would rank 19th on the Fortune 500, ahead of Boeing, Microsoft, Morgan Stanley and JPMorgan Chase. To paraphrase Scarlet O?Hara in Gone With The Wind, this is a market that’s ?worth fighting for and worth dying for?. To be sure, the tactic adopted by ABA is that of nonchalance. ABA is trying to convince Congress that banks are not really interested in pursuing this line of business even if they were legally able to do so, but that they would like to be able to pursue it … just in case.

The truth, of course, is much different and deeply rooted in the economics of real estate. Brokerage firms charge commissions to Sellers, the recipients of the money proceeds in a real estate transaction, and only when Sellers have received those proceeds. Banks, conversely, charge interest rates to Buyers. What ABA is aiming and attempting to do now, is to charge both Buyers and Sellers. Sort of like eating from two dishes at the same time, so to speak. Give the money to the Buyer to complete the transaction, and charge the Seller for completing it.

So again, how much is the Read more…

Europe is pitiful, these days – economically speaking, that is.

The European Union is far from the position of strength politicians only a few years ago were portraying it would be. The socialist welfarism of the recent students riots in France, Italy?s shift to the left, Britain?s Tony Blair under siege and a still comatose German ?Panzer Economie? ? all signal that Europe is in economic decline. It certainly does not appear that Western Europe can now afford what it is politically committed to do, and certainly not so within a decade or two as it regards health care and pensions for the elderly. The hope is to turn the most populous former Eastern European countries ? Poland, Bulgaria, Hungary and Romania ? into large self-sustaining consumers markets, and that may one day happen ? but certainly not in the foreseeable future. The economies of the West and the East are too far apart to be integrated. Even Germany has considerable problems assimilating the former East Germany, and this notwithstanding all the billions of Euros that the ?Deutsche Gesellschaft? has poured into the East already. Not to mention the Union?s energy dependence on the flimsies of the Ukraine and Russia, an entirely separate matter all in and by itself.

The recent French riots in particular underscore the increasingly untenable system of job security at the expense of entrepreneurship, and that the grounds are set for a collision between expectations and economic reality. And whereas certain niches can certainly be found for international real estate investors, especially in countries like Bulgaria, the implied economic risks that must be assumed far outweigh, for the time being, the profits that can be reaped.

In China the economic achievements are huge, but so are the problems. President Clinton, in one of his last speeches, said that 200 million people in China were lifted from absolute poverty from 1978 to about 1999. That’s equivalent to about two-thirds of the entire population of the United States in twenty years. But, at the same time, the factors of economic instability are many and worry the leadership. These factors include a financial and banking system that is basically bankrupt, with bad loans-out greater than the real net reserves of the entire banking system.

But, perhaps even more importantly, there is a great imbalance of wealth between the thirty-five percent of the population that lives in the cities and the sixty-five percent inhabiting the countryside. If one is lucky enough to be born in a city – and registered as a city dweller – it is easier to get into university. In the city, one can work at all the large companies and government agencies. Conversely, those who are registered as rural persons are subjected to very severe restrictions on where they can live and work. And this is actually the biggest human rights problem in China today. There is a majority of this population of 1.3 billion people that are, by law, second-class citizens. And unless the Chinese leadership comes to terms with this reality, this social injustice is a ticking time-bomb that one day will explode, also in the faces of those foreign venturers that invest in China.

Since capitalism is, by definition, a system in which the means of production are predominantly privately owned and operated for profit, and which operates in the absence of Read more…