. Spinning .

Interesting–but not surprising–article this morning regarding the tendency to not spend money in a bad economy even when your income/employment is considered relatively secure.

The frugality of the Kimberlins and Scanlons and millions of other Americans who still have their good jobs feed back on the economy, holding down growth and encouraging other worried workers to trim their spending — causing the whole vicious cycle to run another lap.

Logically, this makes sense; the whole idea behind government (taxpayer) stimulus is to get money circulating, and all good liberals should immediately go out and spend, spend, spend. However, I think that the mob mentality that the article appears to blame for the hoarding is not completely on target.

Economists say many still-flush consumers are handcuffed by psychological traps that cause them to tighten their purse strings even though economic hardship is not their reality. Underscoring the crucial role that consumer psychology will play in turning around the economy, President Obama and Federal Reserve Chairman Ben S. Bernanke have both been on the hustings this week sounding notes of optimism.

“Traditional economics assumes that we are all rational, that we approach these things very rationally, take in all the information, and then weight it and make a decision,” said Thomas Gilovich, a Cornell psychologist and co-director of the university’s Center for Behavioral Economics and Decision Research. “To a behavioral economist that seems clearly untrue.”

While I and many of my friends are not feeling secure, we’ve all started saving for the bad times since last year. We aren’t looking around at what others are doing, we’re attempting to insure our own survival by creating a safety net that’s not based on a government handout as an option.  I think that frugality–at least in my own case–is a learned habit, and it’s extended beyond my own personal finances to that of my thoughts on government spending. Some folks don’t see it that way, and this is likely where the follow-the-crowd thinking comes in: If it ain’t my money, spend it; if it is and I’m the only one paying, hold on tight. The problem here is that these folk who are so free with government spending don’t appear to care that as long as everyone else’s money’s being spent along with theirs, it’s okay.

Personally, we’ve put more money into the system, into government via taxes, the insurance companies via premiums, the school systems via tuitions, etc., etc. than we’ve ever drawn out over the years. That feels good.

It’d be nice to think that this whole “change” thing in American politics was smart enough to recognize what may deeply delay any recovery plans. It’s a little thing about the Baby Boomer generation and how they’re getting laid off first, with no hope of rehire (Older Workers Need Not Apply, NY Times), and how the next ten years of their forcibly changed plans to retire on their own savings and hard work will become the thing they tried so hard to avoid: being a burden on society.

So take some of that money planned for larger schools and shiny electronic classrooms, for building more airy spaces and playgrounds and roads, for tilting at windmills, and put some of that construction and health cost funding into what immediate future needs are being created instead by the ‘solving’ of the current economic crisis: old age homes and medicare for those who thought they’d be able but will not now be able to take care of themselves in retirement.

We get several local weeklies and in going through one this morning, I see a story unfold that is more personal, more poignant than the news on TV, the internet, or big newspaper articles. It is the story of the economic impact on lives seen through the classified ads.

There are more dining room sets offered for sale than ever before. There are more men willing to rent themselves out as handymen, “no job too small,” as the women take to cleaning houses, walking dogs, babysitting. It’s the stories that make up the whole of who is affected by the loss of jobs, savings, homes. It’s showing, not telling, and it’s more heartbreaking that way.

Typical misguided misuse of stimulus funds: Governor Rell (CT) wants a portion of those federal funds to go to a program designed to crack down on sexual predators.

Is the program worthy and important?  Yes, of course it is.

Was it affected any by the economy? Not in any way that I can see. Is it going to help the economy? Not in any way that I can see.

People just don’t seem to understand that the money is there to solve the current crisis; this isn’t Queen For A Day TV. If  a problem was there before the economic situation then it could wait a little bit longer to get the money I’m sure it needs. It seems that special interest groups are like vultures in grabbing a share of free-flowing government funds.

At least China’s, according to the Chinese Premier who claims it is showing “positive changes.”

Yeah, well, it’s hard not to make money on foreigners willing to buy drywall that interacts dangerously with heat and humitity, toys loaded with lead, and milk laced with melamine.

When, oh when, will Americans wise up and refuse to buy any more Chinese junk?

Knauf Drywall Fiasco Biggest Homes Defect Cast in U. S. History

My God, people, can’t we even make our own drywall anymore? It may cost more, but at least we wouldn’t be encouraging these ridiculous low wages for Chinese workers, we’d have jobs here in America where they’re desperately needed, and, according to a tv report just now, we wouldn’t be giving five year-olds emphysema.

Shades of The Road, Blind, and so many apocalyptic and disaster aftermath novels: More Squatters Call Foreclosures Home.

Now there’s something to this that could have been good, could have worked, like not forcing the real owners to leave to become homeless themselves, or groups working with banks and realtors to maintain the larger buildings and homes for the homeless rather than just moving people in on someone else’s misfortune. I especially like this:

MIAMI – When the woman who calls herself Queen Omega moved into a three-bedroom house here last December, she introduced herself to the neighbors, signed contracts for electricity and water and ordered an Internet connection.

What she did not tell anyone was that she had no legal right to be in the home.

An internet connection?

Well, at least the big bad corporations understand the unemployment and healthcare situation better than our government politicos: The Take Care Clinic at Wal-Marts offers “Free healthcare visits for our past, present, and future patients*, and their families, who lose their jobs and are uninsured.”

Screw worrying about insurance coverage; let’s give the people the help they really need and need now: medical services.

I don’t care about the political connections or the somewhat obscene amounts of money paid out; it became the norm and hopefully this can change across all sectors, not just in the business world.

WASHINGTON – Lawrence H. Summers, the top economic adviser to President Obama, earned more than $5 million last year from the hedge fund D. E. Shaw and collected $2.7 million in speaking fees from Wall Street companies that received government bailout money, the White House disclosed Friday in releasing financial information about top officials.  (msnbc/nytimes)

But it does tell me something interesting about why this administration of millionaires is so free with the spending. Especially when it’s somebody else’s money. While they should know better, they appear to have no concept of billion or trillion, or for that matter, the average lower wage earner’s salary of more around $30,000 per year.

This is likely why people get all screwed up over statistics:

The unemployment rate and related data are calculated based on a monthly survey of about 60,000 U.S. households. The survey asks a series of questions to determine whether household residents who are 16 years old or older are employed, unemployed or not in the labor force.  (msnbc)

Isn’t 60,000 households rather a small number to be fudging figures that amount to 13.2 million unemployed? Yes, I’ve taken Statistics and know that there’s a kernal of truth as a basis to form these guesstimates, but in times like this, I hardly think that this small portion of American households is representative of the country. It’s likely that unemployment compensation figures along with recently (within 6 months) of those losing benefits, or company data might project a more accurate figure.

While I’ve never really thought along the same lines as anyone else I knew or anything I’d read, it wasn’t just a spirit of rebellion or a  stubborn streak I don’t think. I’d like to say it’s just a different angle. For example, I don’t really believe this whole “housing bubble” term.

It’s true that real estate sort of simmered and then suddenly boiled over like spaghetti sauce just when you think you’ve turned the flame down to a point where you can walk away, but I don’t believe that prices exploded out of sync with the rest of commodities. Forty years ago (approximately), my sister and her husband bought a house for $40,000 and just before this crisis it was valued at $400,000. That’s in keeping with the price of a ’69 VW Beetle which was $1,800 (I went for the convertible which was $2,500) and the new one is $18,920.  A sandwich roll was $.05, now I’m paying $.59. A quart of milk was $.25. Chicken was $.19/lb and hamburger $.29. I used jumbo shrimp (now called ‘super colossal’ at 6-8 per pound) for my stuffed shrimp at $1.69/lb. vs. current  price of $17.99/lb.

Do you notice a trend here? Prices on all items have all gone up approximately 10 times. So how is the cost of real estate any more ridiculous than the cost of anything else?

Well there lies the problem. My first job in an office as a order clerk typist paid $60/week. That’s $1.50 per hour and minimum wage was $1.25.  Minimum wage will be raised to $7.25 in July of this year, but that’s a far cry from a 10-times rate of $12.50. Even with this obvious lack of cost of living increase in salary to keep up, many workers are indeed beyond that barrier to be bringing in salaries of  $25,000 to $65,000 that are well in keeping with the times, coupled with the fact that there are more two-earner households than there were forty, fifty years ago.

The problem then appears to be the failure of the minimum wage to keep up.  That, and the acceptance of illegal workers which keeps earnings even below that point. I think that if government is to have any say in how businesses operate, that should be a priority. The next step, of course, would be to penalize companies who attempt to avoid paying workers reasonably (though I do see labor union jobs often out of control earnings-wise) by moving production to foreign soil.

So were the housing costs out of sight? I don’t think so. Were mortgages given out indiscriminately to unqualified buyers? Yes. Under pressure from government good intent to help lower income earners to afford housing, and to cater to promising up and comers who bought mansions they worked too long hours to spend much time enjoying,  the housing market was brought down. But was it a problem of overevaluation? I don’t think so.

But then, I always have seen things from a different angle.

Basically I don’t believe in stimulus packages because under the current economy, most folks either use it to pay bills or to save it in case of potential need. And, via taxes, we’re going to have to pay it back in the future anyway as the government sinks itself into debt.

This newest idea is even stranger and less likely to stimulate anyone to buy a steak instead of hamburger much less grow back a stable global economy (yes, global, since most of what we buy isn’t produced in the U.S.A. any more).  As explained by this CNN Money article this morning,

“As a rough guide, singles eligible for the credit might get between $10 to $15 per paycheck if paid weekly; for those married filing jointly, they’re likely to see an extra $15 to $20.”

And this:

“Lower-income workers may not make enough money to have taxes withheld once their exemptions are taken into account. So they won’t see any extra cash in their paychecks. But they may claim their full credit when they file their 2009 tax returns next year.”

Besides the fact that it’s a drop in the bucket when a waterfall is needed, it also seems to be yet another waste of taxpayer money. While most of us could always use that little bit extra, if we’re still fortunate enough to have a job, it’s not a necessary extra right now. It seems to me that the people who truly need the money are the ones who just lost their jobs and I’d just as soon forego the $15 to insure that someone who’s having trouble paying his mortgage on unemployment compensation or about to lose that benefit has the appropriate help from the government taxpayers instead.

I love this, from the BBC News:

“It is a crisis caused and encouraged by the irrational behaviour of white people with blue eyes,” the president said, “who before the crisis appeared to know everything, but are now showing that they know nothing.”

Well there ya go. Now we know who to blame for the fall of the global economy.

(Couldn’t resist including his photo, taken from wikipedia. He’s such a big brown-eyed teddy bear.)

Interesting article in the New Scientist that intimates that if the global warming don’t get ya, a plasma storm will.  Interesting article here: Space Storm Alert: 90 Seconds from Catastrophe.

Still on the subject of corporate pay, I’m seeking answers to the problem from my little bit of knowledge of keeping up on current affairs and from my small experience as a shareholder (not in AIG thank God). Many employees hold shares of their company and as such shareholders are sent usually quarterly or annual voting information. I used to throw these out, knowing that our tiny percentage of ownership amounted to spit in a pond. But that’s not exercising a right that could have an impact if everyone took it more seriously.

There’s always the usual blah blah blah to vote on, but there’s also the usual “disclosure of executive compensation” item that the Board “suggests you vote no” on. Well dammit, vote YES! If every employee with his lousy 100 shares in 100,000,000 voted, then maybe something could be done. The big guys are counting on your lack of confidence in your vote counting.

I’m by no means a proponent of multi-million dollar salaries for executives (nor for movie stars or ballplayers for that matter) but what’s at work here is ‘whatever the market will bear’ and no one is going to refuse the extra money. And the fact of life is that someone somewhere thinks these people are worth it; shareholders, moviegoers, sportsfans. Sometimes these people actually may be worth it; it ain’t easy running a global conglomerate that employs thousands of workers; maybe it ain’t easy to cry on cue for a camera either. And maybe it doesn’t seem fair that one may work hard and get paid 1/300th of the top guy but it’s not just hard work that’s being compensated. It isn’t fair to see some bimbo marry the CEO and walk away a few years later with a portion of his salary that easily translates to the annual salaries of hundreds of laid-off workers either. But life’s never been guaranteed as fair.