Word: short-term
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Pawnshop companies make money by giving short-term loans to customers who offer jewelry, electronics, tools, musical instruments and other merchandise as collateral or by purchasing merchandise outright from customers at a steep discount. Loan terms are typically one to three months in length, with customers expected to cough up monthly storage and loan-servicing fees of 10% to 20% a month. If a customer fails to make a monthly payment, the pawnshop, following a grace period, can sell the item. (See the five big questions about retirement...
...bigger obstacle for pawnshop owners is legislation. The three public pawnshop companies also make so-called payday loans: short-term loans, typically seven to 30 days in length, that are not backed by merchandise. The loans typically carry interest rates of 10% to 20% for a two-week term, which translates into an annual percentage rate exceeding 300%. Industry experts say the APR is just theoretical since payday loans are meant to be very short term, lasting only until the borrower's next paycheck. Even so, a number of states, like Ohio, are imposing caps on the rates...
...problem is, long-term forecasting does not do much to keep people from putting themselves in harm's way. If it did, nobody would live in California or Mexico City or parts of Japan. What's needed is short-term forecasting on the order of weeks, days or hours. And this has stymied scientists again and again. (See the top 10 news stories...
...your thesis change as the recession evolved? The recession validated some of the arguments. One reason that the economy ran off the rails was because of these high-stakes rewards for short-term payoffs. When that went on for too long, it ended up having collateral consequences on the whole economy. (See 25 people for blame for the financial crisis...
Early on, the majority of people seemed to heap the most blame on barely regulated financial products, like credit-default swaps, which brought down AIG; mortgage brokers and their lax lending standards; and Wall Street bonus checks that rewarded short-term profits over prudent business decisions. Goldman Sachs, too, has come under intense scrutiny since the financial crisis, in part because of its ability to quickly turn around and seemingly profit from the mess...