Economics

[Highbeam]

Unfortunately, depending on which study you cite, 49%-78% of Americans live paycheck to paycheck and do not have 3 months worth of emergency funds... I bet most here do, but wood burners are a practical and smart lot...

Those are the people that we don’t want to be.

Unlike most, my children have been taught and shown how to manage money to land well within the top half of this unfortunate statistic which is actually very easy. I agree that woodburners on a forum like this have much better odds of being a successful bunch!

You can bet we have been watching this virus situation from an economic future point of view to help teach lessons. Do you want to be a career waitress? Do you want to be “essential”? How long do recessions last? Do we have enough ammo? Will the markets recover? What does 1200$ actually get you?

 

[mcdougy]

What does the term " living pay check to pay check "actually mean? I would assume that's the scenario for everyone? Some paychecks are just bigger than others......Being fortunate enough that your paycheck allows you to buy a boat, invest in education funds, donate to a charity, save AND pay the mortgage, hydro, utilities and FOOD...isn't alot different than the people whos paycheck only allows them the mortgage, utilities and food without the bonus stuff. To say that this isn't affecting people because they have some savings is incorrect. I have zero income currently and not exactly sure when that is going to change. I do have savings and will be able to pay all the listed above, except the savings part. So technically I consider myself as living pay check to pay check. Everyone's life is based on the income they earn. Just curious what the meaning behind the term truly is? "My paycheck sucks, so I can't budget for non essentials and if I don't have a paycheck I can't pay my required bills"?

 

[PaulOinMA]

Means to me that you have no savings and need your next paycheck to meet one's basic necessities without discretionary spending.

 

[Highbeam]

Means to me that you have no savings and need your next paycheck to meet one's basic necessities without discretionary spending.

Right. Has nothing to with a boat or other luxury item. Has to do with income vs. expenses. Some folks have already spent their next paycheck before it arrives. Any small interruption in income puts them in default and possibly out on the street or hungry. I don’t want to live like that.

And no, it’s not a rich vs. poor thing . Many people with high incomes have such high expenses that they are also dependent on that next payday to pay all of their bills.

 

[NickW]

What does the term " living pay check to pay check "actually mean?

I would say (and this is MY definition), that it is the inability to financially deal with unexpected expenses. Some people live paycheck to paycheck barely affording the essentials. Some people could make a million a year and still be living paycheck to paycheck due to irresponsible habits. Wage is not the only determining factor. Living responsibly within your means is. One family might be very comfortable living on 75k a year and be able to save and be charitable; the neighbors might make the same (or more) and not be able to fix a broken vehicle because they have 4 jet ski's, 4 ATV's, a motorcycle, a "Sunday" car, maxed out credit cards from their annual family vacation in Hawaii, etc. For many it is the unfortunate reality, for many others it is a situation of their own doing - not unlike some of the big companies that have been bailed out (in the past or currently).

An example I'll use (not to toot my own or wife's horn, but because we have the majority of both families in the "irresponsible" catagory and get asked for "loans" on a regular basis...):

I was almost killed in a car wreck in '03. We financially survived (barely...) even though I was out of work for 9 weeks without disability. As soon as we were able (I was semi-coherent), we started making plans for how to deal with the finances if I was off for over 3 months rather than waiting until the worst happened. Alternatively, a family member won $1400 at a casino, blew it in short order, and 2 months later blew the engine in a car... no ability to fix or replace it...

Or another who goes out and buys every woodworking tool in the book, uses them once a year, eats out 5 times a week, doesn't pay rent because he lives in a "family" house, but can't afford gas...

Sorry if that got to be another one of my rants...

 

[Sodbuster]

In my opinion, living paycheck to paycheck in it's most basic form, is only being able to cover your most basic needs, food, clothing and shelter, before your next paycheck arrives. As one country song say's "there's no month end at the end of the money".

 

[Woody Stover]

Guy was on Morning Edition the other day. Made sense to me..
"Ray Dalio is known for making lucrative predictions. His hedge fund, Bridgewater Associates, is the largest in the world. But Dalio, a billionaire himself and one of the world's most successful investors, says capitalism is broken. Even before the coronavirus pandemic hit, Dalio had warned that the wealth gap represented a national emergency. The outbreak, he says, is only exacerbating the disparities between the rich and the poor.
"We will have ahead of us the question of who's going to pay the bills and how will we redefine things," he says, adding that the solutions will "necessitate a lessening of the wealth gap." Dalio spoke with NPR's Morning Edition on Wednesday about what he thinks the crisis will mean for income inequality and the future health of the economy more broadly.

https://www.linkedin.com/pulse/why-how-capitalism-needs-reformed-parts-1-2-ray-dalio/

 

[Sodbuster]

Guy was on Morning Edition the other day. Made sense to me..
"Ray Dalio is known for making lucrative predictions. His hedge fund, Bridgewater Associates, is the largest in the world. But Dalio, a billionaire himself and one of the world's most successful investors, says capitalism is broken. Even before the coronavirus pandemic hit, Dalio had warned that the wealth gap represented a national emergency. The outbreak, he says, is only exacerbating the disparities between the rich and the poor.
"We will have ahead of us the question of who's going to pay the bills and how will we redefine things," he says, adding that the solutions will "necessitate a lessening of the wealth gap." Dalio spoke with NPR's Morning Edition on Wednesday about what he thinks the crisis will mean for income inequality and the future health of the economy more broadly.

https://www.linkedin.com/pulse/why-how-capitalism-needs-reformed-parts-1-2-ray-dalio/

Always easy to say that AFTER you've made your billions. Like he said he started investing as a kid and learned what to invest in, nothing to stop anyone here from doing the same. Open a brokerage account (free) and invest in the market, learn as you go. Not for the timid though, I've found out the hard way.

 

[peakbagger]

Saving for the future is a learned behavior. There is the famous marshmallow study where a child is given a choice between eating one marshmallow now versus 2 later on. The kids almost always grab the one now. Many parents keep their kids isolated from finances and the kids see that whatever the parents want they get (the kids dont see the loan payments or the lack of any retirement planning). The kids are somewhat doomed to failure as the behavior learned and reinforced is grab that "marshmallow" now. Why set aside money for the bad times, their parents will bail them out and it they have tapped their parents to point where they are on medicaid (welfare for seniors) then the government will step in.

I guess I and lot of other hearth folks are just the odd ones. Cutting seasoning and burning wood is inherently delayed gratification. Heck of a lot easier to just crank the dial on the oil or gas furnace than dealing with wood. My guess is take a snap shot of the hardcore wood burners who heat their homes with it and compared to the general population we are probably better equipped for the hard times.

 

[SpaceBus]

Always easy to say that AFTER you've made your billions. Like he said he started investing as a kid and learned what to invest in, nothing to stop anyone here from doing the same. Open a brokerage account (free) and invest in the market, learn as you go. Not for the timid though, I've found out the hard way.

Actually there is. It's called socialism if every single citizen invests their money. I have been preaching this for years, but it falls upon deaf ears. If every single American put $20 into an annuity every month then we wouldn't have these problems. That annuity will garner tax money for the man and earn gains for the owner of the annuity. If every single American invested just a small amount of money it would destroy the economy I think. It's not designed to deal with that kind of input.

Currently in our quasi capitalist system there are artificial road blocks to succces, primarily in the form of our education system.

 

[PaulOinMA]

… road blocks to succces, primarily in the form of our education system …

Can you elaborate on that? What are the roadblocks to success in our educational system?

 

[NickW]

Actually there is. It's called socialism if every single citizen invests their money. I have been preaching this for years, but it falls upon deaf ears. If every single American put $20 into an annuity every month then we wouldn't have these problems. That annuity will garner tax money for the man and earn gains for the owner of the annuity.

That type of thinking has been preached by many for years, but most don't do it. Run those numbers through an anuity calculator...

If you start an anuity at the age of 18 with $1000 and a rate of 6% and monthly add $20, at age 68 you will have less than 100k. Now start that same thing with $500, add $20 monthly PLUS $500 annually and you'll have 235k. Either way a nice chunk, but not enough to independently support yourself through retirement; although barring catastrophic circumstances the 235k might be close. Add it to Social Security and most would probably be fine.

Is this a mandatory government run anuity like Social Security? Deduct the cost of the fed running it. Now where does that 6% interest come from? How does the federal government make money?

Is this independent investment? Then it's not socialism; but like you said, most don't/won't do it. Those who do will inevitably be supporting "greedy big business" who will make more off your money than you do. Take the incentive of making a bunch of money off of it away and there is no reason for them to do it. Now where do you put your $20/mo?

The fed takes more than that $20/mo for Social Security and you can't really expect to live off of that...

I personally don't trust the fed to manage my money wisely or cost effectively. Most people don't handle their own well. Catch 22... The government isn't efficient or fiscally responsible, people as a general rule aren't either, big business and the 1% are greedy...

So where does this leave us?

IMO (change the order to suit your preference, but this is the order in my mind - I am sure some would reverse the order):

#1. Personal responsibility. Learn a skill or provide service that is in demand. Nobody should be expected to take care of you if you are physically capable of taking care of yourself. Don't have more kids than you can support. Be fiscally responsible.

#2. The "rules" need to be fair without taking away the incentive to excel or driving companies out of the country.

#3. The government needs to be fiscally responsible.

#4. It appears we may be screwed - as in there won't be any significant change? See #1, 2 & 3... People will always want the easy way, the rules will probably never be "fair", the government will spend our money irresponsibly... Without #1, #2 won't change anything long term. Without #3, #1 & #2 won't change. Without #2, #3 won't change & #1 will continue to feel it's hopeless... All 3 would have to happen at the same time or in very short order, and that my friends is the (impossible?) nature of the task. I think #2 & #3 are possible; unlikely, but possible. #1...? I have faith in a person, almost any person; but in people in general as a whole...? Ahhhh, the complexities of the human condition!

It's (again IMO) the social that shapes the economic. Groups #1 & 3 need to learn responsibility, group #2 needs to be less greedy... and no, I don't endorse Socialism. That removes the incentive to excel or take personal responsibility.

 

[begreen]

Capitalism 1970: Work hard and you too can be rich.
Capitalism 1990: Work hard and a few crumbs will trickle down
Capitalism 2020: You should be willing to die in order to save the economy for the top percent.

 

[begreen]

That removes the incentive to excel or take personal responsibility.

That is not backed by fact as Germany, Canada, and others have proven. Treat a worker well, with a good wage, benefits and good working conditions and you will get good performance. We used this formula when launching a professional photo-lab in the middle of the Reagan era depression and quickly beat all the competition. We retained the highly skilled workers better than any in the region. This helped propel the lab to one of the top in the nation in just a few years.

 

[PaulOinMA]

Germany and Canada are socialist economies?

 

[begreen]

Germany and Canada are socialist economies?

By our definition for sure. Democratic socialist policies abound in comparison to the US. That said, what most Americans call socialism is not even close to the real definition.
(broken link removed to https://www.tatsachen-ueber-deutschland.de/en/chapter/society/strong-welfare-state)

SGI 2014 | Germany | Social Policies

The SGI is a platform built on a cross-national survey of governance that identifies reform needs in 41 EU and OECD countries. The SGI brings together a broad network of experts and practitioners aiming to understand what works best in sustainable governance. Advocating the exchange of best...

www.sgi-network.org

 

[PaulOinMA]

I thought we were discussing economies and, by default, economic freedom. Their economic freedom is comparable to ours.

 

[PaulOinMA]

That is not backed by fact as Germany, Canada, and others have proven. Treat a worker well, with a good wage, benefits and good working conditions and you will get good performance. We used this formula when launching a professional photo-lab in the middle of the Reagan era depression and quickly beat all the competition. We retained the highly skilled workers better than any in the region. This helped propel the lab to one of the top in the nation in just a few years.

Are you saying that absolutely nobody was terminated for under-performing in those few years?

 

[bholler]

I thought we were discussing economies and, by default, economic freedom. Their economic freedom is comparable to ours.

We are not talking about pure socialism here. That simply doesn't work just as pure capitalism doesn't work. We are talking about democratic socialism which is a combination of capitalism and socialism. It is pretty much how our country has worked for a long time. Just with a few more social programs.

 

[begreen]

Are you saying that absolutely nobody was terminated for under-performing in those few years?

A few, but not may. In general we hired the cream of the crop so only a very few left and they were usually maintenance people. We did lose a couple people over the years that went on to develop their own photography careers. But then we gained some new people and cross-trained others to keep up with rapid growth. This was a professional lab, with high-value clients, not the photo-mill for snapshots.

 

[PaulOinMA]

Hire the best and pay them commensurately. Sounds like a capitalist socio-economic model.

Don't think people in this country want to see a European-model tax structure to pay for socialist programs.

 

[vinny11950]

I am amazed at how poorly this bailout was handled. I am hearing a lot of stories of small businesses now laying off their employees because their loan applications were denied this week. It looks like a big chunk of the money went to businesses that didn't need it. And it looks like there was a lot preferential treatment being done by the banks to channel these loans to their best clients, not the ones who needed it.

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It would have been better for the federal government to pay all wages to July. Then have the Federal Reserve open accounts for every business that needs the money (means testing), and just give them loans, like they did all those financial institutions for their junk products. The loans would just go on the Federal Reserve balance sheet, no big deal now that they are handing out trillions. Over ten years, if the economy keeps growing, those loans will be more than manageable. Unfortunately the priority from the Federal level is not to save small businesses and keep people with their wages whole until this mess clears out.

Talking about priorities, if Remdisivir turns out to be a really good treatment for Covid 19, will the owner of the patent allow copies of the drug to be made at lower prices? I would argue that for the good of the economy their patent should be suspended and cheap versions of the drug manufactured. If there is a treatment, people will feel confident going back to work and if they get sick they (or their family members) don't have to die because of it. At this point the hardest part of getting back to work will be restoring confidence that people are safe to move about. This can be achieved with treatments and testing - both are not guaranteed right now. So the economy will continue to flounder.

All the sports are now suspended. I have heard a few MLB reporters say there is a good chance the season may be cancelled altogether. Next up is going to be college and NFL football in the fall, when Covid may have another resurgence.

We are looking at 20% unemployment by July. People are going to be starving. Jesus Christ this is bad.

 

[NickW]

Maybe they should hire the $15/hr deserving high school dropout burger flippers at $25/hr so they can really support themselves well instead of the cream of the crop...

We are not talking about pure socialism here. That simply doesn't work just as pure capitalism doesn't work. We are talking about democratic socialism which is a combination of capitalism and socialism. It is pretty much how our country has worked for a long time. Just with a few more social programs.

So what I've suggested several times here about the system is fine, but the rules are broken...?

 

[begreen]

Hire the best and pay them commensurately. Sounds like a capitalist socio-economic model.

Don't think people in this country want to see a European-model tax structure to pay for socialist programs.

Having co-workers in Germany I can say that they are much more satisfied with what they get for the taxes they pay.

 

[PaulOinMA]

My wife and I worked for a German company. It's the model they've always known.