Manifesting Money: Our Local Economy will Benefit!

Now here's an interesting topic - starting with Cash or Credit? Find out how much money we can keep in our local economy by making this one, important, choice!...and more!

Cash or Credit?
By Alan Joseph
That’s what the man behind the counter asked, “Would you like to pay with cash or credit?” I was buying $200 worth of parts for Vesta’s car; it would cost the same either way, what difference does it make how I pay? Well, now that I think about it, quite a bit. Pay with cash and $200 goes into the store’s register, pay with credit and the merchant gets $196 and $4 goes to the credit card company….a little flock of dollar bills flying out of Sonoma County. When I handed over $200 in cash, the guy acted like I was out of a science fiction film. Indeed, we have all become accustomed to paying with credit cards, but I think we should look closer at this financial system.

Your Money Leaving Home
When a merchant accepts a credit card, they typically pay a fee of 2 to 3 percent of the purchase amount. That doesn’t sound like a lot of money, but let’s do a little math. I would venture most of you spend at least $20 a week for gas, about $1,000 a year…….times 2% means $20 dollars in transaction fees a year. Just for fun, let’s say there are 100,000 drivers in Sonoma County sending $20 each in credit card fees every year. Folks, that is a flock of $2,000,000. And that is just the transaction fees…..no interest charges. Add groceries, clothes, utilities and all the other purchases that are paid with credit cards and you have darkened the sky with a constant migration of millions of dollars flying away to the financial institutions.

How Much Money?
How many dollars are we talking about? Well, it is estimated that the 4 major US credit companies processed 1.7 TRILLION DOLLARS in credit card charges in 2008. That is 17 followed by 11 zeroes…….$1,700,000,000,000 of charges times the typical 2% fee = $34 BILLION DOLLARS in credit card fees paid by businesses across the country and sent to Visa, Mastercard, Discover and American Express. $34,000,000,000 is an average of over $100 from every citizen of these here United States; every man, woman and child. I would wager that Sonoma County’s contribution to this financial exodus is well over $50,000,000 a year. And remember, that is only the merchant fee, the interest charges are another topic entirely.

From Cash to Plastic
It wasn’t always this way. 100 years ago the only credit available was from your local store, your local bank or your family and friends. The first credit card was introduced by Diner’s Club in 1950, followed by American Express and Bank of America. 60 years later and the credit card industry has inserted itself into the daily purchases of each and every one of us. Food, gas, clothes, travel, you can even pay your property taxes with a credit card. It is to the point that people think nothing of using a credit card to pay for their decaf soy latte, sending money flying every time they do.

Granted, the banking institutions have made credit cards convenient, even essential to modern living. Ever try to rent a car or make travel plans without a credit card? But we are supporting a system that has crept its way into every aspect of America’s spending habits adding billions of dollars in expenses for everything we buy. I have to admit, banks have done a marvelous job of getting us to go along with this ever increasing profit center. But taken as a whole, those financial and banking institutions have not been earning my trust as of late.

Your Money Staying Home
I don’t know about you, but I’m thinking this has gone in the wrong direction and we should be questioning our support of this system. So what are we to do? Well, here’s a suggestion: there are lots of purchases that can be made with cash. You remember cash don’t you? No, I am not talking about your debit card, I mean CASH. So here’s the deal: where ever possible buy from a local business, and drum roll please: PAY WITH CASH. Your merchant will thank you and those dollars will stay right here in our community. The next time you go to pay with plastic, ask yourself about that 2% of your purchase. Come on guys and gals, pay with cash and keep that money right here at home.

What could Sonoma County do with YOUR $50,000,000?

$$$$$$$$$$$$$$$$$$$$$$$$$
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The start-up opportunity in the
Great Recession

By Richard Koman
These days the economy is all that’s on anyone’s mind. I stopped at Starbuck’s this morning (I usually go to independent coffee shops like Flying Goat, and that less and less) and dropped into a conversation about how Starbucks is in the midst of closing several hundred stores and laying off 7,000 people.

I bought a copy of the New York Times to articles about the stimulus package debate, lessons from Japan’s attempt to build itself out of its long recession and a study that shows that men are disproportionately suffering layoffs. When I got to work, I called up Google News and saw the January unemployment numbers – 7.6 percent unemployment and a loss of 598,000 jobs – the biggest loss since the mega-recession of 1974.

I had barely settled in with my coffee, when one of the lawyers in the law suite I share stopped by to say, “Maybe between the four of us, there’s enough work for one lawyer.”

Make no mistake – hard times are here and they’re likely to get harder. “We are in the middle of a very severe, a violent, collapse in activity and it could go on for months,” one economist said. And one gets the feeling that we’ve been living beyond our means for quite some time – living on paper-money home equity and credit cards.

Meanwhile, banks are expecting eight million foreclosures and collection and bankruptcy lawyers couldn’t be busier. So what to make of this situation? I have a couple of ideas.

I think the most important result of the Great Recession will be an unprecedented number of new small business startups. As it becomes obvious that big businesses are scaling back for the long term, and people get sick of being at the mercy of someone else’s management skill, lots of people will simply start cottage industries, software startups and personal services businesses.

Many will fail, but your odds of succeeding and of being able to exit gracefully go up exponentially if you have your legal bases covered. You should think through proper formation, limited liability, making sure you understand whether workers are employees or independent contractors, and having legal counsel of any contracts and leases you sign. For example, I just met with a couple who are being sued for well over $100,000 because they signed a five-year commercial lease with no escape clause and no binding requirements on the landlord to ensure certain levels of traffic. Another client who did work as a third party with no written contract or clear understanding of the parties’ roles was never paid for about $10,000 worth of work. Yet another client loaned a house seller money to keep the home out of foreclosure with no written agreement and no security.

A modest legal bill now will forestall much bigger ones in the future -- with no guarantee of recovery. It’s the old line: Pay me now or pay me later.

For those with an entrepreneurial spirit and the stomach to keep going through the recession, a loss of a job could mean the opportunity for personal satisfaction and business success when the turnaround kicks in later this year or early 2010 (I hope). But investing in your future also means getting your house in order and avoiding nasty surprises down the road.

Richard Koman is an attorney providing transactional and litigation services for small businesses and consumers. A Forestville resident, his office is 1400 N. Dutton Ave., Suite 21, Santa Rosa. Call him at 707-544-5354 or email rk@richardkoman.com. He also blogs on legal issues at richardkoman.com

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“Even as household budgets shrink, many people are choosing to direct more of their spending to local businesses. This could be a key factor in getting the economy back on track. Study after study has concluded that locally owned businesses deliver more jobs and significantly greater economic benefits to their communities.” - Stacy Mitchell, senior researcher with Institute for Local Self-Reliance “Ninety-five percent of the retailers said that the fact that their business is locally owned matters to their customers. This invaluable data is proving the case that communities are rallying behind independent businesses — and a strong reminder that these entrepreneurs are the bedrock of a local living economy,” said Doug Hammond, executive director of the Business Alliance for Local Living Economies

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$49 million
Community First CU Pumps Money INTO our County Economy

What credit freeze? Community First Credit Union, a Sonoma County-based financial cooperative with 11,163 local Members, reported an increase in lending activity for 2008. It also paid $2.93 million in dividends to depositors for the year.

Real estate lending (first mortgages, seconds and home equity lines of credit) totaled $20.79 million in 2008, barely edging out vehicle loans, which totaled $19.09 million. Small business loans, a much smaller portion of the credit union’s lending mix, rose a whopping 101% in 2008, from $2.59 million to $5.21 million. Despite an 11.79% drop in vehicle loans, Community First Credit Union made more money available to Sonoma County residents in 2008 than in the prior year – $46,068,093 vs. $45,637,551, an increase of about 1% in a severely contracting economy.
Community First has a community charter, which means it can take deposits and make loans only in Sonoma and Mendocino counties. It ended the year with a record loan portfolio of $103.8 million, a 7.78% increase from 2007.

“We keep hearing that credit markets are frozen, but we think it still makes sense to reinvest in the local community where our Members have jobs, homes and businesses, and where their children attend schools,” said Todd Sheffield, CEO of Community First Credit Union.
In addition to loan production and portfolio, Community First posted gains in other areas in ‘08. Among them:
• checking accounts: +2.09%
• Membership: +1.55%
• online users: +10.47%
• eStatement users: +27.38%
• internet traffic: +46.9%

About Community First Credit Union
Community First, founded in 1961 as the Sonoma County School Employees Credit Union, has four offices in Sonoma County: Through its cooperative arrangement with other credit unions, Community First provides surcharge-free access to 25,500 ATMs and 3,260 branches nationally. Any resident, student or business in Sonoma County can be a Member. For more information about Community First Credit Union, go to: www.comfirstcu.org

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Balance the Budget with POT

By Vesta Copestakes
Taxing Marijuana sales is not a new idea, but it finally has a chance. Budget deficits are so severe that government entities are desperately looking for ways to bring in money. Think of how much money taxes on cigarettes and alcohol bring into the economy. Both of these substances are highly addictive, and cost billions of dollars a year to society. What they bring in taxes is offset by the cost of law enforcement and medical expenses.

Law enforcement would rather bust a pot smoker than a drunk. Most pot smokers are too lethargic to do much damage. Just like alcohol, a little bit gives a person a pleasant buzz, loosens the strings on their personalities and conversation, and everyone is happy. Add more of the substance and alcohol will make a person belligerent and even violent, where a pot smoker will tend to take a nap.

Beyond use as a pain–killer in Western movies, I’m not sure there’s a legitimate medical use for alcohol, although red wine has been touted for it’s blood cleansing. Beer has B vitamins – right? But marijuana – well, it lessens pain, makes people on cancer drugs feel comfortable enough to eat and tends to lighten depression for many. In CA, it’s a prescribed drug.

So now that our top down government has changed, we see the first light of reason. “It’s no longer federal policy to beat up on hippies,” is how one former Justice Department official stated. And it’s no longer just hippies and musicians who smoke pot.

With that in mind, we could start with “The Governator” and convince him to have a pleasant chat with the new Feds about this valuable money resource. Another side-benefit is that if it is no longer illegal, we won’t be spending law enforcement dollars on it, so that’s one savings. Another is that all those nasty illegal cartels, etc. won’t have this one substance as a money tree. The have plenty of other destructive drugs to make money on – and cost our society and lives in the process. Take one away from them!

So there it is – one solution that is right here waiting for us. What are WE waiting for? A little more time for government and society to shift to this reasonable path and we’re there.

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The Cost of Meth
Societal Cost of Meth Use Is Measured

By Erik Eckholm
In the first effort to calculate the national price of methamphetamine abuse, a new study said the addictive stimulant imposed costs of $23.4 billion in 2005. While the authors, from the RAND Corporation in Santa Monica, Calif., caution that many impacts were difficult to quantify, their study suggests that methamphetamine takes an economic toll nearly as great as heroin and possibly more.

Methamphetamine was named the primary cause of some 900 deaths in 2005, and the report estimates that premature mortality alone cost $4 billion. Its abuse has spread from Hawaii and rural areas of the West and South since the 1990s, slowly expanding to the Midwest and the East. In the process, it has wreaked havoc on addicts’ physical and mental health and on their families.

Federal surveys suggest that the share of Americans using the drug in a given year has stabilized, at about 1 percent of the population over age 12, which is far higher than the rate for heroin but half the rate for cocaine. About 400,000 Americans are believed to be addicted to methamphetamine, but a rising number are smoking it rather than taking it orally or snorting it. Smoking brings a faster, jolting high, quicker addiction and more ill effects.

The study is part of a project at RAND to evaluate the costs of drug addiction, financed by the National Institute on Drug Abuse and directed by Rosalie L. Pacula, co-director of the Drug Policy Research Center at RAND.

Extra financing for the report was provided by the Meth Project Foundation, a private group that seeks to prevent young people from using methamphetamine.

Dr. Wilson Compton, a division director at the National Institute on Drug Abuse, said the study’s major innovation was its effort to quantify the effects of addiction on the quality of life — how factors like poor health, anxiety and paranoia shrink the addict’s horizons and pleasure over time. Such estimates have been made for heart diseases and other major ones but not for illegal drugs, Dr. Compton said.

These intangibles proved to be the largest costs, with an estimated price of $12.6 billion. Other major costs included $4.2 billion in crime and criminal justice, $904 million for endangered children put into foster care as a result of parents’ use, $687 million in lost productivity, $545 million for drug treatment, $351 million for health care and $61 million for injuries and deaths at exploding meth labs and for cleaning up the toxic wastes they produce.

Because of the difficulty in pinpointing the role of methamphetamine in crime, medical care and other factors, the RAND researchers gave a range of estimates, saying the overall toll may be as low as $16.2 billion or as high as $48.3 billion.

Several potentially major costs were not factored in because they could not be measured. These include, for example, the burdens imposed on the families and friends of addicts, and the burdens of children who are not taken into the foster system.

The study is available on the Web at methproject.org.

“It’s destroying families; it’s destroying our schools; it’s destroying our budgets for corrections, social services, health care. We’re losing a generation of productive people. My God, at the rate we’re going, we’re going to have more people in jail than out of jail in 20 years.“ - Montana Gov. Brian Schweitzer