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Economy

Frugality, savings, and the causes of doom

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Okay, I know that writing about the same thing other bloggers are posting is a form of mob journalism, much to be avoided. But what the heck… Pimp Your Finances is riding one of my favorite hobbyhorses, the argument that saving and frugality are harming the economy. We cheapskates are to be blamed for the fall of civilization as we know it.

No. ‘Fraid not.

As I was harmonizing with PYF’s rant, it occurred to me that there’s a subtle difference between saving and frugality.

Saving means setting some money aside for future use. Generally savings go into bank accounts or into other financial instruments with higher risk and higher potential return.

Frugality means living within your means: spending less (or at least no more) than you earn.

Most people who are frugal are in a position to save money; obviously, if you manage to spend less than you earn, you can take that unspent money and invest it somewhere. But some people who are profligate—who have run up revolving debt or have bought more house than anyone in their right mind could possibly claim to need—also are able to save money, if only through mandatory 401(k) or retirement fund contributions.

My Journey to Millions added a comment to PYF’s post noting that savings do not get locked in a vault somewhere. Banks loan out depositors’ savings (or so they’re supposed to do) to individuals and businesses, and that’s a large cog in the wheel that is our economy. When banks refuse to lend, as they’ve been doing in the present crunch, the economy grinds to a halt. Thus saving not only is not bad for the economy, it’s crucial to any nation’s economic health.

What short-sighted critics are saying is that frugality—which they equate with miserliness—is wrecking the economy. These are the ninnies who suggest that if we would just all hurry to the mall and max out our credit cards on junk we don’t need, everything would be just fine.

Here’s the hitch in this thinking:

When the bank owns your car, your house, your furniture, your clothes, and the dinner you sit down to at a restaurant, you’re renting your whole life and you have nothing. Although you may look affluent, the truth is you’re living in poverty. Living on the cuff creates the illusion of wealth, but it’s only an illusion.

It’s like living in the Land of Oz. Behind the lights and mirrors, our late, great “prosperity” was phony. With everyone spending until their income went mostly to service debt, no one had a REAL nickel or dime to rub together.

When everyone spends and saves responsibly, from the average person on Main Street to the A.I.G.’s of this world, then the economy will be healthy. The economy is healthy when most consumers, businesses, and lenders are financially healthy.

There’s no “paradox of frugality” here. None at all. Just a fake wizard in an Emerald City.

More on unemployment insurance ripoffs

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Remember that I mentioned the Unemployment Insurance representative told us, during the 90-minute chivaree in which all us furloughed Great Desert University employees were to sign up for the Shared Work program, that we should be careful of the various “fees and penalties” Chase Bank was likely to charge against the required debit card we would be given? Well, the guy wasn’t kidding.

CNN runs an article today detailing exactly how many gouges the banks are digging out of Americans’ unemployment benefits: 40 cents for the privilege of asking how much remains in your balance; 50 cents if they deny your card; 35 cents to access your account by phone. According to this report, ripoffs range from around 40 cents to as much as $3 per transaction.

These, we may note, are being coughed up to the very institutions whose executives are using the taxpayers’ TARP money to frolic in fancy resorts and fly around the country in private jets.

Oh, yeah, speaking of gouges: you get to pay income taxes on your unemployment insurance, too.

Talk about a Nation of Sheep. I can’t believe we’re not at the barricades!

The William E. Morris Institute, a nonprofit that represents low-income people in court pro bono, is spearheading a class-action suit against Arizona’s Department of Economic Services, which administers Unemployment Insurance disbursements here (after a fashion). The complaint is that DES isn’t processing claims fast enough—or, in some cases, at all. That’s not surprising, given the agency’s antediluvian operations.

It’s good to hear that someone, somewhere, is trying to put these clowns’ feet to the fire. What’s amazing, to my mind, is that we don’t have riots in the streets. But I guess as long as we can afford our cable bill, we can keep sucking on our pacifier. What, us worry?

How do we deserve these morons?

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Yesterday I heard our new governor, Jan Brewer, the Republican former Secretary of State who succeeded Democratic Governor Janet Napolitano, speaking on the local NPR station. Some of the things she said were breathtaking. It is hard to understand how such retrograde fools get into public office.

Well, no it’s not. One of her proud constituents called in to ask her when she was going to abolish all-day kindergarten, a blandishment Governor Napolitano fought long and hard to establish. He remarked that all-day kindergarten, which has been shown to improve children’s school performancesubstantiallyover the long run, is “nothing but day care for working mothers.”

So, I guess we get what we deserve: we raise up ignoramuses in our third-rate public schools, and we get ignoramus voters and ignoramus leaders in state and national office.

Brewer took several opportunities to repeat the local Republicans’ party line: that all of the state’s financial problems can be laid squarely on the shoulders of former Governor Napolitano. Every economic woe that afflicts us, from the collapsed real estate market to the government’s emptied coffers, are 100 percent her fault. As though no national and international economic crisis ever happened; as though the state of Arizona existsin its own little vacuumindependent of the rest of the world, its fate determined solely by an evil Democratic governor. And as though our fine Republican leadership had never heard the concept that we must work together to solve this mess (they probably haven’t: remember, these are members of the party that elected another governor who admitted to never reading anything but the Bible).

Apparently these people are totally unrepentant, and they are incapable of understanding that their bankrupt and now discredited “philosophy” (not to say “doctrine”) is what led to the collapse of the U.S economy. It would be wise to keep this in mind come the next elections. There are still people in office who have learned nothing from the present disaster.

A note to the governor, sent this morning:

Dear Governor Brewer:

I would like to let you know how offensive and small-minded your comments about your predecessor sound. This sort of back-biting and nastiness is exactly the opposite of the leadership our state needs in these difficult times. When I hear you and your colleagues speaking in this way, I can only conclude that none of you have learned a thing from the fiasco your party’s misguided thinking has caused our country. Frankly, it makes you look not too bright.

Please quit it. And let’s show a little humanity and intelligence, instead of vengeful and nasty meanness now that your party is back in power here and can get away with any damnfool thing you like.

If I were queen of the world…

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SDXB forwards this bit of intelligence from Bloomberg:

Feb. 9 (Bloomberg) — The stimulus package the U.S. Congress is completing would raise the government’s commitment to solving the financial crisis to $9.7 trillion, enough to pay off more than 90 percent of the nation’s home mortgages.

And from the Latin American Herald-Tribune we learn this:

SAO PAULO — General Motors plans to invest $1 billion in Brazil to avoid the kind of problems the U.S. automaker is facing in its home market, said the beleaguered car maker.

According to the president of GM Brazil-Mercosur, Jaime Ardila, the funding will come from the package of financial aid that the manufacturer will receive from the U.S. government and will be used to “complete the renovation of the line of products up to 2012.”

“It wouldn’t be logical to withdraw the investment from where we’re growing, and our goal is to protect investments in emerging markets,” he said in a statement published by the business daily Gazeta Mercantil.

Got that? Unimaginable amounts of U.S. taxpayer dollars are being forked over to corporate interests, who are taking that recovery money and investing it in jobs in overseas, while American workers are being thrown out of their homes.

These two reports go to prove my own theory:

If Congress handed out the cash to the people who need it—that would be you and me, folks—the “crisis” would be solved.

If everyone in the country were given enough to pay off the average U.S. mortgage and required to use the money that way,the mortgage crisis would end today. People would suddenly have between $1,500 and $5,000 a month back in their pockets, and they would start to spend again. Everyone would be solvent, and bankers would no longer have to worry about whether people with credit scores in the high 700s could make payments on loans.

Let’s suppose your mortgage weren’t as high as the handout. You’d be required to pay off your mortgage, and then you could keep the rest of the dough. If you were one of those virtuous doobies who actually scrimped, saved, worked three jobs, and paid off your mortgage, you would get the entire handout, no strings attached.

If your mortgage exceeded the handout, you’d be required to apply it all toward your mortgage, AND your lender would be required by law to let you refinance the rest at a reasonable rate, no more than 5% or 5.5%.

Everyone would win. Mortgage lenders would get their money back and not be stuck with a dog of a house that can’t be sold. They could now start over with a clean slate. Borrowers would get out from under toxic debt. For most people, it would no longer matter whether they could sell their houses for what they paid for them. And people who were willing to stay in their homes for a few years would be golden.

What a flicking outrage. You don’t suppose I would ever buy another GM car, do you? I buy Japanese cars because the two Chevvies I’ve owned were junk (though not as bad as the Ford Lemon that was my first car). In the past, I’ve bought anything but American because of the awful quality and safety issues. Now, you can be sure, I won’t buy an American car on principle.

Cleaning lady layoff day

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mopTrying to work up the courage to call the new cleaning ladies and tell them they won’t be coming back. The “furlough” (read “pay cut”) will excise almost twice what they charge from my paycheck. And paying what they charge was a stretch in the first place.

So, I feel bad about that, because I’m sure they wouldn’t be doing the work if they didn’t need the pay.

On the other hand… The last time they were here, Norma announced she didn’t like the steam cleaner I use on the 1860 square feet of tile that covers my floors…could she use the mop and Simple Green? Sure, said I, thinking each to her own.

I then went on about my business. When I came back in, I thought the house smelled mighty strongly of Simple Green. It didn’t smell of Simple Green: it reeked. And it continued to stink of perfumed detergent for the next three days.

Odd, thought I, since that never happens on the rare occasions that I clean the floors with a mop. Ohhh well.

Well, a couple of days ago I went to grab the big bottle of vinegar out of the the garage cabinets and found the lifetime-supply bottles of Simple Green in front of it. Pick one up to move it out of the way and whoa! It’s almost empty!

Those women used almost an entire gallon of Simple Green on the floor! What the heck did they do? Dump the stuff into the bucket and use it undiluted? For hevvinsake, no wonder the place stank.

A gallon of Simple Green will last me for a good six months, or more. It’s not like the stuff is cheap or easy to find—Costco quit carrying it, and Home Depot only recently picked it up. So now I’ll have to pony up money out of my reduced paycheck to buy some more of that stuff. And come next cleaning day, I’ll have the fun of scrubbing the residue up off the tiles. Wheeee!

Just goes to show, if you want something done right, do it yourself.

Teapot’s tempest loses steam

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Hmmm… This furlough thing may not be the disaster initially envisioned. Instead of requiring people to take a day a week, as was our first impression, HR (always a fount of accuracy…) is saying they expect employees to take one unpaid day per paycheck.

  • For faculty working and paid on a 12-month appointment,this furlough program will beginJan. 30, 2009(pay period 1.26.09