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You have to go all the way back to 1991 to recall an inflation spike as high as the one we’re going through right now. Last Wednesday, the U.S. Labor Department confirmed what so many Americans already know: inflation is up 5% over the same period in 2007. Leading the way are gasoline and food prices which are currently at record levels.

This news comes on top of other findings which reveals that wages are not keeping up, increasing on average 3.4% over the past twelve months. Already hit hard by higher gas and food prices, many consumers are also paying more for their mortgages and finding that many other consumer products are also on the rise due to higher shipping costs.

Energy prices for June 2008 were up 6.6%, fueled by a 10.1% increase in gasoline. All throughout the month of June pump prices climbed on a daily basis sending shockwaves through the auto industry and dropping consumer confidence.

Federal Reserve Bank Chairman Ben Bernanke weighed in on the news by offering a lengthy report to the US Congress in conjunction with the Fed’s semi-annual monetary policy report. Highlights of his speech included the following statement:

“The U.S. economy and financial system have confronted some significant challenges thus far in 2008. The contraction in housing activity that began in 2006 and the associated deterioration in mortgage markets that became evident last year have led to sizable losses at financial institutions and a sharp tightening in overall credit conditions. The effects of the housing contraction and of the financial headwinds on spending and economic activity have been compounded by rapid increases in the prices of energy and other commodities, which have sapped household purchasing power even as they have boosted inflation. Against this backdrop, economic activity has advanced at a sluggish pace during the first half of this year, while inflation has remained elevated,” said Bernanke.

Though it is within Bernanke’s authority to drop interest rates in a bid to stimulate the economy, the Fed chairman hasn’t indicated that additional decreases are coming. Typically, when inflation creeps up, the Fed responds by raising rates. However, with the housing and consumer lending crunch looming large, Bernanke will likely not increase rates either.

Finally, although the Consumer Price Index (CPI) rose just 0.3% during the same period, annualized it is a 3.6% increase jump, much higher than the Fed’s preferred 1-2% annual increase. The CPI, however, does not include food and energy prices, the two biggest driving points in this lackluster economy.

(Source: CNNMoney.com)

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The failure of IndyMac Bank earlier this month has left some depositors worried. Though the bank’s demise was unusual — they were overly committed to funding bad home loans — they aren’t alone. Scores more financial institutions may also be vulnerable, possibly bringing about a rash of additional failures at a pace not seen since the 1980s.

For most depositors they have little to be worried about. When a bank fails, most funds are protected and access to their monies is almost immediate as the federal government steps in and takes over the failed financial institution. Soon thereafter, the closed bank is sold off with deposits transferred to a new institution.

Not every customer of IndyMac Bank will recoup their finds, offering a stark warning to everyone else who has money invested. Specifically, some funds are vulnerable, particularly if:

Accounts have more than $100,000 in them. The Federal Deposit Insurance Corp. (FDIC) limits the amount of money they will insure to $100K per individual accounts or $200K if joint accounts. The FDIC will also cover separate individual retirement accounts for up to $250K and certain revocable trust accounts for up to $100K each. A visit to the FDIC’s consumer page gives detailed information on deposit insurance, limitations, pay outs, etc.

Accounts are not titled correctly. Having “Totten Trust” or “Payable On Death” accounts where the monies will go to some other party upon your death are only covered if they are specifically titled that way. For example, if Bill has a $300,000 account for his three children the account needs to read, “Bill Smith POD to his 3 children.” Each child would be equal beneficiaries.

Some consumers have more money in their banks than they realize with accumulating interest pushing accounts about $100K. If  your balance is, let’s say, $103,114 and your bank fails. You’ll get $100,000 back but lost $3114. You still might receive a portion of the funds you lost back after the bank’s assets have been sold.

Although the FDIC knows in advance which banks are in trouble, they do not inform the public about problems, choosing to work behind the scenes instead. Fed worries of causing a “bank run” is the chief reason why you’re not told until after a bank failure has taken place, necessitating that you remain vigilant when it comes to managing your finances.

(Source: www.fdic.gov)

Additional Consumer Information

FTC Reveals Current Sweepstakes Scams

Keep Those Savings Up!

Smart Money Tips

What Are Creditors Saying About You?

Con artists are always at work, coming up with ways to get people to part with their money. Some scams are small, involving the selling of a product that doesn’t live up to its reputation while others involve the pilfering of entire life savings.

The Federal Trade Commission (FTC)

The Federal Trade Commission (FTC) is an independent arm of the United States federal government tasked with providing consumer protection for U.S. citizens. The FTC monitors allegations of fraudulent, deceptive, and unfair business practices in the marketplace, providing information to consumers to help them spot, stop, and avoid them.

One scam that has received a lot of attention lately are sweepstakes prizes designed to lure people to send money in to claim a prize that they supposedly won. The money is a fee to cover service charges and taxes, but no prize is ever delivered.

Old Scam, New Twist

The latest twist on this particular scam is that the thieves are using names of various government agencies and legitimate phone numbers which mask where they’re calling from. In the May 2008 FTC report outlining the scam, the commission says that the callers will identify themselves as being representatives of “the national consumer protection agency” or the bogus National Sweepstakes Bureau, with even the boldest crooks asserting that they represent the FTC itself!

Internet technology allows scammers to make it look as if they are calling from a government phone or from your own area code, both of which can catch unsuspecting people off guard. People who fall for this ruse will wire money via Western Union which ends up in the hands of a scammer who is usually based overseas.

The FTC offers some tips on how consumer can prevent being victimized including:

• Don’t pay to collect sweepstakes winnings. If you have to pay to collect your winnings, you haven’t won anything. Legitimate sweepstakes don’t require you to pay “insurance,” “taxes” or “shipping and handling charges” to collect your prize.

• Hold on to your money. Scammers pressure people to wire money through commercial money transfer companies like Western Union because wiring money is the same as sending cash. If you discover you’ve been scammed, the money’s gone, and there’s very little chance of recovery. Likewise, resist any push to send a check or money order by overnight delivery or courier. Con artists recommend these services so they can get to your money before you realize you’ve been cheated.

• Look-alikes aren’t the real thing. It’s illegal for any promoter to lie about an affiliation with — or an endorsement by — a government agency or any other well-known organization. Disreputable companies sometimes use a variation of an official or nationally recognized name to try to confuse you and give you confidence in their offers. Insurance companies, including Lloyd’s, do not insure delivery of sweepstakes winnings.

• Phone numbers can deceive. Some con artists use Internet technology to call you. It allows them to disguise their area code: although it may look like they’re calling from Washington, DC or your local area, they could be calling from anywhere in the world.

• Take control of the calls you receive. If you want to reduce the number of telemarketing calls you receive, place your telephone number on the National Do Not Call Registry. To register online, visit www.donotcall.gov. To register by phone, call 1-888-382-1222 (TTY: 1-866-290-4236) from the phone number you wish to register.

• File a complaint with the FTC. If your number has been on the National Do Not Call registry for at least 31 days, and a telemarketer calls, file a complaint with the FTC. To file a complaint online, visit www.donotcall.gov. To file a complaint by phone, call 1-888-382-1222 (TTY: 1-866-290-4236). If you receive a call from someone claiming to be a representative of the government trying to arrange for you to collect supposed sweepstakes winnings, file a complaint at ftc.gov. It’s most helpful to enforcement officials if your complaints include the date and time of the call and the name or phone number of the organization that called you. Although scammers may call using a telephone number that disguises their location, law enforcers may be able to track that number to identify the caller.

To file a complaint or to get free information on consumer issues, visit ftc.gov or call toll-free, 1-877-FTC-HELP (1-877-382-4357); TTY: 1-866-653-4261. The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure online database available to hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.

(Source: Federal Trade Commission)

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