The poor are still spending ALL their money, the rich are still hoarding theirs

[SoCalDem]

The "middlers" seem to be the key to the locked-up economy.

Poor people probably don't eat out much at places like Red Lobster, Chili's, CoCo's, Applebees, etc.

They probably also don't stay very often at hotels or travel that much by air or on cruises.

The probably don't go to "day-spas" or spend much on extras.

These seemingly insignificant "extras" are vital to the people who work IN those places. Without hours on the job, THEY have no money to spend for the little "extras" for their own families. They don't take that mini-vacation weekend or buy that new bedspread, or sign their kids up for sports. They rent movies instead of going to the theater.

The rich always do fine, no matter how loudly they whine about how tough things are for them..

Boo-Hoo, so they have to lay off the staff at their 3rd vacation home in the Hamptons, or maybe they lease the new jet instead of buying it...or they make-do with a 50ft yacht instead of the 80 footer.

They spend what they need for the things they want, and mostly do not want for anything, but they often "shop" in a tight inner-circle. Sure, someone somewhere makes the things they buy, but they probably contribute very little "shopping" to the mainstream retail economy.

Retail & Service is where most people work these days, and where the large bulk of spendable income is generated and recycled. The poor spend ALL their money in this arena, so they are more than "doing their fair share".

The middlers are the ones who are being "shy" these days...why?

Lets see:

If they HAVE a home, it's probably their one-and only, and is probably NOT "paid for". They are "renting" from a mortgage company or bank, and are probably paying a mortgage amount every month that is based on a value that has long-since dropped like a rock.

When they signed on the dotted line, they probably extended themselves as far as possible, being optimistic that their wages would keep up and the home-value would stay at least as good as then, or maybe even increase.

What they did NOT expect, was for them to be on the hook for payments on a home worth 1/3 to 1/2 less than their loans, or that they would be getting laid off or having hours cut dramatically. They did not count on having their 401-ks losing 1/4 to 1/3 value.

They did not expect their credit lines to be slashed or eliminated. They probably figured out pretty quickly that they had been relying on credit too much, but unlike banks, they had no bailout headed their way.

A logical response to all this, is to cut back on spending, and that's what we did.

The unfortunate part is that the "non-spending", in an economy comprised of 70% "service & shopping", took a mortal blow.

Without an massive infusion of aid to the middle class (and I DON'T mean tax cuts), nothing will change anytime soon.

No one in government has the power or guts to do what is really needed, so we will probably slog on as we are now, with foreclosures and layoffs continuing, for the foreseeable future.

What would/could help?:

1. Student loan forgiveness
2. Mortgage PRINCIPAL adjustment
3. Loan re-dos to eliminate the "adjustable" rates
4. Re-set of mortgage interest at 4% MAX..(big banks get $ @ 0%)
5. Cap credit card interest at 10% MAX, but reinstate realistic credit limits
6. Put vampire check-cashing/payday loan places out of business
7. Either "create" jobs, subsidize them or at least continue the unemployment benefits.

The goal is to PUT MONEY INTO THE HANDS OF PEOPLE WHO WILL SPEND IT.

That's in the here and now, but the long-range goal should be to get back into the business of actually making things we need. as long as we are hostage to doing each other's nails , serving food to each other, and shuffling papers for each other, we are always going to be insecure.

If we make the stuff we all need and want, we have a logical cycle again, and can earn, spend, save money derived from our own labors, and our own commerce. ( I know it sounds anti-globalization, but enough's enough sometimes, and if all our spending & buying is doing is generating profits for already rich corporate fat-cats, what's in it for US?)

I know that in the abstract, globalization sound great, but wasting fuel schlepping stuff made elsewhere all over the place is part of the climate change problem and the pollution problem, and the oil-hunger problem, as well as job insecurity.

[geckosfeet]

1. Instead of government funding research and bailing out bankers, why

don't the companies and people with money do it? Why should millions of little guys pay taxes to bail out a handful of corporations and rich guys?

[Initech]

5. Exactly. *THAT* is trickle-down economics.

[jotsy]

2. I have suggested to utility companies

that they spend just one year helping out by parceling out their customer base into 12 equal portions and give each portion a month with no bill! It's only 8.3% from month to month, so I don't see as how it would really hurt them too much.

Power
Phone
Water
Garbage
Cable/Sat
Car Payments
Credit Cards

Doesn't seem like a lot to ask, but anytime I suggested it, I was laughed off the phone.

[RB TexLa]

3. I try to spend as little as possible, and I am very good at that.

[KillCapitalism]

4. It's all a numbers game.

Spending $2,000 a month to live is too easy and often that amount doesn't last a whole month.

On the other hand, someone bringing in $20,000,000 a month will have a really hard time spending it in that time period.

[Travis_0004]

6. If you force credit cards at 10% and mortgages at 4%. . .

Then what are you going to do when banks stop loaning money to people with marginal credit.

Its not profitable to issue a credit card at 10% to people with bad credit. They default too much, so if I owned a bank, I wouldn't loan credit at all to anybody who had bad credit if I could not get a high enough interest rate to secure a profit.

Also, Government bonds (30 years) are paying 4.375%, so if you capped mortgages at 4%, then a bank wouldn't loan to anybody, since you can make more money with 0 risk.

Its not about being mean, but banks will take the option with less risk, unless they get compensated for the risk. Your ideas would freeze up the credit market and make credit impossible to get.

[SoCalDem]

10. That's the way banks USED to loan money..

You had to have good credit to borrow, and you had to have a real down payment when you bought a house. The recklessness of banks is a large part of the "problem".

"Plastic" replaced wage increases, but sooner or later (and it is now very much "later") the piper must be paid.

Houses used to appreciate in value, slowly...over time also, which kept the prices modest, so more people could afford them. There are places where "ordinary" people just cannot buy a home, no matter how badly they want to. This is another problem for society too, because the young people are being FORCED to leave the places they grew up, because they cannot afford a home, so they all migrate to the outer rings and create pressure for schools where none existed before, and the schools in the aging (but more affluent) areas have to lay off teachers and many just close up.

and also, bear in mind that "some" businesses may not need to exist in the first place. If you are running a business on such a negative basis that you have to continually borrow to make payroll, maybe your business is not successful..Businesses used to borrow to make improvements or to expand, but these days they are borrowing to buy merchandise and make payroll..

[hobbit709]

12. Even with good credit, the credit card companies screw you.

Chase upped my interest rate to 31.99% from 17.99%just before the new law took effect. I had never missed a payment, always paid more than the minimum and was not over 50% of my limit on the balance. When I called to complain, their attitude was "tough shit"

I got a card from my credit union and about had a heart attack when I saw what the limit was-it was over double the total limit of the TWO chase cards. I transferred the balance from the one Chase card-the other was already paid off. My new card has a 0% on balance transfers for a year and it will be paid off by the end of this year so no interest. After a year the new card has a rate of 11.99%.

I told Chase to cancel the two cards and they seemed mildly surprised when I told them that the reason was that they wanted more interest than the local loan sharks.

Our mortgage 20 years ago was locked in at 7.59%-it will be paid off in about 7 months. Of course the property taxes have skyrocketed. The house has tripled in assessed value but the taxes are almost 7 times higher than what they were in 1990. This makes it fun since my income is about 40% of what it was in 1990.

And I consider my self better off than a lot of people.

[Imagevision]

7. I disagree seeing so many businesses gone out of business here in Naples Florida ($$$)

[Canuckistanian]

8. Money is like manure

Pile it up in one place and it starts to stink.

Spread it around and it does some good.

[Wilms]

9. .

[trotsky]

11. Ours is a demand-side economy.

Supply-side was always doomed because what created the great American economic boom was the creation of a vast middle class with a good amount of disposable income.

Truly, selling supply-side is one of the marketing marvels of the 20th century, convincing so many people to vote against their own best interests.

[blindpig]

13. A major government jobs program would do the trick

but we know that wouldn't sit well with the Chamber of Commerce so it is unmentionable.

[phiddle]

14. Simpler solution: Drastically raise the personal exemption.

Currently the PE is $3650, as if someone could live on that? IMHO it should be raised to the equivalent of full time minimum wage work, or $14,500 per year before income tax is levied. ($7.25 per hour x 40 hours per week x 50 work weeks per year). The loss to the US Treasury should be made up by taxing capital gains and dividends as wage income, plus raising the transaction tax on securities. These changes would be simple to write and enforce, equalize the tax treatment of labor and capital, and would keep a lot more income in the lower classes than currently, thereby helping the demand side of the equation.

[glowing]

15. It's very basic economics. Somehow those with the fancy degrees and lots of loot

Don't understand these basics. Or there is something more sinister going on. Perhaps they r just really that out of touch. You would think pres Obama could catch a clue. Or listen to those he used to help as a community organizer. One meeting with any avg person would clue the idiots in.

[femrap]

16. The rich love to sit

around and count their $$$. It takes all day to do it and then they are exhausted and go to bed.

The rich don't build anything. They don't want to start new businesses because that would be TOO RISKY and they might lose some of their money. Plus they lazy...well, not lazy, just tired from counting all that money. And let's not forget that most of these rich, tired folks did NOTHING for the money....they were simply born into a rich family. And most of them are apples far from the tree....spoiled brats.

And they don't want to loan it to people who want to start a business...again, TOO RISKY.

And just what kind of businesses are regular, everyday working people going to start anyway? A 'mom and pop' store to compete with Walmart, Target, CVS, Kohl's, Home Depot, McDonald's, Taco Bell, etc. etc?

Just what kind of business does the 'little dude and little dudettes' start? Walmart and the others won't allow competition...they'll squash any kind of competition. And who would shop at the competition when their prices are so much higher due to the fact that they can't get 'volume discounts?'

And if a 'little person' does come up with a good idea that competes w/ the big boyz, what happens? The little person is pushed out if he/she doesn't sell out to the big boyz....who will take the little person's good idea and sit it on a shelf FOREVER.

So what's left for regular little people? Retail jobs at $8.00/hour. OK, Walmart has been very good and generous in Chicago and will offer $8.75! Whooppee!:sarcasm:

I f*cking hate multi-nationals and their evil ways. May they choke on their money!

[SoCalDem]

18. My aunt ran a small boutique clothing business

and I do mean SMALL.. The whole place was about the size of my living room/dining room.. She paid $175 a month rent, and ran it as strictly cash & carry. Her only employees were herself, my uncle and ME..and then later my sister.

That little business paid for round the world cruises every year for her and my uncle, and they were very generous too...always helping the family. *they had no children of their own. The yearly 3 month cruise & their new Cadillac every other year were their only vices. They lived in a tiny, but paid-for 2 bedroom house in a not-so-nice part of town, and they took no salary. They paid their "help" (me!) peanuts, but augmented the salary with chic clothing at cost :)..(what teen would not love that?)

She had a loyal customer base because she sought out clothing that was not carried at any other store in town, and then purchased stuff that she knew her customers would love:)

The reason she was successful?

This was during the "downtown era" and there were no malls/shopping centers/discount places dead-set on putting her out of business.

In her later years, this was not the case, and she chose to sell out because once those places were in operation, the downtown died and she could not make any money as she was too old to run it herself and all her "help" had married & moved away:cry:... She started the business in the late 50's and it finally closed in the early '80s.

I really think that finally letting go of it led to an earlier passing for her. her health declined sharply after she retired:(

[femrap]

22. I remember

that kind of retail...and I hated to see it go.

All the downtowns have died except for a few, I guess. And in this economy, people simply aren't spending money except for the necessities.

You'll see some mom and pop retailing around universities or 'art' districts. But as a small retail business owner, one is going to be working 10 am to 9 pm.

I don't what would be a decent business to start these days.

I am glad you had a wonderful aunt and uncle....and they had a successful business (until Raygun).

[WillyT]

17. You See This ??? - K & R !!!

Link: http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=389x8703991

:shrug:

:hi:

[SoCalDem]

19. yup.. they can't be bothered with ramping UP their businesses

they'd rather sit on the sidelines & watch the carnage:(

[Greyhound]

20. K&R. Capitulation to evil never results in anything but more evil.

[CoffeeCat]

21. Many are still scared to death...

When the economy imploded in 2008, it was like someone dropped a bomb on a party. Suddenly, everyone
realized how vulnerable they were. Too much house debt, too many credit cards and too little savings.

People either lost a job, took a paycut or knew many people who endured one or both of those things.

2008 put the brakes on a way of life. People were out of control with spending money they didn't
have. You're right, it's the weekend getaways, the Applebee's dinners and the $75 trip to Target
for cotton balls--where you end up spending $120 on random stuff that you don't really need. People
have cut back on much of that stuff. They've always wised up about the big farce that credit cards
are.

I'm afraid that way of life is pretty much gone. You'll always have reckless people, but more people
are scared shitless. The $100 vase at Pottery Barn that many would have purchased on a whim with a
credit card---now seems foolish and unnecessary.

That's why the economy won't return to previous levels. We've experienced a paradigm shift.

[SoCalDem]

23. I don't see how Pier 1 stays in business

Every time I go there, I am the ONLY customer:(

[CoffeeCat]

24. I know!!!!

That's very interesting that you should mention Pier One. I rarely go in there, but
if I do--I get incredibly cheap stuff that's on clearance. Love those red tags!

Pier One has to maintain a very high level of inventory. That store is all about
the tons of pretty glasses, dishes, etc.--and how they all collectively look
and sparkle together. I don't understand how they're still in business either! As
you said, I'm usually the only one in there when I'm there. I rarely see cars in their
parking lot either. The store in our area is in front of a Super Target and a Kohl's and
other popular stores, so there is high traffic.

Interesting, huh?

[nadinbrzezinski]

25. Globalization, so people get it

is not about paying you and me.

This is about 20% of the cost for ACME widget (insert widget here) best case. They move production lines, lock stock and barrel, because of other externalities that they'd love OUR guv'ment to remove. As much as regulations have gone down, we still have EPA and OSHA and other stuff that really IS expensive. Never mind, as I told a critter who exported jobs, sooner or later you and I will not be able to buy their crap.

That said, they are in the process of CREATING a world wide consumer class that will do that... and right now they are not too concerned... I mean we are only 300 million... China, the new frontier, has what over 1.5 billion? Even if ten percent of their population consumes... it is more than the total population of the United States.

It is sickening when you open the hood and look inside that engine. Oh and trust me, capitalism it is not.

[SoCalDem]

26. Amazing how so many people don't get it.. They think getting a pair of $1 flip-flops is Nirvana

and then they wonder why they haven;t had a real raise in years..a raise that was not overtaken by an increase in their insurance premiums, or why cars have to be financed for 6-7 yrs, or why a modest house is out of reach..

It's ALL connected..

Bad-for-you food remains cheap, and "entertainment" on tv is cheap,, and the tvs themselves can be cheap, so Bread & Circuses are there for us, but the peace of mind that allows us to enjoy life, is gone, and had been for a very long time:(

[uncommon]

27. I actually have no pity for people whose houses are losing/have lost value...

I work in a bankruptcy law firm and I see this every day. People buy real estate for the wrong reasons and then feel betrayed by the universe when their "investment" loses money.

A house is not an investment unless you are wealthy and can afford to limit the amount of financing you need OR hold the property long enough to account for significant market fluctuations.

A house is a liability - it is something that will cost you hundreds of thousands of dollars and that you will likely never own outright since most people continue to borrow against any equity they do have.

I actually have more respect for people who buy homes as an emotional investment - to have a stable place to be over the long term. These people are much less likely to gripe when the value of their home, inflated to begin with, drops to a reasonable level.

[SoCalDem]

28. Homebuying has changed over the years (that's part of the problem)

We've been in this same ugly old house since 1982, and could have "moved up" many times, but I HATE packing:evilgrin:..but too many people bought into the movin'on up meme.

Our house has been underwater many times during the time we have lived here..when the air force base closed, the value plummeted, and of course the fake values that made it skyrocket went away too.. The only ones who make out big are the ones who are lucky and cash out at just the right moment and then move to cheaper locations.,.

We bought , to have a place to live..a home..not as an investment.

People also used to buy their first home, well into their 30's AFTER they had been saving money for a long time.

Banks pushed the myth that anyone could own a home, and not surprisingly, people took them up on it:(

I object to the fact that banks got bailed out for their "bad loans", and then also got to KEEP them on their books. The foreclose, push people out, and then end up dumping the house for a price that the people living there COULD have afforded.