Today’s Economy & the Depression: Is it Panic Time?

October 31, 2008

Are we headed for another Great Depression?  It’s a question a lot of folks are asking these days.  Foreclosures are hitting record numbers, banks are failing, unemployment is on the rise, consumer spending is tanking, and the stock market is giving average Americans anxiety attacks.  It sounds frighteningly reminiscent of the Great Depression, but does it really compare? The Consumer Warning Network’s Angie Moreschi  takes a look at then and now.  Hear what some folks who lived through it have to say and the general consensus of economists today.

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Just who falls for the Nigerian Money Scam? My Email Exchange with a Con-man

October 28, 2008

money manBy John Newcomer:

Last week, I noticed a curious email in my in box. After checking with my IT department, and having their assurance that I could open it and respond without fear of compromising our computer system, I began my email conversation with a Nigerian con-man.  

You can read a sampling of the colorful exchanges below.  They provide an inside look at how the scammer lures in victims.

This is nothing other than an internet version of the old Nigerian money scam. It is also known as the 419 scam. 419 refers to the Nigerian criminal code dealing with fraud. With the assurance from my IT department I decided to see how far the con-man would go in trying to separate me from my hard earned $120. The answer is – really far.

I had more than 42 email exchanges with him. He promised me hundreds of thousands of dollars. I portrayed myself as desperate. I told him that I had lost my home to foreclosure and lost my job. I told him I would have to borrow the money from my grandmother after she went to sleep. I even told him I would meet him in London and buy his plane ticket in order to expedite the process.

The con-man’s responses went from matter-of-fact, to “lucky me,” to “share my windfall with the poor,” to “if he is not telling the truth that God would punish him,” to anger when I told him that I had mailed the check instead of using Western Union, and finally to frustration.

After reading the emails it is hard to believe that anyone would fall for this scam. But the scam has been working for decades. It has been a cottage industry in Nigeria since the 1980’s and it has now spread to Benin (a small African country just south of Nigeria).

Former special agent for the F.B.I., Al Scudieri investigated the scam more than 15 years ago. He said “It turned out that thousands of Nigerians were generating the scam mailings. In fact about half of the profits of the Nigerian post office were related to the mass mailings.”

In 2006, it was reported in the United Kingdom that similar criminals had tricked victims for more than 150 million pounds. In the United States, the latest numbers were more than $100 million dollars lost in the Nigerian scam. (For personal accounts of people falling victim to this scam, read this.)

Do not fall for this scam!! My colleague Terry Smiljanich wrote an article for CWN on the 5 warning signs of a scam. The warning signs are all over this scheme. If you do receive a scam email you should forward it to spam@uce.gov .

Unfortunately, people fall for this everyday.  Misspelled words, hot mail as a return e-mail address, poor grammar, and a mail drop address from a small African country are all clear signs that something is not right.

By the way, Nigeria does not have extradition with the United States so the F.B.I. can’t help. You need to protect yourself. The following is just a sample of how far the Con-man will carry his scam. Read on and be warned:

Dear Friend,

I have been waiting for you to come down here to pick up your Bank Draft since, but I did not hear from you, then I went and deposited the Draft with a ECO BANK,under the care of Fedex because I am traveling to return next month end.

You are to contact fedex BENIN immediately to know when they will deliver your package.

The delivery charges and insurance fee has been paid. The only money you have to send to them is there security keeping fee of $120 to receive your package. Do not be deceived by any body, below is there Contact Information Customer Service Manager,Johnson

Address EMAIL: (deanjohnson_1@hotmail.com) Contact them as soon as possible to avoid increasing the security keeping fee. Finally, you have to reconfirm this information, namely; your complete names, phone number and residence address to them again to avoid any mistake in the delivery.

Provide to them your registration NO.of your package.

Registration No; Eg2272

Code Number::0172157

Regards

James Brawn

Let me know as soon as you receive your Bank Draft

_______________________________________________________________________________________________

Dear John,

Your mail is received but you did not include the security keeping charges of US$ 120, kindly send the money on the name stated bellow so we can have your draft dispatch first thing tomorrow morning.

Receiver Name===EPHRAIM ONUORAH EMEKA

Country========Benin Reupblic

City======= Cotonou

text Question who is great?

Answer==God.

Amount= $120

Address: C/12 Senada AKPakpa Cotonou Benin Republic.

Waiting for the mtcn.

Mr Dean Johnson.

Dear Mr. Johnson,

My house just got foreclosed and times are very hard for me. This money is like a present from heaven and will help me and my wife and children. Since I lost my job I do not have a bank account. How can I get the security keeping charge to you? Also how much money is the bank draft? I do not want to spend $120 if the draft is small. I hope it is enough money to get my life back.

Thank you, John

Dear John,

I want to let you know that there is nothing it shall profit a man after gaining the whole world and loose his heart, so simple go and send the money and have your bank draft dispatch first thing tomorrow, as soon as you received it go to any bank of your choice and clear it, the amount is 850,000.my advice is to make sure you help the motherless baby and poor ones. pay the security keeping fee with this name below.

I got the money from my grandmother and will send the $800 for your ticket and the $120 security fee this morning. I got a cheap ticket for London and will leave this afternoon. Because of my credit problems I do not have a cell phone. My lap top is all I have left. My wife is afraid that this is a scam. What can I tell her that this is true.

Thanks and can’t wait to see you John

Try to tell your wife that this is a real business not scam, just send to me the money because i have concluded all my arrangement and i will give you my London number on my arrival to London, i will be waiting to recieved the money and make my move. i will be waiting for the infomation from western union.remember that God will purnish me if you travel to london and you refuse to see me, i will be waiting to received the money because tha is only holding me.to move to London.

OK. I sent the money by US mail express. My plane to London leaves in two hours. I will contact you when I get to London.

Send the money direct to western union office because it is the best way so that i will have it and started my movement to London.

I already put the check in the mail. How do I send it to Western Union?

Just send it through western union to enable me pick it up here in a equivilent to that amount that is only quick means i can pick it up today otherwise through other courrier service will consume more than three days while my schedule time is today 10:30pm so advice western union to convert it on the name below for the payment

I can’t take the money back. The check is in the mail and I have no more money. Please meet me in London and we can go to the bank and I will pay you.

Ok but in ragards of the money you said you sent, because we have no US mail express here in Benin, but what we have here is EMS and PTT and before any parcel will be release. You must have to provid an infomation to identify you as the beneficiary of the parcel.

I made it to London. Very tired and I did not know that they have different money. I am at Paddington station, but hope to find a room soon. Sorry about not using Western Union, but since I addressed the package to you you should be able to provide information to identify yourself. I do have a concern. Is the $850,000 legal? Where did it come from?

When will you arrive in London?

Lon are using Pouds so you can convert the $920 to pounds and send it to me for my ticket why i dont understand the type of business you have in london that makes you not to conclude with me and start moving to london. is like you are not serious in business. i can not understand the type of human being you are, if you are sending the money kindly let me know guy.

I want to let you know that Mr James Brawn who issue the 850,000 made a mistake because in my verification i realise that you are not the original owner of the money but as it is i want us to do the business, this money is legal and safe, all i want you to do is that send me the money for my ticket so that i will start coming to London immidiately and meet with you since the money was issued with your name. stop all this delay so that on my arrival to London we can go to the bank and get it clear immidiately. Mr Dean.

You Too Can Profit From the Government Bailout!

October 28, 2008

We’re all going to have to pay off the $700 billion price tag for the new government bailout program (called TARP, “The Troubled Asset Relief Program”). It is comforting to know, however, that the money will only be spent where it is most needed and that no one is going to think about profiting off of our misery, right?

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Today’s Crisis: Echoes of 1873

October 27, 2008

Though hardly as grim, today’s economic crisis looks very much like a panic brought on 125 years ago by land speculation, the failure of complex and little understood security deals and cheap goods that undercut traditional industry.

The Panic of 1873 saw the world’s credit and economic development shift from Central Europe toward the United States, leading directly to the industrial concentration that became known as America’s Gilded Age. While big business flourished, average Americans suffered terribly.

Today’s mortgage and banking crisis echoes the Panic of 1873.

In the late 1860s, the leaders of Germany and France created new lending institutions that issued mortgages for residential and municipal construction. These new, easier-to-obtain mortgages launched a building boom, prompting land values to skyrocket. To cash in, borrowers assumed more credit, often using unbuilt or half-built houses as collateral.

As speculation grew, the European economy faltered in the face of competition from the farmers of the American Midwest, who undersold them. By 1871, wheat, food and manufactured goods from the United States had undercut the major markets of Central Europe in what was dubbed the American Commercial Invasion. It is, some historians say, the 19th Century equivalent of goods manufactured in China. These low costs threatened trade.

The shaky economic underpinnings of the economy gave way in late 1872 or early 1873.

European banks failed. The survivors refused to lend to one another because they were unsure which were involved in the mortgage crisis. The interbank rates – the borrowing costs between banks – skyrocketed. The banking crisis hit the United States in 1873.

The crisis hit the railroads first. Railroad had promised investors a fixed return through a series of complex financial instruments that few understood, much like the credit swaps and derivatives of today’s crisis. When a railroad financier couldn’t pay his debts in September 1873, the stock market crashed.

Over the next three years, hundreds of banks closed. Well-financed industrial companies capable of fueling their own growth thrived. Among the names still familiar today are: Andrew Carnegie and John D. Rockefeller. They gobbled up their competition at fire sale prices. It led to the Gilded Age of America.

Everyday Americans suffered. Small factories and workshops closed. Unemployment exploded, reaching 25 percent. Unemployed workers demonstrated in Boston, Chicago and New York demanding that the government create public work projects. Some of the most violent strikes in American history followed.

The parallel to today’s crisis is astounding.

Today, loans were issued to first-time homebuyers who signed up for mortgages they probably couldn’t pay off. Speculators bought properties on credit, hoping to flip the real estate for a quick profit as real estate prices soared.

The mortgages were packaged in complex, little understood securities wrapped with credit swaps and derivatives. When these securities weren’t covered, banks failed.  The price of short term loans skyrocketed as banks hoarded cash, refusing to lend to one another, in part, over fears of exposure to these mortgage backed securities.

Scott Reynolds Nelson, a professor of history at the College of William and Mary, said in the end the world’s credit shifted from Central Europe to the United States after the Panic of 1873. He wonders whether the current panic suggests a shift from the United States to China and India.

A Lesson For All Americans From the Tampa Bay Rays

October 22, 2008

Tampa Bay RaysIn these tough, and soon to get tougher, economic times, we could all take a lesson from the Tampa Bay Rays baseball team. Against all the odds, they beat last year’s World Champion Boston Red Sox to win the American League Championship and advance to the World Series.

The Rays accomplished this while having the lowest team payroll in the American League. The third place Yankees team payroll is five times the size of the Rays, and the last place Detroit Tigers have a payroll three times the size of the Rays. There are no superstars on the Rays of the caliber of Alex Rodriguez or David Ortiz (whose combined annual salaries almost exceed the entire Rays roster), just rookies, like Evan Longoria and David Price.

How did they do it? Read more

How Safe is Your Halloween Candy?

October 17, 2008

Halloween is the single biggest holiday for candy sales, but how safe is that candy? Last year’s incidents of deadly poisons in Chinese food products, including milk used in chocolate candy production, raised legitimate concerns over the safety of our imported foods. Should we continue to be concerned?

In China, unacceptable levels of melamine (a deadly toxin used in plastics and fertilizers) was found in 2008 at several milk production facilities. Thousands of Chinese children were hospitalized or died as a result. Milk is a major component of most chocolate candies.

The two biggest chocolate sellers in America are Hershey’s and Mars. Hershey (Kisses, Reese’s) states that it never purchases milk products from China. Mars (Snickers, M&M’s) states that although it does use Chinese milk, it does not purchase any from the affected Chinese companies. In South Korea, however, the government has recalled Mars products manufactured for sale in that country. Cadbury, another manufacturer of chocolate, has had to recall several of its Chinese-made chocolates.

Hershey and Mars products sold in America are for the most part made in America, although not from 100% American ingredients. The disturbing fact remains, however, that in the ever increasing globalization of our food sources, the Food & Drug Administration inspects less than 1% of food shipments into this country. A recent GAO report found that our current system of regulations leaves the U.S. food chain very vulnerable to a terrorist attack. Currently, food inspections and safety functions are split among 15 different agencies.

The facts are there for everyone to see: 76 million people a year get sick from food-borne hazards, 325,000 are hospitalized, and 5000 die. Meanwhile, 9% of of the food inspector positions remain vacant due to decreased funding of employment dollars for these vital posts.

In 2009, there have been very few recalls by the FDA regarding chocolate or candy production in the United States. In June, the FDA recalled Nestle’s Toll House Cookie Dough based on outbreaks of E. coli infections in 30 states. Parents should reject any “home made” treats in their kid’s trick-or-treat bags from unknown sources, and certainly reject any home-made chocolate chip cookies this season.

The Canadian food safety inspection agency recalled Appleton Chocolates because the ingredient labels did not mention that the chocolates contain milk, thereby creating a potential safety concern for anyone with milk allergies. The British government recalled Asda Chocolate Delights, but this candy does not appear to be distributed in the United States.

Parents should follow some simple trick-or-treating safety tips for their children, such as accompanying small children, letting them do their house to house trips only in daylight hours, and inspecting any and all candies or treats given to their children.

We can never achieve 100% food safety, and American food is comparatively safer than that in much of the world. In an age, however, where the percentage of foods we eat are grown or manufactured overseas, or made here from imported products, we have to do a better job. Is there any greater priority out there?

Break out the Cuffs & Send Them to Jail

October 16, 2008

The prime players who ignited the mortgage meltdown have been conspicuously given a free pass, as taxpayers take the fall for them.  What happened to the high profile FBI probe of mortgage and securities fraud launched earlier this year?  With a federal bail-out in place for banks, suddenly the string of predatory lenders who took all the profits and left the American people holding the bag appear to be off the hook.  Check out this report from Newsweek’s Michael Hirsh:  Make them Pay – Why aren’t the big fish on the hook for the financial crisis?  Very enlightening.

Credit Card Consumers, Beware the Arbitration Clause

October 14, 2008

credit cards

There’s nothing worse than knowing you’ve been wronged and having no way to fight back.  We’ve all been there, but few of us realize just how many consumer rights are being taken away from us every day. One of the sneakiest and worst tactics out there today is the arbitration clause.

Binding Arbitration is effectively providing many companies, including most credit card companies, the ability to circumvent the legal system to the detriment of consumers.  The arbitration clause has established a way for those with deep pockets to sidetrack our justice system and violate an individual’s right to a jury trial.

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WaMu Execs Reckless Lending Exposed

October 14, 2008

Great story on ABC’s Nightline.  An interview with WaMu’s former Vice President of Risk Management exposes an atmosphere of greed and gluttony and shows how warnings to reign it in were ignored in favor of outrageous executive compensation.   Check it out:

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Tips To Protect Yourself From Telephone Fraud

October 13, 2008

One good indication of a scam is whether a caller asks for your bank account number or asks you to send money by wire transfer, such as Western Union or MoneyGram. Crooks prefer wire transfers because they are fast and the money can be picked up at many different locations.

Here are some tips to detect a scam and protect yourself:

  • Don’t fill in the blanks for the caller. If the caller says it’s your grandson, ask which one.
  • Confirm your real relative’s whereabouts. If your real grandson or granddaughter is at home, school or work, you know it’s a scam.
  • Don’t send money unless you have verified that your relative is in trouble.

“The likelihood of getting the money back once it is wired,” says Kristin Alexander a spokesman for the Washington Attorney General’s Office, “is slim to none.”

MoneyGram offers a comprehensive list of tips specific to common wire transfer schemes on its website.

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