The Lifestyle They Thought They’d Left Behind
Readers suggested a topic on expectations and the housing bubble. “How can most non-rich Americans reasonably expect to live in the future? Looking at the big costs, food, housing, transportation, education for the young, health care in old age, years in retirement. If it is less than in the past, what is the reason?”
A reply, “Demographics? More old consumers, less young producers? Unfunded promises? More promised money than actual money? A debt driven economy that can no longer acquire debt? A consumer-based economy powered by consumers who are broke?”
Another added, “Is there an implied guarantee in this country that we should live as well or better than previous generations?”
One said, “I like that suggestion and I hope you don’t mind if I expand on it and ask for a discussion on when and how the portion of the 50% that have jumped a few income niches in living standards through the use of credit will realize they’ve got to start sloughing off their material items and assume the lifestyle they thought they’d left behind.”
“It’s occurred to me that the bubble has lasted long enough in duration that some of the younger set (young 30s and below) may not realize that a lot of what they think is normal is smoke and mirrors and so they’re not acknowledging how far back the system is going to correct, not to mention any overshoot.”
“But it’s really not just about that age group. I remember watching my college friends (’83) buying bigger homes, 1 year after graduation, than what their parents had built up to after 20-25 years together. Right off the bat they put all the bells and whistles in them. It kind of did work out for us 80s graduates who if they were smart stayed in one home and are having mortgage burning parties now. Well I’ll be the first to admit while they were paying down their mortgae I was dropping $50-$100 a night in the Boston dinner/bar scene. Now their kids are out of school a year and buying homes even when single. Not sure it will work out so well for them but I wouldn’t be surprised to hear their parents are explaining everything works out just fine if you take the long view.”
“I believe a lot of people who think they’re ‘rich’ will find they just rode the credit bubble up. Some were smart enough to know it was a limited gig and exited appropriately. Many grew their wealth cautiously and it is protected probably as well as anyone can through hedges. But others were caught unprepared and are too late to unload assets.”
“I’m watching this group like a hawk. Yeah, their condescension when we didn’t follow them into the maelstrom angered us. Some even accused us to our face of being jealous losers. I’d love to say to them: You had a beautiful ride but may lose what to you is ‘everything.’ We had stability. Maybe we each got exactly what we wanted.”
Another had this, “How do 2 people survive in what has now become a 3 income household? As a necessity, not for procreation. There are child-labor laws, you know.”
A reply, “Funny you would mention that; I’ve long called the HELOC trend the ‘third income,’ to try to get people to understand how out of control American finances had become. There is no fourth income, so all that expansion had to STOP. And once it stopped, then it had to crash… which the government is desperately and constantly trying to delay and cover up. This must all end, and badly.”
“Food, transportation: these are highly dependent on the cost of energy. So they will be markedly higher.”
“Housing: will continue to fall and then stagnate for a generation. Sadly, too many will have not foreseen this, due to ideology, and will not be able to afford to buy with cash despite the cheapness.”
“Education for the young: this will continue to climb since it’s essentially a middle-class drug. But eventually (maybe 15 years from now) more and more people will reject it as an unnecessary cost. Lots of Americans now are hit with what’s effectively double taxation, since they pay their local property taxes for lousy local schools, while they send their kids to private schools on their own dime.”
“Health care in old age, years in retirement: we had it too good, and the time is here to pay the price. I just had a friend die at age 87. He expired from lack of nutrition in his own home, as he wished and as his family wished. There was no real possibility to keep extending his life at the cost of losing the family home. More and more people will have to make this choice, since economically there won’t be other choices.”
From Bridge Michigan. “Thousands of Michigan home and business owners have been the recipients of hundreds of millions of dollars in property tax cuts in recent years — a savings that few seem to recognize. The impact of that tax cut has been minimized for a variety of reasons. For many taxpayers, the cut in their property tax bills and declining incomes have ‘canceled each other out,’ said Craig Thiel, director of state affairs at the Citizens Research Council of Michigan.”
“Michael LaFaive, director of fiscal policy at the Mackinac Center for Public Policy, a free market think tank, agreed. ‘It only comes because they’re poorer,’ he said. ‘That’s not a tax cut to me. That’s just a recognition that people aren’t as wealthy as they once were.’”
“Walt Sorg, a retired talk radio host and Democratic candidate for a state House seat in Lansing, said the value of his Lansing condo, which he bought in 2005, has fallen about 50 percent. His tax bill is about $1,000 a year less than when he purchased it, even with the passage of several tax hikes during that time. Most of his savings are being spent to reduce debt, he said. ‘Everybody likes a tax cut,’ Sorg said. ‘But when I dial 911, I want someone to respond. I want fire and police services and good roads. None of the cost of providing those things has gone down 50 percent.’”
“Michigan State University economist Charles Ballard said he thinks most of those not spending their tax cuts on necessities are either saving it or using it to pay down debt. ‘A large number of people are over their heads in debt,’ he said. ‘They’re funneling some of it into paying student loans or paying off credit cards. It means they’re not putting that money into buying stuff.’”
“Mike Maziasz, a General Motors retiree living in Troy, said he thinks lower property values are a bad thing, particularly for retirees who want to move to a warmer climate, but can’t sell their homes without taking big losses. ‘Is it a little easier to write the (property tax) check? Yes,’ he said. ‘Do I like having a reduction in my property value? No.’”
I plead GUILTY !!! Yes I have always thought that atleast I should have a “Better” car every few years, but walking in nice fowl weather gear years ago was only possible by the WEALTHY, let alone to be able to afford the Street Cars. Spoiled, spoiled, spoiled I & others have become. It has been just some blind fortune that I have never dipped into the real estate swamp, so that today I am a very, very, happy renter at age 60 and NEVER having owned a house. {Enough $ in the bank to bury me so my family will not complain} and a truly grateful heart to God to hearing me those many nights I looked at the ceiling and ask Him to help me make one more day.
Merry Christmas & a Happy Holiday [if there are other ones you enjoy that have been tagged on Christmas, but don't get me started on that]
I had a neighbor once who drew 3 pensions (non-union), all of which he had earned. His one quirk was he would trade in his Cadillac for a new one every 3 months. True story.
Geez, that is a fairly expensive quirk, given what happens to car values the day they leave the lot. I suppose he had a deal in which his fresh returns still could be sold as dealer demonstrators. Still…
This was a long time ago, and IIRC it was costing him $1000 per trade in. He had flown supplies over the hump in WW2, had been a judge and something else, so he he had $3000/month coming in he didn’t even need. He was a sensible guy, but this was his one eccentricity.
Sounds like a senator…
“It has been just some blind fortune that I have never dipped into the real estate swamp, so that today I am a very, very, happy renter at age 60 and NEVER having owned a house.”
I just tried the NY Times rent-versus-own calculator based on recent experience (at least where I live) of 0% annual rent increases coupled with 4% annual home price declines, 1% property tax rate, 2.75% mortgage interest rate, current rent we pay, Zillow estimate of the market value of the home we rent, and 0% down payment (to properly reflect the opportunity cost of sinking hard-earned cash in a housing market money pit).
Using assumptions that reflect current housing market conditions, here is the conferred advice:
“Buying is never better than renting after 30 years.
If you stay in your home for 6 years, renting is better.
It will cost you $104,316 less than buying, an average savings of
$17,386 each year.”
Is It Better to Buy or Rent?
Whether renting is better than buying depends on many factors, particularly how fast prices and rents rise and how long you stay in your home. Compare the costs of buying and renting a home in the calculator below. Click the advanced settings button to change inputs such as your rate of return on investments, condo/common fees and your tax bracket.
Buying seems to never be less expensive than renting In places along the California beaches. So why do people bother buying there? I remember my assigned covered parking space where I rented was two spaces from a cool looking Jaguar XF. Knowing that my rent price was far below the pITI and maintenance of the 50 year old houses in the neighborhood, I did not think the Jaguar owner was dumb to put money in his car and rent for $1300 per month.
“of 0% annual rent increases”
Well that’s your problem right there.
It’s only a problem if (1) you are the owner and (2) inflation is positive, in which case real rent increases are negative.
It’s a problem for the renter if the income does not keep up with rent increases, inflation or not. It’s also a problem for the renter if the rent and buy howmuchamonth are the same. Rent goes up, howmuchamonth does not.
I believe, over time, if you add at least one extra payment to principal every year, you’ll end up a winner as a buyer.
I did this on a 30-year loan plus a little more when I got bonuses.
Paid off a 30-year loan in 17 years.
Right now, buying seems cheaper than renting in my (at least) 5-college town.
Wife and I have been marveling at the bargains we see in great neighborhoods, but we have to remember the lower value of our finally-paid-off house.
Cost of college increasing so much that rental demand may drop.
It’s all connected.
“I’m watching this group like a hawk. Yeah, their condescension when we didn’t follow them into the maelstrom angered us. Some even accused us to our face of being jealous losers. I’d love to say to them: You had a beautiful ride but may lose what to you is ‘everything.’ We had stability. Maybe we each got exactly what we wanted.
————————————————————————————-
I got busy when Carrie Ann posted this but I too have my radar on high sensitivity for the pseudo-rich aka “affluent”(always loved that word for the pseudo-rich).
My friend accountant told me a few Sundays ago that he’s now underwater on his McMansion(the real thing) on the golf course. Then stated “I had $400k in equity just 4 years ago.” You ought to see this place folks. 5500sq ft of Housing Bubble. It’s him, his wife and a 2 year old boy…. catching on yet? The floor ceiling windows had to be covered with $22k in drapes. Anyways, his wife slide the comment in that “we don’t need all this space”. Heh…. I had to laugh considering she drove the decision to buy the place.
I wish him well. I like him alot and he’s knows precisely what the problem is with the system. He gave me his copy of “The Creature from Jeckyll Island” and it opened my eyes to the corruption of the Fed Reserve. It’s ironic he’s on the losing side of it all now.
Suzanne researched this.
Too bad there is no thumbs up on HBB, nailed it!
“5500sq ft of Housing Bubble. It’s him, his wife and a 2 year old boy…. catching on yet?”
Small family size provided some middle-class households with enough rope to financially hang themselves with a falling-knife real estate purchase.
There are realtors with waterfront property and builders with some of the most spectacular spreads in the area.
Reportedly two I’m thinking of in particular are still doing fine, emphasis on reportedly. I suppose the bubble hung on for a long enough duration that they should have diversified and hedged.
Neither party is w/o their detractors and shady stories. I wouldn’t want to be too closely associated in business dealings w/them once their little empires started falling apart.
Carrie….. and how do you think waterfront shacks ended up in the hands of corrupt reaItors in the first place?
He knew the game and bought in anyway. The power of cult-like peer pressure is pervasive.
In the words of a friend from Central California; “Its like half of the state is boarded up” He travels extensively for his job as a GIS mapper for utility companies and enforcing areas mapped to curtail development due to sensitivity environmental impact.
As he put it; after hearing that I had weathered the storm with a paid off house. He was happy for me because he bears witness to the maxim “The bigger they are the harder they fall”
Builders all over CA who speculated as much as possible (given the lax underwriting standards) even for construction loans, are now broke and unable to borrow to build more nor can they pay off their construction loans cuz they can’t sell their spec homes.
Its a tough environment to be sure. But my son just finished an awesome season in basketball, wife coached, kids and parents had tons o’ fun. That kind of stuff you cant put a $$ value on, so those are the experiences that stoke our fires these days.
“How do 2 people survive in what has now become a 3 income household?”
Wasn’t that where home equity wealth effects were supposed to perpetually bridge the gap, by chipping in the third income source?
“In theory, they say, the only people who should be expected to experience a positive wealth effect from rising prices are those who expect to sell their houses soon to cash in.”
How is that ‘positive wealth effect from rising prices’ for ‘those who expect to sell their houses soon to cash in’ working out these days?
Robert Shiller answers critics of housing “wealth effect”
Posted by: Peter Coy on July 06
Guest blog from Economics Editor Peter Coy
Breaking a tidbit of economic news here: I just got off the phone with Yale’s Robert Shiller, who has some interesting responses to the posting this morning on voxeu.org by Charles Calomiris and others that questions the existence of a “wealth effect” from changes in home prices.
The wealth effect theory, which says that rising home prices stimulated Americans to spend more during the boom years, has been cited frequently by Federal Reserve Chairman Ben Bernanke, and it’s built into the Fed’s main macroeconomic forecasting model. The theory seemed to be corroborated in a 2005 paper by Karl Case of Wellesley and Shiller—the namesakes of the Case-Shiller home price indices, among other badges of honor—and John Quigley of Berkeley.
Today, on voxeu.org, there’s an important posting that denies the existence of the effect. It’s called “The (mythical?) housing wealth effect” and it’s by Charles Calomiris of Columbia and Stanley Longhofer and William Miles of Wichita State. It summarizes a June National Bureau of Economic Research working paper by the authors with the same title.
Calomiris et al. argue their case on both theoretical and factual grounds. In theory, they say, the only people who should be expected to experience a positive wealth effect from rising prices are those who expect to sell their houses soon to cash in. Renters who had hoped to buy should actually experience a negative wealth effect, as they realize they’ll need more money than ever to buy. And people in the middle—most of us—should be neutral. Furthermore, they say, it’s possible that even if consumption does rise when home prices go up, it doesn’t have to be a cause-and-effect relationship. It could be, for example, that both consumption and housing are rising in response to an increase in expectations for future incomes.
…
It could be, for example, that both consumption and housing are rising in response to an increase in expectations for future incomes.
The days of companies giving out large wage increases is gone for good. Outsourcing rules now.
The stupidity of denying the wealth effect is mind boggling. Maybe when cash out refis and HELOCs were rare birds their point might have had merit, but in an era of allowing people to borrow against anything it just confirms that there are blind spots even in an ivory tower.
“…when and how the portion of the 50% that have jumped a few income niches in living standards through the use of credit will realize they’ve got to start sloughing off their material items and assume the lifestyle they thought they’d left behind.”
“When…”
Pretty soon I’d imagine, if not already.
“…and how…”
Your guess is as good as mine, though I doubt investing in multiple single-family houses on low- or no-doc subprime loans is part of the household survival strategy for many.
Half of America is officially poor
Published: 15 December, 2011, 22:26
Rick, who did not want to give his last name, waits in line with others to collect 70 pounds of perishable and non-perishable food at the Manna Food Center in Gaithersburg, Maryland (Chip Somodevilla / Getty Images / AFP)
While it’s no surprise that nearly 50 million Americans live below the poverty line, new statistics from the US Census show that almost 100 million others are counted as low-income citizens, making half of the population of America officially poor.
The latest figures out of the US Census Bureau show that in addition to the 49.1 million Americans who fall below the official poverty line, those that rake in enough to be between that level and the income equitable to double it fall into a new “low-income” category, which counts an additional 97.3 million people. Altogether, that clump of nearly 150 million Americans living in dire economic standing accounts for around 48 percent of the US population.
American officials have deemed the current poverty line to be at around $22,000 for a family of four, but the new category just about doubles that figure to $45,000 and places those that fall between the numbers as low-income. The Associated Press reports that for families that fit in that range, often half of the household income is spent on child-care costs and housing bills.
Taking into account medical, commuting and other living costs, the number of people living below 200 percent of the poverty level has been drastically changed and not for the better. Before those factors were taken into consideration, the US Census reported in September that only one-in-three Americans qualified as poor or low-income.
As RT reported earlier this year, the number of Americans living below half, or 50 percent of the poverty level, is equally as alarming. Around 20.5 million Americans — or 6.7 percent — have personal incomes that place them in that bracket, which equates to annual incomes of less than $5,570 for an individual or $11,157 for a family of four. In Washington DC, which is part of the wealthiest metropolitan region per-capital in the country, one-in-ten residents are grouped into that category.
Don’t fret though. It isn’t all doom and gloom!…
“Altogether, that clump of nearly 150 million Americans living in dire economic standing accounts for around 48 percent of the US population.”
So I guess we can officially conclude that trickle-down economics (aka Reaganomics) has proven to be a total crock of $h!t. (As predicted, long ago, by me and many others.)
But hey- at least the rich got extremely richer! (Which, of course, was what it was really all about. Thank you, Reagan voters, for falling for it like suckers, and destroying our country!)
Now, someone just needs to somehow blame it all on Keynesian theory. (Which, of course, worked just fine for half a century, and created a once-strong American middle class. We abandoned it and here we are, but somehow, I bet it’s still Keynes’ fault.)
It’s been said before, but
trickle-down = tinkle on
Nearly half of Americans are below the average income. Hmmmm.
What statistics like this do not capture is the tight situation of many above average income families, that have so saddled themselves with debt service that their what is left for living expenses makes “poor” look well off.
My dad used to call these folks “broke at a higher level”.
“Nearly half of Americans are below the average income. Hmmmm.”
Technically, over half of Americans are below the average income, assuming ‘average’ is taken to mean ‘arithmetic average.’ For right-skewed distributions like the U.S. income distribution, the median, which is the point which splits the data in half, is lower than the average; consequently, more than half of Americans are below average.
Here are some numbers to back me up.
Median U.S. household income: $48,753
Average U.S. household income: Can’t find it anywhere; maybe it became too unpopular to report how much higher average income per household is compared to the median income, given that we currently enjoy the greatest disparity in wealth since the 1930s?
Poverty line in California and New York: $32,869
If you click the median household income link above, you learn at a glance that U.S. household income peaked in 1999, the last full year of Clinton’s two-term presidency, at $53,252, and has remained lower ever since, even as U.S. housing prices had a parabolic blowout that lasted until 2006.
One industry is sure to survive the coming apocalypse, thanks to preparations currently underway:
Porn prepares for the apocalypse
Published: 13 September, 2011, 22:07
The population of Van Nuys, California is barely 150,000, yet the Los Angeles neighborhood is a host to all the hallmarks you’ll find along the booming Hollywood Hills.
There are breathtaking views, million-dollar homes and celebrity hangouts all along Sylvan Street.
Yet deep underneath the surface in this San Fernando Valley suburb, a subterranean operation is beginning to be built that only a select few are going to be a part of. It’s a little bit Bat Cave with a dash of Playboy Mansion and all the accommodations you’d expect in an apocalyptic bomb shelter.
A pornography studio by the name of Pink Visual is beginning groundwork on an underground bunker that will insure that, come the 2012 apocalypse, whoever is left standing will still be safe from the aftermath of riots, looting, fires and zombies. And, of course, that the rest of the surviving world will still able to get their porno.
The press release from Pink Visual is blunt. Then again, when you’re in the adult entertainment biz, you learn that cutting to the chase is often all too necessary:
“We’re building an enormous underground bunker in preparation for the Apocalypse that various prognosticators and ancient calendar interpreters have predicted will take place in December of 2012.”
Pink Visual takes no time in answering the obvious questions:
“Yes, we’re serious about this.”
“No, I mean it: we really are building a great big underground bunker.”
“Our goal is nothing less than to survive the apocalypse to come in comfort and luxury,” says spokesman Quentin Boyer. “Whether that catastrophe takes the form of fireballs flung Earthward by an all-seeing deity, extended torrential rainfall, Biblical rapture, an earthquake-driven mega-tsunami, radioactive flesh-eating zombies or some combination of the above,” Boyer intends on letting the billion-dollar porn industry live on, come hell or high water. Literally.
…
I guess porn is one of the few industries where America still leads the world. The last of our industrial base.
I have no doubt porn will survive the apocolypse. It is the original circus of crowd weakening bread and circus fame. Besides, sex has got to be, hands down, depending on how utilized, both the greatest motivator and demotivator of all time.
“…sex has got to be, hands down, depending on how utilized, both the greatest motivator and demotivator of all time.”
CarrieAnn,
Could I possibly put you in touch with my wife?
Get used to financial market volatility, because there is no end in sight.
France’s AAA Outlook Cut; Fitch Reviews Others
By Emma Ross-Thomas - Dec 16, 2011 4:13 PM PT
France’s credit outlook was lowered by Fitch Ratings, which also put the grades of nations including Spain and Italy on review for a downgrade, citing Europe’s failure to find a “comprehensive solution” to the debt crisis.
Fitch affirmed France’s AAA rating and placed Spain, Italy, Belgium, Slovenia, Ireland and Cyprus on a “Rating Watch Negative” review, which it expects to complete by the end of January, according to a statement released yesterday in London. Belgium’s credit rating was cut two levels to Aa3 yesterday by Moody’s Investors Service.
The move by Fitch increases pressure on the region’s leaders to stem a two-year debt crisis that has seen bailouts of Greece, Ireland and Portugal. European Union leaders meeting this month in Brussels agreed to forge a tighter fiscal union as the thrust of their efforts, even as the European Central Bank resisted investor calls to ramp up its bond-buying program.
“Of particular concern is the absence of a credible financial backstop,” Fitch said in an e-mailed statement. “This requires more active and explicit commitment from the ECB.”
Without a full solution, Fitch said the crisis will persist, “punctuated by episodes of severe financial-market volatility that is a particular source of risk to the sovereign governments of those countries with levels of public debt, contingent liabilities and fiscal and financial sector financing needs that are high relative to rating peers.”
…
Got negative stock market wealth effects?
Dec. 16, 2011, 4:34 p.m. EST
U.S. stock indexes end two-week win streak
By Kate Gibson, MarketWatch
NEW YORK (MarketWatch) — U.S. stocks on Friday finished with weekly losses after a rating agency warning on Europe pulled the plug on what began as an upbeat session on a confidence vote in Italy.
“We had a big move to the upside this morning after Italy’s prime minister won a vote of confidence. It paves the way for a budget package to be passed,” said Michael Gibbs, managing director and director of equity strategy at Morgan Keegan.
“The mid-day Fitch comes out and implies they are going to downgrade six sovereign-debt ratings, and now we’re struggling to hold above the flat line,” he added.
…
Funny money and cheap credit keeping the music for musical chairs going, or so the Fed hopes. Before we had liar loans to keep the gambling in housing going, now we have the Fed engineering low interest rates. When most everyone is in debt, who does low interest rates help? The game is truly over, this junkie is dead yet the Fed keeps offering dope (low rates). The largest demographic for this credit (dope) housing bubble are Baby Boomers, and they are downsizing, the McMansions are done for a generaion. The next generations offer little hope. Gen X is half the size of Boomers and most are not in high paying jobs. Gen Y are broke with student debt. With low wages the norm, higer reasonable interest rates would make the dollar more valuable and not worth less and less. Been to the supermarket lately.
“Gen X is half the size of Boomers and most are not in high paying jobs. Gen Y are broke with student debt. ”
Well put.
“Been to the supermarket lately.”
I have, in fact, and I was just thinking about this today: In the past year my daycare costs have gone from $328/wk to $298/wk and yet I am saving less. The culprit is the grocery bill, and this is on top on me going vegan, which has saved us a lot of money.
Agreed, our grocery bill is outrageous. The other day I was actually thinking how much income will be freed up when my kids leave the nest. (A good 5 years away).
Also things need replacing much sooner than they used to. I used to have one set of tires that lasted at least 4 years and I skied almost every weekend which meant lots of mileage on my vehicle. Now I only put about 12k a year on, I’ve got my radials and a set of snows which you’d think would double the life of my radials and yet I’m still replacing tires every 2 years. This has happened on 2 different highly rated brands. My 2 year old phones are crap. My 18 mos old laptop fried out its video something or other when I used to get 7 years out of my computers. My running gear is very well made but replace $100 sneakers every 3 mos as recommended? We as consumers had 1/2 a chance when they made things to last. Now they’ve got us on a permanent replacement carousel.
The other day I was actually thinking how much income will be freed up when my kids leave the nest. (A good 5 years away).
Until they have jobs won’t you still be paying for it one way or another? And it would seem the economy would need to improve for them to get jobs…at least on average.
I’ve noticed that some gen(x,y,…) have an aversion to greasy mechanical things. I had a visit to a site where among other things an oil seal was bad; it was indeed a mess and foggy cold too. It was interesting to see who finally jumped in to get the job done — older guys while the few young carefully watched glancing occasionally at their boots or trousers for signs of spatter. Gallons of solvent were splashed everywhere, and several boxes of shop towels soaked up the mess. I was glad to have my knee pads handy, and knock on concrete, inwardly thankful that I have my engineering degree.
” - older guys while the few young carefully watched …”
Older guys, when they were young, used to have to learn to fix their own cars because they didn’t have the money to hire somebody else to fix them. They acquired a lot of skills by doing this.
Young people never acquire the skills because there is never a need for them to acquire any because they always had enough money to get somebody else to do the fix.
(Until now.)
You are reminding me of some of the outrageously handy things this non-handy poster did at points when cash was short, including a brake job, a garage door opener installation and numerous plumbing jobs of various descriptions. Necessity coupled with a cash shortage can provide the incentive to discover hidden talents.
Every single person in my graduating class had to rewire a lamp in 7th grade shop - even those of us who made something other than a lamp (I made a candle stick) for our lathe project. I don’t actually remember how I did it, but if I could do it when I was 12 I could do it today after a few minutes with a diagram off the internet.
I’m just pointing out what I’m sure you already know: Younger guys would need an automotive diagnostics machine to determine what’s up w/today’s engines. So they can only do the minor stuff now. But let’s talk about what changed w/some other skills.
If you want to talk about light electrical/plumbing, guys used to learn from getting together w/others in the neighborhood. They’d work on the home projects and then have a beer together. In some neighborhoods today, that wouldn’t happen because (I’ll pick on my former industry) the marketing guy’s wife has decided she didn’ want her kids playing w/the blue collar kids. She’s afraid they’d undermine their work ethic or take their focus off the dreams she has for their future. A lot of people have been taught by their schools (our district refuses to expand its teeny BOCES program) and their parents that certain skills aren’t as worthy as others. So where would there be any motivation to learn them?
And what do we do to turn those attitudes around?
“Older guys, when they were young, used to have to learn to fix their own cars because they didn’t have the money to hire somebody else to fix them. They acquired a lot of skills by doing this.
Young people never acquire the skills because there is never a need for them to acquire any because they always had enough money to get somebody else to do the fix.”
For me, I blame the housing bubble. My dad was very handy, would do small home and car repair, and had a big shop with lots of tools. Woodworking was a hobby, he has his own saws, a lathe, plus lots of other misc. tools both for woodworking, home maintenance, auto, etc. He had a garage to store these tools in, which also served as a place to do the work.
Me, I’ve been in apartments for the last decade thanks to the bubble. I’ve been living light, and haven’t accumulated much, especially in the way of tools. I have one small toolbox. I call the landlord for repairs, I take the car to the shop. No place to work on it in the apartment parking lot, anyway. No way I’m doing electrical repair myself when I’m renting.
I used to be a lot more handy, but I’m out of practice now and I don’t have the tools to do half the stuff myself now, anyway. No place to put the tools if I had them.
Kids have more time than (their own) money yet have become accustomed to all the time-saving services that I only enjoyed as an adult with a full-time job. Parents are not doing their children any favors by hiring out all the jobs that used to be known as chores. You can’t text message your way out of the real world.
What hasn’t changed and what will not change: the power of the human mind to come up with new products and discoveries to raise productivity and increase the quality of life. Youth extending drugs, new medical procedures to quicken healing, energy sources, better software tools to plan your personal investing. Better quality cars.
This is not a matter of Pollyanna optimism. This is from historical data.
Most of you assume all variables will stay the same and no new variables will be added, so you think your negative economic predictions will be certain. You are wrong.
We have moved from a one and done fix model to a manage your symptoms/bleed the consumer dry model. So yeah, of course people will still be making discoveries and moving the knowledge base forward. It’s believing the marketplace will embrace said discoveries and allow the general public to know they exist that is in question.
I notice the people in charge only believe in creative destruction when it’s others taking the hit.
I’m as optimistic as anyone. But what these distortions of the economy result in is to keep progress from happening, or producing negative outcomes. Let’s look at what you said:
‘raise productivity and increase the quality of life’
If productivity is increasing, medical costs should be dropping. But they are actually rising so much that even if there is some great new procedure, most people can’t afford it. Something’s broken there.
You’d think drug advances would be increasing the quality of life. But most of what people pop in their mouths these days just makes them numb.
Technological advancement can be great, but if it isn’t in the direction of true progress, not so much.
new products and discoveries to raise productivity and increase the quality of life.
How and for whom? The average American? The problem is that since the late 70s middle-class income gains have not matched productivity. Without structural changes to allow income gains to match your increased productivity, what positive difference to the average American will any further increased productivity make?
http://stateofworkingamerica.org/charts/productivity-and-real-median-family-income-growth-1947-2009/
I expect those generations who are young today will not live as long, on average, as those generations who are old today.
Their taxes will go to debt service, not Medicare and Medicaid. They are more likely to be obese. And they will be poor. Lifespans will fall, as in Russia after the collapse of the Soviet Union.
Speaking of FBs and the Trump wannabe set getting their comeupance, it looks like the fast money crowd in China is getting their wings clipped.
http://www.bloomberg.com/news/2011-12-16/prada-poised-to-extend-slump-as-china-s-shoppers-cut-back-spending-retail.html
Dec. 16 (Bloomberg) –Prada SpA is falling out of fashion six months into its Hong Kong trading debut as investors brace for Chinese shoppers to curb spending.
Shares of the maker of $2,000 bags and Miu Miu shoes, which gets more than 42 percent of sales from Asia, have dropped 32 percent from their July peak. The stock has fallen with companies such as jeweler Luk Fook Holdings International Ltd. (590) and Omega retailer Hengdeli Holdings Ltd. (3389) as property and stock- market declines hurt China’s consumers.
Luxury-sales growth in the world’s most populous nation will slow in 2012 from a forecast of at least 20 percent this year, said Royal Bank of Scotland analyst Katherine Chan. Coach Inc. (COH) to Gieves & Hawkes seller Trinity Ltd. (891) are already feeling the effects.
“The golden time, or the high-growth period, for many luxurious goods retailers is probably over,” said Chan. Sales growth at high-end stores open more than a year may drop by as much as six percentage points in 2012, she said.
“…the fast money crowd in China is getting their wings clipped.”
To the extent this trend continues, I expect further weakness in the gold price, thanks to increased numbers in this temporarily wealthy group needing to sell gold investments for cash rather than buying gold.
Dec. 18, 2011, 9:37 p.m. EST
Gold slips after struggle to stay atop $1,600
By V. Phani Kumar, MarketWatch
HONG KONG (MarketWatch) — Gold futures struggled to hold their ground above $1,600-an-ounce during Asian trading hours Monday, losing further ground after last week’s 6.9% tumble as the U.S. dollar strengthened.
The precious metal’s contract for delivery in February GC2G -0.24% fell $2.60, or 0.2%, to $1,595.30 an ounce, after rising as high as $1,608.20 earlier in the day.
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Decoupling, schmupling…
Bloomberg
China November Home Prices Post Worse Performance This Year
December 18, 2011, 9:11 PM EST
By Bloomberg News
(Updates with share prices starting in seventh paragraph.)
Dec. 19 (Bloomberg) — China’s home prices posted their worst performance this year with more than half of the 70 biggest cities monitored in November recording declines after the government reiterated plans to maintain property curbs.
New home prices dropped from the previous month in 49 of the cities monitored by the government, compared with 33 posting decreases in October, the national statistics bureau said in a statement on its website yesterday. Only five cities had gains in home prices, according to the statement.
“Home prices will fall further as the government’s tightening continues,” said Jinsong Du, a Hong Kong-based property analyst for Credit Suisse Group AG. “We’ll see more small developers file for bankruptcy or sell off their assets next year.”
The government said last week it won’t back away from real- estate industry curbs that are damping home sales and pulling down prices. China intensified measures this year by raising down payment and mortgage requirements and also imposed home purchase restrictions in 40 cities.
New home prices in China’s four major cities of Shanghai, Beijing, Shenzhen and Guangzhou each retreated 0.3 percent from October, the biggest monthly falls for these metropolitan areas this year, according to data from the statistics bureau.
The eastern port city of Ningbo and Shenyang in the north close to the North Korean border posted the biggest month-on- month declines of 0.6 percent, while Guiyang in the southwest rose 0.2 percent, the most among the 70 cities.
‘Critical Stage’
The gauge tracking property stocks on the Shanghai Composite Index slid 1 percent as of 9:43 a.m. local time, compared with the 1.6 percent retreat in the benchmark measure.
The figures came after private data also showed further signs of cooling. China’s home prices fell for a third month in November, SouFun Holdings Ltd., the country’s biggest real estate website, said earlier this month based on its survey of 100 cities.
“It’s more and more clear that home prices are falling around the country,” said Shen Jian-guang, a Hong Kong-based economist at Mizuho Securities Asia Ltd. “It’s still the critical stage of China’s property curbs, so the government doesn’t want to send any signals of easing of those policies too early as it may reverse the trend.”
Chinese developers will face challenges over the next 12 to 18 months including slowing sales, tight bank credit and downward pressure on prices and profit margins, Moody’s Investors Services said in a Dec. 15 report.
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