1. Minimum Wage vs Inflation

    Back in 2007, I wrote a post comparing what minimum wage would buy in 2007 versus 1973. Now here comes an article at MSN that’s along those same lines:

    MSN: What Minimum Wage Buys, Then and Now

    The author traces minimum-wage purchasing power (of things like rent and gas) across the decades, starting in 1950. Interesting stuff, if you’re so inclined.




     

     

  2. Paradox of Thrift

    Don’t know how I managed to miss this treat, but I did:

    National Post: 93-Year-Old Threatens American Capitalism

    I remember reading something about Ms. Veitch and her still-chugging-along 1964 Mercury Comet recently. But whatever it was that I read, I certainly don’t remember her being presented as all that’s wrong with the American economy. Because that is, you know, the tongue-in-cheek gist of the article above.

    I feel quite confident that my beloved America is in zero danger of becoming a nation of Veitchian monsters. Holy crap, no. We love our plasma TVs, McMansions, and our lane-cramming SUVs. We thrive on $10, triple-decker, bacon-and-bleu-cheese-cheeseburgers. (Dangit. What’s for lunch, anyway?)

    And debt? Oh, we loves our debt. In fact, debt is a lot like The Force. It surrounds us, binds us. Debt is the ever-increasing glue which holds us all together. Even when we don’t have any money, we can keep spending money, because we can always get debt. Always. Well, except for 2007 and 2008 and part of 2009. Then we couldn’t get debt. And you saw how that went, didn’t you?

    Oh, but Dark Siders, like Veitch, who save money and make full use of all their assets and take advantage of the deals and guarantee presented to them — well, these people are Communists and apparently don’t believe in the almighty goodness of Debt, Debt, and More Debt.

    So our greatest economic enemy drives a ’64 Mercury Comet. Who knew?




     

     

  3. U.S. Standard of Living Tailspin

    So the U.S. standard of living is getting crushed, and the trend shows no sign of abating. That, at least, is the case according to this article:

    TheStreet.com: US Standard of Living Down 50%+ Since 1970

    As I wasn’t even around in 1970, I certainly can’t make any sort of personal-experience comparisons to the average standard of living (SOL) then and now.

    (Though I can pretty much state, unequivocally, that rock ‘n’ roll music was far better then. In that regard, I’m pretty confident that we’ve seen a decline in quality FAR greater than 57 percent. But I digress.)

    The article’s an opinion piece, and clearly marked as such, but right here’s where the elephant steps on your toe:

    Using the year 2000 as the numerical base from which to “zero” all of the numbers, real wages peaked in 1970 at around $20/hour. Today the average worker makes $8.50/hour — more than 57% less than in 1970. And since the average wage directly determines the standard of living of our society, we can see that the average standard of living in the U.S. has plummeted by over 57% over a span of 40 years.

    Hmmm. Reminds me a lot of what I read in The Two-Income Trap back in 2003, except that this guy uses words like “rape” and “parasites” to describe the treatment of “average” families today by Big Business and the government. (Not that I necessarily disagree in all cases. ‘Cause I don’t.)

    But here’s the part that totally lost me, where our esteemed author is discussing structural unemployment:

    Technology always eliminates jobs faster than it creates new opportunities. This means that our economies are permanently reducing jobs (and creating structural unemployment) every day, every week, every month, every year. For more than 200 years, our governments have dealt with this permanent structural unemployment problem by shortening the work week every few decades…until now. The refusal of our governments to shorten the work week (while we have the worst structural unemployment in history) is a deliberate attempt to maintain massive unemployment — which is the strongest downward driver of average wages.

    Uhhh … say what? I mean, I know the PC revolution was pretty hard on typewriter makers and all, but … say what? And how does shortening the work week help increase average wages? (For most folks I know, if you’re not working, you’re not getting paid — politicians and welfare fraudsters excluded, of course.)

    Oh well. It’s late, and I’m probably just missing something.

    Like how much better the beer probably was in 1970. There’s your pinnacle in standard-of-living, right there.




     

     

  4. Minimum Wage Again

    Those unstable folks who, like me, are fixated on all things economic, will get a boost from this quaint Bloomberg piece:

    Bloomberg: Today’s Minimum Wage Lower Than LBJ Era

    I dunno. No matter what Congress and our state legislatures say, I’m pretty confident that the true minimum wage is and will always be zero. But what do I know. I don’t work for any kind of economic or policy think-tank.

    Here’s the one passage I adored:

    The studies find minimum-wage increases even provide an economic boost, albeit a small one, as strapped workers immediately spend their raises. A 2011 paper by economists at the Federal Reserve Bank of Chicago found that a $1 minimum-wage increase lifts household income by about $250 and increases spending by about $700 a quarter in the following year. The spending increase is driven by a small number of households that primarily buy vehicles.

    So a wage boost lifted income by $250, but spending went up $700 for the same period? You mean the wage increase encouraged people to go out and spend STILL MORE money than they have? Why, that’s great news!

    (If you’re a proponent of debt slavery, that is.)




     

     

  5. House Prices Suffer From Student-Loan Debt (But Colleges Seem Happy)

    For today’s “LOL” moment, I proudly present to you:

    Businessweek: Student Debt Is Stifling House Prices

    It’s pretty darn comedic when you think about it: A pharmacist earning $125k/year, and carrying $100k in student loans, is miffed that she can’t — for some unfathomable reason — go out and buy a home. Like, yesterday.

    Roshell Schenck has a Ph.D. in pharmacy and earns $125,000 a year. Yet, because she has more than $110,000 in student loan debt, counselors have told her she can’t qualify for a mortgage. “I’d love to buy and can afford to buy,” says the 28-year-old graduate of Lake Erie College of Osteopathic Medicine in Erie, Pa. With lenders scrutinizing college loans more closely than in previous years, it’s almost impossible for borrowers such as Schenck to get approved for mortgages. “My debt is crushing my chances of purchasing a home.”

    Roshell, say hello to my esteemed colleague, the Law of Unintended Consequences. Kinda crazy, isn’t it, how these days, the debt you’re already carrying seems to matter again? And, darn the bad luck, it’s mattering just when you’d really like to borrow even more! Ain’t that a kick in the pants!

    It’s not that I don’t have some sympathy for grads like Ms. Schenck. The situation she finds herself in — making a really nice income in a good field, but unable to qualify for a home loan due to six digits of student-loan debt around her neck — isn’t entirely of her own doing. After all, the government and our university system forced her to take out those loans—

    Okay, never mind. It IS entirely of her own doing.

    Look: She’s fortunate to be making the money she is. I mean, I would love to have an income like that.

    But only if there’s not $100k+ of debt attached to it.

    But She Wants It Now

    By my reckoning, Ms. Schenck makes enough money that paying back those student loans should be no biggie, in the grand scheme of things. A few years of scrimping, saving, and consistent four- and five-digit extra payments toward those loans, and she’ll be in fine shape.

    Admittedly, though, this concept works only if she goes all Dave Ramsey on it, and can manage to not play “Keep up with the Joneses” as regards her spending habits. (Yes, that dreaded disease which ravages so many of the high-earning types, like doctors, lawyers, pharmacists, and so on. Lots of money comes in the door, sure … and even more of it goes out. Wouldn’t want to not “look the part.” Heavens, no.)

    Back to the article:

    Recent college graduates carry an average debt load of more than $25,000, limiting their ability to qualify for mortgages even if they’re able to land a job in a market with an unemployment rate of 9 percent for 25- to 34-year-olds. Dubbing it a “student loan debt bomb,” the National Association of Consumer Bankruptcy Attorneys (NACBA) warned on Feb. 7 about the effects of rising student debt on recent graduates, parents who co-signed their loans, and older Americans who’ve gone back to school for job training.

    Well, the good news is that borrowing of federally-subsidized student-loan dollars shows no signs of abating. So colleges will remain free to increase tuition at will, year after year, with no danger of “decreased financial resources” or anything outlandish like that out there to slow things down.

    “Just as the housing bubble created a mortgage debt overhang that absorbs the income of consumers and renders them unable to engage in consumer spending that sustains the economy, so too are student loans beginning to have the same effect, which will be a drag on the economy for the foreseeable future,” John Rao, vice president of the NACBA, said on a conference call.

    Absolutely preposterous, says I. How great of a country can we be, really, when our citizens’ past borrowing proclivities keep us from borrowing skads more now, right at the time when we most need it? Pffft.

    I don’t know who came up with this silly idea that “Today’s choices create those of tomorrow,” but I don’t like it. And it seems like Ms. Schenck doesn’t, either. Since when should debt limit our choices? I mean, really.

    Someone should just, like, do something.




     

     

  6. How to Make College More Expensive

    For this, they needed a study? Really?

    SmartMoney: Why College Aid Makes College Cost More

    It’s pretty basic: The more money you make available for a limited good or service, the more that good or service will cost.

    This is what happened when “Fog a mirror, get a home loan” policies were all the rage in the early 2000s. It’s also why “Fog a mirror, get a student loan” policies are NOT the elixir for ever-increasing college tuition that everyone makes them out to be. Rather, they make the problem worse.




     

     

  7. Which Decade Is He Referring To?

    Aside from the scalding melodrama of the headline, I found this to be a pretty interesting piece:

    Fiscal Times: This Rule Could Kill the Housing Market

    The gist of the article centers on a chunk of the recently-enacted Dodd-Frank legislation — a chunk which contains the onerous requirement that lenders must maintain on their balance sheets some share of the risk of mortgages they sell off to investors.

    Oh, the horror. Mortgage lenders retaining a sliver of the mortgage risk they create? Dear Lord, what legislative insanity will we birth next?

    No, really. While I tend to come down against Big Government most of the time, given what happened in 2008 and 2009, I’m pretty content with mortgage lenders being required to balance-sheet some risk from the mortgages they create. To me, this sounds like a burden our esteemed megabanks worked exceptionally hard to earn during those heady years of the mid-2000s.

    But get a load of this choice bit of idiocy:

    Even frequent critics of lender practices, such as the National Community Reinvestment Coalition and the National Consumer Law Center, have joined bankers and bank lobbyists in calling for regulators to rethink the rule.

    “The proposal as introduced will literally erase a decade of accomplishment in defining what is a responsible loan,” said David Berenbaum, chief program officer with the Coalition, an advocacy group for community organizations that support affordable housing and equal access to credit. “It is going to narrow the range of loans that lenders are willing to originate to the point that only consumers with the best credit scores—meaning white and affluent consumers—are going to get loans.”

    Say what? A “decade of accomplishment in defining what is a responsible loan?” Can this guy be serious? Or is his definition of “accomplishment” just far, far different from mine?

    I’m thinking it’s the latter.




     

     

  8. Food Stamp Usage: Still, Still Rising

    Courtesy of Yahoo, I’m reading that food stamps are now used by 1 in every 7 of us Americans. That’s up from July of last year, when 1 in 8 Americans were on the program.

    Looks like the effects of Recovery Summer™ have long since worn off. Pity, that.




     

     

  9. More Credit-Card Debt Needed

    Last week we established that debt lifts young folks’ self esteem. The next step along this ridiculous path, of course, is that our struggling economy needs — wait for it — more credit-card debt.

    USA Today: More Credit Card Debt Might Be Good…

    I find this line of thinking fascinating, really. No one has any money; no one has any savings to speak of; no one is spending; thus, the economic recovery is faltering. The answer? More debt. That’s what it’ll take to get people spending now.

    Forget saving money and slowly repairing Joe Sixpack’s household balance sheet, so recently decimated by house-price declines and more than ten years of rollercoastering stock markets. No, what’s important is that those credit cards come back out and start lighting up cash registers again.

    Yeah, that’s the ticket.

    And I’m particularly enthralled with this last chunk of the article. Here we’re introduced to a Houston couple who’ve decided, apparently, that carrying $15k in plasti-debt is no reason to not “go get some stuff” again:

    Some are loosening up. Amy and Brian Stonesifer of Houston halved their $30,000 in credit card balances the past year after their interest rates soared and Amy, 45, began worrying about her job security at a promotions firm. But after a year of scrimping, they recently charged new clothes, a grill and other non-essential goods. “We just got tired of not having things,” she says.

    Only in America would you find someone who’d rung up $30k in credit-card debt lamenting the sad, sad state of “not having things.”

    My question: Which one of Dave Ramsey’s Baby Steps says to reduce your credit-card debt by half — to a level that’s still five digits’ worth, mind you — and then go out and charge a grill and some Dockers at Target?

    Hmmph. I totally missed that one.




     

     

  10. Bubble Chasing

    I try to read John P. Hussman’s (of Hussman Funds) articles at least once or twice a month. His article of this past week, entitled “The Recklessness of Quantitative Easing,” gives me a chunk which I’d award Quote of the Month. Heck, Quote of the Year, maybe.

    Long-term economic prosperity is created by carefully allocating savings to productive investments that increase the output of goods and services that meet the needs of consumers, and whose production generates the income required to purchase that output. Everything else is bubble chasing.

    The entire article is absolutely worth a read — if you’d like an economic point of view that runs counter to what we’re so often force-fed by CNBC and most financial outlets.