You are a free subscriber to Me and the Money Printer. To upgrade to paid and receive the daily Capital Wave Report - which features our Red-Green market signals, subscribe here. Credit Card Theater on the Potomac...This time, the credit card companies graciously give you back a whopping 0.1% on your charges... Here's our final preview of Postcards before we return on Saturday.
We got the squeeze that I talked about last night… over at Capital Wave Report. But today is really about the new project in my life. As you know… Postcards will return this weekend. It’s been a long time coming… here’s another preview of that letter…
Dear Fellow Expat: I was at a bar last week. Nothing fancy. Just a place to grab a drink and watch the game. The guy next to me had been there a while. Three beers, some wings, decent tip. His tab came to maybe $45. He handed over his credit card. The bartender ran it, then slid the receipt across the bar. “There’s a 3% credit card fee?” the guy asked, pointing to the line item. “Sorry,” the bartender said… with no additional explanation. The customer looked at the receipt. Looked at the bartender. Shook his head. Forty-five bucks became forty-seven. For what? Moving numbers around a computer… The customer signed the receipt and left. The bartender cleared the bar and moved on to the next tab. Two minutes. One transaction. One more person learning that the system extracts its cut whether you like it or not. That’s the story behind this week’s headlines about the “historic” swipe fee settlement. The skinny? How about 20 years of political theater… billions in legal costs… And the result? A rounding error disguised as reform. The Ways They TakeHear ye… Hear ye… America is saved! Visa and Mastercard announced they’ll reduce interchange fees by… checks notes… 0.1 percentage points for five years. Seriously? 0.1%? Are you f… Hey, the networks will spin this as meaningful reform. Politicians will claim victory. And the extraction machine will keep humming. So, instead of paying 2.35% on every credit card transaction, merchants will pay 2.25%. For five years, and then go back to whatever the networks want to charge. That bar tab? Instead of a $1.58 fee, it becomes a $1.53 fee. A nickel saved. For five years. Oh my goodness, the savings! Last year, U.S. merchants paid $111 billion in swipe fees to these two networks. Total swipe fees across all cards hit $187 billion. Visa and Mastercard networks control over 80% of the market and set the rules everyone else has to follow. This settlement doesn’t change the structure. It doesn’t create competition. It doesn’t break up the duopoly. It just gives the tollbooth collectors a PR victory while locking in their dominance for another generation. But it gets worse… What’s Beneath the NoiseWant to know why nothing ever changes in the 20-year “war” on swipe fees? Follow the campaign money. Since 2021, Democratic Senator Dick Durbin has collected gobs of donations from the retailers pushing his legislation. His co-sponsor, Republican Roger Marshall, raised significant funds from retail and grocery interests. Home Depot wrote checks to these lawmakers. The National Restaurant Association kicked in… Walmart added some cash. Target contributed a lot too... The National Association of Convenience Stores, Kroger, Sheetz, Wawa, Publix, 7-Eleven, Love’s, RaceTrac. They’re all funding the “reform” movement. So when Durbin stands up and declares this settlement “falls short,” ask yourself… Is he fighting for consumers, or performing for his donors? This movement is now so old that I was writing advocacy letters on this in 2010 while I was in graduate school. I was 29 years old… Today, I look 5,500 days older… And after 20 years of Durbin’s crusade, the networks still control everything. They still set the rates. They still dictate the terms. Hell, Nancy Pelosi – who oversaw the post-2008 laws tied to these networks – took part in Visa’s IPO. If this were ever going to be fixed, it would have happened by now. How Power Really WorksThe genius isn’t that swipe fees are hidden. It’s that they’ve been normalized. Every business owner knows they pay the fees. Every consumer knows prices are higher because of them. Everyone understands the game. But somehow, nobody can change it. Visa and Mastercard control the payment rails. Once you control infrastructure, you don’t need to win political arguments. You just need to maintain the appearance of negotiation. The networks don’t jack up rates overnight. They let inflation and spending growth do the work. When that bar tab goes from $40 to $50, the fee goes from $0.94 to $1.18 automatically. That’s just the work of the Fed benefiting the networks… There was no rate increase needed. They fund lobbying on all sides. They pay banks to issue cards. They pay retailers to accept them. They pay consumers through rewards programs. Everyone gets something. Everyone feels like they’re winning. And the tollbooth keeps collecting. Durbin and Marshall’s political theater, meanwhile, serves a different purpose… It channels frustration into harmless reform instead of actual competition. The Everyday HustleThere are plenty of coffee shops out there paying tens of thousands of dollars a year just in card processing fees. They could hire new employees… but it will go to Visa and Mastercard. Businesses can’t opt out… and the people in Washington want a more cashless society… Cash is a very small part of the restaurant or retail business. I recently had lunch at a restaurant where the payment systems were temporarily down, and no customer in the entire place had cash. It was awkward for a while… When the credit card fees add up… what do restaurants do instead? They either try to build the fee into the price… or they have to put that fee right on the receipt… Multiply that across every small business. Every restaurant adding “service fees.” Every gas station with different cash and credit prices. Every retailer quietly raising prices to cover processing costs. The family buying groceries doesn’t see “Visa tax” on their receipt. They just see higher prices. They blame inflation. Corporate greed. Supply chains. Everything except the 2.35% toll collected on every transaction. The Real EconomyThis $187 billion a year in fees means small businesses operate with permanently higher costs. But the worst part is how it kills innovation. When you control the payment rails, you don’t need to compete on efficiency. You just maintain your position. Instead of building better systems, the networks spend resources maintaining barriers to entry. They lobby against crypto adoption. They fight central bank digital currencies. They create compliance requirements that smaller competitors can’t meet. They sign exclusive deals with major retailers and banks. The result is a payment system that works beautifully for the networks and tolerably for everyone else. Not great. Not terrible. Just permanent. After 20 years of political pressure, massive lawsuits, and congressional investigations, the best reform we can achieve is a 0.1% temporary discount. That tells you who really holds power. The Back PageDick Durbin has been fighting swipe fees since 2005. Two decades. Hearings. Legislation. Speeches. Donations from grateful retailers. An entire political brand built around fighting the credit card companies. And here we are. Same networks. Same market share. Same model. Just slightly lower fees for a few years. If you wanted to design a system to channel reform energy into harmless theater, you couldn’t do better. Give people a champion. Give them hearings. Give them legislation that almost passes. Give them settlements that almost matter. Keep the fight going forever, but never actually fight the infrastructure. Real reform would look like breaking up the networks, mandating open standards, allowing actual competition, and treating payment rails like public utilities. None of that is on the table. The entire 20-year debate has been about fee levels, not market structure. The system allows fights over the toll's size. It does not allow fights over whether the toll booth should exist. The Sovereign MoveYou can’t dismantle a captured system from the inside. But you can reduce your exposure. This week’s sovereign move… Pick three recurring payments currently on your credit card and switch them to ACH or direct bank transfer. Your utilities. Insurance. A subscription service if you can… Most can be paid directly from your bank account, bypassing the networks entirely. Every credit card transaction gives Visa or Mastercard a cut. Every ACH transfer gives them nothing. The networks count on convenience and habit. They count on people not wanting to change payment methods. They count on the friction of switching. But sovereignty grows through small defections. One payment at a time. One step away from systems designed to extract value from your every move. The toll booth will still be there tomorrow. But you don’t have to feed it as often. We return formally on Saturday on the edge… If you liked what you read… sign up for free right here… Stay positive, Garrett Baldwin About Me and the Money Printer Me and the Money Printer is a daily publication covering the financial markets through three critical equations. We track liquidity (money in the financial system), momentum (where money is moving in the system), and insider buying (where Smart Money at companies is moving their money). Combining these elements with a deep understanding of central banking and how the global system works has allowed us to navigate financial cycles and boost our probability of success as investors and traders. This insight is based on roughly 17 years of intensive academic work at four universities, extensive collaboration with market experts, and the joy of trial and error in research. You can take a free look at our worldview and thesis right here. Disclaimer Nothing in this email should be considered personalized financial advice. While we may answer your general customer questions, we are not licensed under securities laws to guide your investment situation. Do not consider any communication between you and Florida Republic employees as financial advice. The communication in this letter is for information and educational purposes unless otherwise strictly worded as a recommendation. Model portfolios are tracked to showcase a variety of academic, fundamental, and technical tools, and insight is provided to help readers gain knowledge and experience. Readers should not trade if they cannot handle a loss and should not trade more than they can afford to lose. There are large amounts of risk in the equity markets. Consider consulting with a professional before making decisions with your money.
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