Whoa, have vs. have-not {money geek talk}

[tabs]

I've done my work here, well.

Nobody is going to riot until they lose their SUV and can't watch the Super Bowl.

There is one thing U boyz have missed. The Historical perspective. After WW2 the MC grew, any Schmo working in a Factory could be MC, mever before in the HISTORY F MAN HAD SO MANY PEOPLE HAD IT SO GOOD. This was unsustainable in light of the increasing economic competition the US faced from the 1960s onward. The US is probably returning to the more Historic norm. It would be interesting to compare the MC of 1910 to the MC of 2007.

[competentone]

Originally posted by tabs
There is one thing U boyz have missed. The Historical perspective. After WW2 the MC grew, any Schmo working in a Factory could be MC, [never] before in the HISTORY [OF] MAN HAD SO MANY PEOPLE HAD IT SO GOOD. This was unsustainable in light of the increasing economic competition the US faced from the 1960s onward. The US is probably returning to the more Historic norm. It would be interesting to compare the MC of 1910 to the MC of 2007.

The implications of your comments is complete BS. You are implying that there is some "limit" on everyone being in the middle class.

There is nothing limiting everyone from being extremely wealthy, much less living at a middle class status.

People are poor because they are not productive (or in the case of mixed economies and socialism, because the government took their wealth or put up restrictions on their abilities to create wealth).

"Foreign competition" has no net negative effect on the wealth of the U.S. population -- in fact, the creation of wealth in other countries will primarily have a positive effect for productive people here. There is no damage done to you if other people are productive in this country or in other countries. One person does not produce "at the expense" of the person who does not produce! More productive people mean more trading partners, which means a bigger (world) economy which benefits everyone.

Competition may mean that one has to change the nature of work one is engaged in if the marketplace won't support the particular enterprises people build, but competition never "takes away" any wealth.

[fintstone]

Although my combined family income is much greater than most of the folks that work for me (about 80 people), all seem to spend a great deal more money day-to-day than members of my family do. They drive newer cars, have bigger TVs, fancy audio and video components, take more vacations to more exotic places, etc. They spend a lot on entertainment, movies, shows, sports events, etc. They eat out daily while I rarely do (I usually brownbag my lunch). They send their children to colleges where they have to pay out-of-state tuition and room-and-board while my child attends a local school on full scholarship. They also provide their children an amazing amount of expensive toys (electronic gear such as x-box, Ipods, etc), clothes, and cash. Many of them have little or no savings or investments and could not pay the rent if they missed one pay check. Almost all that are home owners have refinanced their home for spending cash multiple times and have no equity or are actually upside down now. The ones that are civil service have the opportunity to contribute to a 401k where the first 5% of their salary that they contribute each year is matched with free money from their employer (the gvt) but do no contribute at all. Although I do not make all that much, I have saved a bit and have investments to the point where the fellow that recently did the investigation for the renewal of my security clearance was concerned about why I had so many assets/money. I second the point that someone made earlier about freedom providing the opportunity to screw up as well as succeed. A good illustration for me is a rental house that I own near Denver. I rented it out to a family when I was reassigned to another city in the early 80's. Initially the mortgage was slightly higher than the rent, but I was able to write the small difference off on my taxes. When interest rates dropped, I refinanced and the house rent became a net positive. At this point, the renters could have purchased exactly the same house in the same neighborhood for less than their payments to me, but did not do so. They are still renting the house today, but after all this time, it is paid off. They could be living in a fully paid-for home, but instead, own nothing. To add insult to injury, I am thinking about selling the home now...and would be willing to give them first shot at buying the home for $175,000 that was worth about $60,000 when they moved in, that they have paid off for me. They are nearing retirement age with really only Social Security as their retirement plan...and don't even own a house. Life is tough...but it is tougher when you are stupid.

[HardDrive]

Originally posted by Bill Verburg
As I said, analogies are never exact, but anyhow, if you think that there is no real hunger and poverty and need in this country, you are a part of the problem.

Not saying that. There is certainly real hunger, and real poverty in this country. There are people in desperate situations.

But folks who have jobs, who have stupidly gotten themselves into debt, are in a prison of their own design. And that prison often includes some pretty nice toys to keep them distracted.

[on-ramp]

fintstone is right. too many people try to live above their means. and this is a formula for financial disaster.

if you can't afford that 2K HDTV, dont charge your CC and don't buy it , simple as that.

[Moneyguy1]

How does one change that mindset?

Look at the ads. Target's little ditty: "Gotta gotta have it, gotta have it right now...."

An entire generation brought up on instant gratification. Not necessarily stupid, but brainwashed.

Shoudn't there ba a mandated course in Highschool on some elementary money management? There used to be. It was called "Home Economics".

[fintstone]

The only way to fix the problem is to let them pay for their mistakes. That will teach them their lesson and the folks that stupidly loan them money...not to.

[Seahawk]

Originally posted by Bill Verburg
Not onerous, but certainly designed to benifit the haves at the expense of the almost haves

That sentence represents one of my favorite shibboleth's:

To wit, the tax code favors the rich. Tax Rates

% of Taxes Paid, by Bracket

Of course you are now going to say that I have tax advantages (itemizing, business deductions, mortgage breaks, etc.). What I will say is that I worked for it.

[Dixie]

the US savings rate was minus 1%....

Y'all are missing one HUGE nuance.

The US saving rate, as measured, does not include money invested in the market. The purchase of stocks, mutual funds, EFTs, and such are NOT considered to be savings. They’re purchases of assets.

So if you have $200,000 in stocks and $50 in your savings, you're probably one of those non-savers.

[Rondinone]

Originally posted by competentone
The implications of your comments is complete BS. You are implying that there is some "limit" on everyone being in the middle class.

There is nothing limiting everyone from being extremely wealthy, much less living at a middle class status.

People are poor because they are not productive (or in the case of mixed economies and socialism, because the government took their wealth or put up restrictions on their abilities to create wealth).

"Foreign competition" has no net negative effect on the wealth of the U.S. population -- in fact, the creation of wealth in other countries will primarily have a positive effect for productive people here. There is no damage done to you if other people are productive in this country or in other countries. One person does not produce "at the expense" of the person who does not produce! More productive people mean more trading partners, which means a bigger (world) economy which benefits everyone.

Competition may mean that one has to change the nature of work one is engaged in if the marketplace won't support the particular enterprises people build, but competition never "takes away" any wealth.

No, competition doesn't take wealth away. But it does divide the aggregate demand by one more party.

What about limits to natural resources and natural limits to demand? There is, at any particular time, a limit imposed by nature to all human activities. We can't all build cars if there isn't enough steel to support it. We can't farm without water and land, etc.

[competentone]

Originally posted by Rondinone
No, competition doesn't take wealth away. But it does divide the aggregate demand by one more party.

What about limits to natural resources and natural limits to demand? There is, at any particular time, a limit imposed by nature to all human activities. We can't all build cars if there isn't enough steel to support it. We can't farm without water and land, etc.

Competition does nothing for demand -- it's effect in the economy is on the supply side -- it helps create more goods at lower prices.

For most practical purposes, we are not even a fraction of a percent near depleting resources that would limit all citizens from living like "wealthy" people, if they were as productive as most wealthy people are.

There would be some limits obviously, for example, not everyone would be able to live on a 100,000 acre ranch -- but a free marketplace is very efficient in effecting the distribution of resources limited by nature.

[Dixie]

...sigh
In case you missed it.

Y'all are missing one HUGE nuance.

The US saving rate, as measured, does not include money invested in the market. The purchase of stocks, mutual funds, EFTs, and such are NOT considered to be savings. They’re purchases of assets.

So if you have $200,000 in stocks and $50 in your savings, you're probably one of those non-savers.

[slakjaw]

Tabs,

What class are you in?

[turbo6bar]

Originally posted by Capt. Carrera
Y'all are missing one HUGE nuance.

The US saving rate, as measured, does not include money invested in the market. The purchase of stocks, mutual funds, EFTs, and such are NOT considered to be savings. They’re purchases of assets.

So if you have $200,000 in stocks and $50 in your savings, you're probably one of those non-savers.

I don't think this addresses the issue with the bottom half having such a poor asset to debt ratio, though. I'm sure YOU and all other Pelicanites are doing fine, but the bottom half of households don't seem to be doing all too great.

Something stinks, and it ain't my feet.

[Bill Verburg]

Originally posted by Seahawk
That sentence represents one of my favorite shibboleth's:

To wit, the tax code favors the rich. Tax Rates

% of Taxes Paid, by Bracket

Of course you are now going to say that I have tax advantages (itemizing, business deductions, mortgage breaks, etc.). What I will say is that I worked for it.

Figures don't lie, but liars sure can figure and just show the #s that they want. We all work hard for our $, some harder than others and there ain't no free lunch anywhere. But the folks at the very top sure have made it easier for themselves by controlling the legislative process.

the tax burden is the collective result of all of the taxes and fees that one is subject to, when all taxes as a % of gross income are totaled the curves show an increasing % into the low $100k range then a decrease beyond that.

As to the second reference if the top 1% pays 32% of the total federal income tax but owns 50% of the assets the effective tax rate is less than that on the rest of the population

Don't forget to consider that it's the first $30k or so of income that is most significant to food, shelter ie the real necessities of life.

[Big Ed]

Originally posted by slakjaw
Tabs,

What class are you in?

Tabs is like school on Saturday....no class.

[MRM]

Capt. is correct. The people who wrote that article, and the others like them, are stupid at best and are deliberate alarmists to get attention at worst.

I won't argue that the US should save more (on average Americans should save more) but we do not have a negative savings rate. The things that are not included in savings are precisely the places where any American with an ounce of sense puts his money these days: Investments, 401(k)s, paying down the mortgage, etc. Take out thosethings and what is your savings rate?

[turbo6bar]

Alarmist, perhaps, but everyone has an agenda, correct?

What do you say of the statistics about assets and debt of the top 1% vs. bottom 50%? If households really are socking away money in assets, why the disparity? Also, absolute numbers shouldn't be the focus. Could we simply review the trend? Have there been changes in society that make the trend less accurate?

I think the truth is somewhere in between. Americans do not save like their counterparts in Europe and Asia, but Americans aren't one step away from the poorhouse.

[Nathans_Dad]

I fail to see how an individual's decision to not save money and run up credit card bills is a national concern...

[turbo6bar]

I did some digging at the BEA (Bureau of Economic Analysis) web site.

From the FAQ section:

Personal saving is the amount left over from disposable personal income after expenditures on personal consumption, interest, and net current transfer payments. This amount is available to acquire financial assets such as bank deposits and mutual funds, to use towards acquiring a home, or to reduce liabilities by repaying principle on mortgages or consumer debt.

The BEA does not use capital gains in their income calculations, so that helps Americans.

Note above that principle paydown on mortgages is not considered an expenditure. It is paid with personal savings.

BEA compared their numbers against numbers generated by the Federal Reserve. The Federal Reserves Flow of Funds gives us insight into where money is flowing.

http://www.bea.gov/bea/dn/nipaweb/Nipa-Frb.asp



The yellow line represents personal savings via BEA, and is the negative personal savings rate referenced by the media. The red line represents personal savings as calculated by the Federal Reserve. Notice the negative rate in 2000.

The blue and green dots represent acquisition of assets, while the purple dots represent taking on new debt and new home mortgages. Acquisition of assets is up substatially, but it's offset by a massive jump in mortgage debt.

Simplified conclusion: Americans are fine if housing prices continue to climb and asset prices go up. Americans aren't fine if housing deteriorates further or financial assets perform poorly. Duh!