The New World Economy

[sputnik]

I would be interested to hear the perspective of the non- American members of the forum.

I just read through the Warren Buffet piece provided by Audible Nectar and really hits home. "Squanderville" reminded me of a 1998 PBS documentary entiltled "Affluenza".

Af-flu-en-za n. 1. The bloated, sluggish and unfulfilled feeling that results from efforts to keep up with the Joneses. 2. An epidemic of stress, overwork, waste and indebtedness caused by dogged pursuit of the American Dream. 3. An unsustainable addiction to economic growth.

Here are some sample questions (perhaps a bit dated) from the PBS Affluenza web site,

http://www.pbs.org/kcts/affluenza/home.html

1. Which of the following is comparable to the size of a typical three-car garage?

a. a basketball court

b. a McDonald's restaurant

c. an "RV" (recreational vehicle)

d. the average home in the 1950s.

Answer: d. Many of today's three-car garages occupy 900 square feet, just about the average size of an entire home in the 1950s. Many people use the extra garage space to store things they own and seldom use. Often we hear that Americans have lost ground economically and have less purchasing power. But Americans are buying more luxurious items, partly by working more and going deeply into debt. The homes they live in and the cars they drive today are often bigger and more technologically advanced than those purchased by their parents.

2. The percentage of Americans calling themselves "very happy" reached its highest point in what year?

a. 1957

b. 1967

c. 1977

d. 1987

Answer: a. The number of "very happy" people peaked in 1957, and has remained fairly stable or declined ever since. Even though we consume twice as much as we did in the 1950s, people were just as happy when they had less.

3. How much of an average American's lifetime will be spent (on average) watching television commercials?

a. 6 months

b. 3 months

c. 1 year

d. 1.5 years

Answer: c. In contrast, Americans on average spend only 40 minutes a week playing with their children, and members of working couples talk with one another on average only 12 minutes a day.

4. True or false? Americans carry $1 billion in personal debt, not including real estate and mortgages.

Answer: False. Americans carry $1 trillion in personal debt, approximately $4,000 for every man, woman and child, not including real estate and mortgages. On average, Americans save only 4 percent of their income, in contrast to the Japanese, who save an average of 16 percent.

5. Which activity did more Americans do in 1996?

a. graduate from college

b. declare bankruptcy

Answer: b. In 1996, more than 1 million Americans declared bankruptcy, three times as many as in 1986. Americans have more than 1 billion credit cards, and less than one-third of credit card holders pay off their balances each month.

[T2K]

I have enjoyed your posts here AudibleN. It is nice to hear from someone that actually keeps themself informed and sees the big picture, unclouded by partisan politics, and expresses concern for what is good for themselves and their country.

Keith

[boomac]

What do you guys figure the definition of middle class to be? What should a middle class family be earning, what level of housing should they have and what future expectations are within their reach? If this group is shrinking, what percent are moving up and what percent are moving down?

[johnyholiday]

the gamma ray exposure, from quarks exploding ,an turning into blackholes ,on the outer edge of our expanding universe, raining mass dementia upon are people

[Audible Nectar]

Boomac -

The Middle Class is usually thought of in two ways:

In most economics classes, "The Middle Class" is considered the "middle 20%" of wage earners - the middle quintile.

In more "common parlance", the "middle class" is that section of the middle of the "bell curve", usually thought of as a bit broader category of wage earning families making roughly 50-100K per year (could be a bit higher in high property value markets). But typically we are talking families that have an average home, two decent autos, two or three kids, and usually two jobs to support it.

Increasingly, that middle is getting pushed aside - mostly DOWN. More important than stagnant/declining wages is the increasing costs. The necessities cost more (health, home, school, gas), so these families must work more to keep up.

As a statistical analysis, the upper 20% (upper class) has done better in income, the second (upper middle) has done about the same, the other three quintiles are declining. It's beginning to statistically look like Brazil, where the number spread looks much the same - an increasingly higher concentration of wealth in the top 20% - so much wealth there, and much less below, that it is customary for the rich to go shopping in Rio with security guards.

The only way a middle class has ever existed in any economic system has been to CREATE ONE. Middle Classes have never existed without controls - be it by laws or collective bargaining. If you have a purely lassez faire capitalistic system (which is what the current administration and business leaders want), the middle class will disappear. Once that takes full flower, that's the point where the economic system will no longer work for the majority of people.

Another point I want to make: You all have heard (if you follow politics) about the upcoming battles over the future Supreme Court nominees. Much of the political talk and "frame" has been in terms of those future Justice's views on "right to life". But let me fill you in on something......

This is a RED HERRING. This is not about "right to life" from the view of the powers that be - the "right to life" thing is for political button pushing ONLY from thier perspective. What this really involves is

******** THE INTERPRETATION OF "THE COMMERCE CLAUSE" *********

This is "the invisible monster" from my perspective. The objective is, by rule of the SCOTUS (who is law of the land and there for the lives of the judges), to remove any ability for the government to control aspects of commerce. This means no wage controls or unions/collective bargaining, no pollution controls, etc. - basically it allows businesses to do whatever they want with no government oversight. Big Business wants NO GOVERNMENT REGULATION of commerce. Not on wages, pollution, taxes - they just want free run of the place with no impediments to the bottom line.

If those appointments are successful, you will be looking at the disappearance of the middle class for about 30 years to come - which is about the average stay for a Supreme Court justice. If the economic crapola comes with these new judges in place, no amount of turnover in the House and Senate will change the laws until the Judges on the Scotus die off. The potential exists for the middle class to go on a 30 year hiatus.

So when the SCOTUS confirmation hearings come, don't think "pro-life", think COMMERCE CLAUSE. To me, this is what the battle over SCOTUS appointments is really all about.....yet no one seems to know about this. The powers that be aren't talking about this - because they do not want the public to understand the ramifications.

[Audible Nectar]

Affluenza -

This is a most interesting piece of work. I tend to file this into the "personal responsibility" column, though. If you buy Porsche vehicles when you cannot afford one, that's your stupidity - but those who live within thier means, are hard working, and cannot obtain or afford health insurance is a problem. "Affluenza" is certainly a good look at symptoms of Americans living beyond thier means, however.

On house size:

It's interesting, because I currently live in an older dwelling that has an addition. The original home is four rooms plus a bathroom. The addition is "the den". My current layout isn't really that large - but it places a real world example on the housing size example posted above by sputnik. I cannot imagine the original being "the house" - because the bed and two dressers barely fit in the bedroom, and the living room isn't much bigger than most bedrooms. I always said that I would never buy this home as a "home for life" kind of thing - it's not so much the total square footage, it's the layout - too much space gets wasted, and the home is poorly proportioned.

There is another documentary piece just released called "The Corporation". This film analyzes corporations from the perspective of corporations having legal "personhood", and the validity of such a law. More interesting is the application of psychological evaluations on a corporation as a psychologist would examine a real person. The film arrives at the conclusion that most corporations, when compared to human beings (since both have "legal personhood"), are psychopathic in nature. It opines that if people on the street did what many corporations do as entities, we would commit them to a mental institution.

[Champagne taste beer budget]

On the "Middle Class" and $300,000 houses...

I consider myself to be middle class, at least by the definition I accept. My wife and I live comfortably, for us at least. We drive newer, but not New, vehicles. We go out to eat when we want to, but not for $200 meals for the two of us. Our child isn't lacking for anything in the areas of food, clothing, health care, toys or shelter. We can buy what we consider to be reasonable items at a reasonable cost. We take an occasional vacation, a weekend away when we get a chance, took a cruise to Aruba, St Thomas, etc a couple years ago. We seldom carry a balance on our credit card, and only have two; one for work and one for home. I guess, to me, being middle class means not being without anything you need for yourself or your family, living within your means and being comfortable with it.

Now the big ole house deal...

For the last 10 years, we lived in a 600 s.f. house that we paid 59K for. Had it paid down to roughly 19-20K left. It sat on 300 feet of good lakeshore with good elevation and nice shoreline. Several realators appraised it, were told it would be valued at roughly 150K with or without the house, due to it's size and age. We thought about selling, taking the cash and rolling it into a different house, but liked the lake, lot, neighbors and area. Besides, in this area 200K buys you an older house on 100 ft of lakeshore, didn't really want to make a lateral move, so we rebuilt. Bulldozed the old, started from scratch. One year and 160K in construction loans later, we're in our new house. Two story, walk out to the lake, 4,200 s.f per level. The downstairs isn't finished, not even wall studs, but we can do that over time. We installed the hardwood floors, the tile in the entryway and bathrooms, did all the interior trim work, installed all the plumbing fixtures after the rough in was completed, did all the interior painting, wired all the coax and phone lines to the rooms, installed most of the light fixtures, hung the interior and garage doors, and other stuff I can't remember, figure we saved roughly 40K in labor. We ended up with a new house, on a great lot, appraised at over $400,000. My wife, the money monger that she is, had been paying extra half payments for months on our old house, so we went from needing $800 a month for the mortage payment to just a hair over 1,100. An extra $300 a month for an additional 3,600 s.f. and still over $200k in equity. It was a no-brainer.

That's how WE ended up affording a $300,000 + home.

BTY, my wifes and my combined income is under $60K. It CAN be done, it just isn't easy.

[Dylanl]

That is interesting. I did a similar thing. When I was 22 years old I bought a peice of property for 17,000 and built a 2800 sq. ft. split entry home on it 2 years later for 55,000. You can do the math but now my same home is close to being worth 190,000. Now that I have the home paid off my concern would be if I sold where would I go based on building costs and most of my neighbors homes going for 200,000+. When I built a sheet of plywood was well under $7.00 now pricing is just crazy. Building on your own used to be a way of getting ahead but now even doing things yourself is twice as hard.

[picky]

I'm sure you all know that Lakefront property, especially in Michigan, sells for a huge premium. Many times, because it's so costly, it's sold by the lineal foot.

According to a few of the Realtors I've spoken with in the very popular resort area of Houghton Lake & Higgins Lake of central-lower Michigan: Many of the people whom are walking-in, buying up the older, adjacent lake properties, bulldozing them and then constructing half-million and higher "big foot" homes across the 2 or 3 properties they've bought are doing so with "Death Money" (the Realtor's term).

Somebody dies and leaves a huge insurance policy behind. Their adult kids inherit it and then blow it on a vacation dream home on a lake up North and then outfit it with all of the toys (pontoon boats. speed boats, jet skis and snow mobiles, etc.). I'm not saying I hold an opionion on this either way. I simply thought it was an interesting observation on the part of the realtors.

Hmmm...my dad's already gone and my mom lives with us. I guess I'm out-of-luck as far as buying a "Lakeside big-foot".

[boomac]

Audible Nectar Im sorry but the type of doom and gloom conspiracy theory you suggest is ridicules. If your assertions had any validity they would be front page news and the debate would be on. The Democrats would have been all over it during the campaign. BTW, with your theory in mind, please explain Bushs appointment of David Souter. I just dont think its productive to toss wild theories around like a dinner salad.

If a family is making between $50,000 and $100,000 a year, they shouldnt be slipping. Thats a lot of iron and unless they reside in super cost of living areas, that income should go a long way. Yea, $50,000 makes it tight but it aint poverty and there are millions of families managing with that amount of income. No, they probably cant drive newer cars and afford Duke University for their kids but there are other reasonable options.

Look, Im interested in keeping jobs in the US. We need to do more and we need to put pressure on our elected officials to initiate policy that favors America. The way I see it, the more opportunity for success the better we all are.

[3dzapper]

Here is an article in theEconomist. about what Europe thinks of our economy.

Here in the North East, $300,000 doesn't get you much house. My own house a "hip roofed split foyer executive" , (fancy name for a raised ranch) on just under 3/4 acre. The upstairs is about 1400sqft with 1100 in the finished portion of the downstairs and a 2 car garage. Nice but definately not opulent would list for about $390,000. Trouble is, to move up I'd have to spend a half a million.

My new room is going on the south side to mirror the garage. Soon!

Rick

[JJkizak]

My community with 17k population collected $100,000.00 in permit fees last year on remodeling and building new homes. Let's see, well permit, plumbing, electrical, building, tree cutting, septic tank, deck, fence, gas, oil, yadda, yadda, yadda. In building your own home you might have 3k in fees. Sewer tap in 18k, gas line tap in 6k, city water charge 18k, but leaf and garbage picup is free. Lets see, thats 40k and you haven't even dug the basement yet. Me oh my.

JJK

[boomac]

With those "tap" in fees I would never even consider living in that community. 18K for water and you have to dig your own well? Good Lord! Is this a gated community with 24/7 security, a golf course like the TPC at Sawgrass, tennis courts, (in and outside) bike trails and laundry service? Live entertainmnet on Saturday Nights! If not, whoever the community boss is, he should be fired. Why do you have to pay 18K in sewer fees if you have a septic system? You don't live near Madison Wisconsin do ya. The "commies" up in that area never stop trying to find new ways to assess and tax your butt.

[JJkizak]

I'm chuckling, the well permit is for geo-thermal heat transfer. The man that bought my land dug 7 wells 250ft deep for the geo-thermal heat transfer. He also dug a $30,000.00 ditch 800 feet long in solid rock for the city water and gas and electric and cable tv lines. By the way, he has cable and satellite feeding the tv's in the house. The heating and ventilation in the house was $250,000.00. Light fixtures $60,000.00. Shall I go on?

JJK

[boomac]

So the guy has deep pockets! Wow! It must have been a decent sized lot if he had to dig an 800 foot trench for utilities. Hey, about a mile down the road from me a guy bought 3 sub division lots and has been building a 19,000 square foot house for well over a year. They have a couple kids with handicaps and wanted to live in the area because of our school system and the staffs ability to work with challenged kids. It looks more like a shopping mall than a house. It has pools in and out, elevators, an 8 car garage with a lift and many other upgrades. I dont doubt that his property taxes will be over $3000 per month. Maybe even a bit more.