Surviving & Thriving

To every thing there is a season, and a time to every purpose under the heaven.
Ecclesiastes 3:1 (KJV)

Anyone who has been close to the edge knows what “survival mode” is like.  Small flashes of adrenaline propel you from one day to the next.  Each fitful dawn is a mix of dread and possibility, all of them taken one at a time.  Next week?  Worry about it when it comes.  Next month?  Forever away.

Many people find themselves in “survival mode” through this Depression, especially those without either work or unemployment bennies.  For them it is a slowly unfolding tragedy, but in great numbers they become a society, a culture, and an economy that is unable to function.  That’s because a free market only reaches equilibrium in the long run, actually running on small differences in the short term.  But in the very longest term the magic of market forces become something else altogether.

Everything has its own time.  When we start to understand that “The only thing we have to fear is fear itself” it helps to appreciate the short, long, and very long term that are all whipping us through each day and all of our days.

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Too Many Dollars, Too Few Dollars

What is the real rate of inflation? The official Consumer Price Index (CPI) is calculated with a basket of goods that are supposed to reflect the economy as a whole. There are over 200 categories of consumer goods that make their way into the CPI, including health care, airline travel, clothes, education, and so on. The price of this basket of goods is checked from one month to the next and it’s all added up to produce the CPI.

There is one big problem with this, however – not everyone buys the same goods. On average, over the whole economy, it’s about right. But people who have very little money don’t fly, go to the doctor as often, pay for school, and so on. Charles Gave of GaveKal Dragonomics came up with his own measure of inflation, modeled for the poor, and found some surprising results – and a correlation that spells trouble for the nation’s poor for a long time to come.

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Can’t Wait ’til Payday

The woman ahead of us in line at the convenience store had a bit more than the impatient, bored look we all shared. She held her head high and spoke to the cashier in a friendly tone, paying for the gasoline she was going to pump. Like many people at this store, in this part of St Paul, she paid with cash – but hers came in crisp twenties slid neatly out of a bank envelope. After we paid our own way out of the line I asked my daughter if she noticed. “My guess is she just cashed her paycheck because she doesn’t have a bank account,” I told her. It was a good guess, because it turns out that more than 17% of that particular neighborhood’s households have no bank account – and many rely on the UnBank check cashing up the street.

There are many reasons people don’t have bank accounts, up to and including the fact that check cashing stores can actually be cheaper than fees on everything. But some people wind up using these places for a “Payday Loan”, or a one-month advance on the next paycheck. A recent study shows that people who do this have to take out another loan the next month to pay off the first, and so on – with 62% eventually hitting 7 or more months in a row, the point where the interest payment exceeds the loan amount.

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Pope Francis Teaches Another Way

“There is no class so pitiably wretched as that which possesses money and nothing else. Money can only be the useful drudge of things immeasurably higher than itself. Exalted beyond this, as it sometimes is, it remains Caliban still and still plays the beast.”
– Andrew Carnegie

It may seem strange to open a discussion of Pope Francis’ Apostolic Exhortation Evangelii Gaudium (The Joy of the Gospel) with a quote from an icon of capitalism and a self described atheist. But a deeper understanding of message requires a step back with greater context. Francis is not decrying capitalism – far from it – but he calls for wealth to serve the human spirit and be a genuine force for liberation. The distinction is not academic but is a theme  Barataria has elaborated on as well.

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Poverty Persists

How good are things getting?  It depends a lot on where you are in the economy.  At the top end life is definitely improving – but at the bottom end it’s just endless misery. That’s the only conclusion that can be reached after two reports released this week.

The first was an analysis by the Associated Press that showed that underemployment is much worse for those at the low end of the economic scale, which in technical terms is hardly surprising.  But what they found is that 20% of those at jobs worth $20k per year don’t have enough hours, versus 7.2% of those who would normally qualify for jobs over $150k.  The second piece release was by the Census Bureau showing that 15% of Americans, 46.5M people, are stuck in poverty as they have been for 4 years.

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Cheers for the Underground Economy!

“Since we decided to adopt the leaf as legal tender, we have all of course become immensely rich.  But we have run into a small inflation problem owing to high leaf availability. That means the current rate is something like three major deciduous forests buy one ship’s peanut. In order to obviate this problem and revalue the leaf, we’ve decided on an extensive campaign of defoliation and burn down all the forests. I think that’s a sensible move, don’t you?”
– The Management Consultant to Fintlewoodlewix (later called Earth) – “Hitchiker’s Guide to the Galaxy”

It’s good to have a lot of money, assuming that not everyone has a lot.  Inequality is apparently bad when it gets too big, but it also makes the whole economy possible in small doses.  But how much money is really out there, and where is it going?  It turns out that this is more complicated – and hidden – than most thought.

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