The Negative Saving Rate and the Age of Easy Credit

The Negative Saving Rate and the Age of Easy Credit | Get Rich Slowly

"The personal saving rate in the United States has been declining for years. In the 1970s and early 1980s, it frequently climbed above ten percent. More recently, it has hovered around zero. But the general trend is downward. Americans are not saving."

I.O.U.S.A.

At the bottom of my blog, I have the National Debt. It is updated at a fast and furious pace. That number represents our liabilities. But what if I told you that that number is only a fraction of the overall debt? What about everything else (medicare, medicaid, etc, etc)?

Let's break down the numbers:
11,000,000,000,000 (Total Liabilities)
7,000,000,000,000 (unfunded promise of Social Security)
26,000,000,000,000 (unfunded promise of Medicare A,B)
8,000,000,000,000 (unfunded promise of Medicare D)
+ 1,000,000,000,000 (unfunded Misc Items)
__________________

53,000,000,000,000 Total

I just recently watched I.O.U.S.A. and have included the cliff notes (30 minute) version. If you watch one video from my blog, make it this one. This film boldly examines the rapidly growing national debt and its consequences for the United States and its citizens.




For more information on the organizations mentioned in the video, please visit the following:
-The Concord Coalition
-The Peter G. Peterson Foundation

10 Places NOT to Use Your Debit Card

10 Places NOT to Use Your Debit Card | Yahoo

Debit cards have different protections and uses. Sometimes they're not the best choice.

A lesson in free markets: eBay

I was meandering through Best Buy the other day looking for the box set of The Wire and when I found it, I was taken back by the price.

$154.99 is a lot to pay, for anything.

So I immediately get on my iPhone and open the eBay app, type in "The Wire, box set" and look at the prices. Then it hit me; eBay is the perfect example of a free market. The buyer and seller exchange without much regulation/interference from government (though eBay does have some regulatory rules...but nothing too imposing), no tariffs imposed that favor one seller over another, no quotas on how much can be sold or restrictions on to whom. The seller can raise the price and list it as a "buy it now" option (if it is in high demand), or list it for the lower price and have the potential buyers bid.

Which brings me to my next point...

After the bidding is complete and the item sells for a specified price, that price is exactly what the product was worth to the market.

In this case, the box set of The Wire is not worth $154.99 to the market, it's actually worth $65-80 (this includes straight bidding and most "buy it now" options).

Ebay puts more buying power into the consumer's hands which is not a bad thing.

I paid $70 for my box set of The Wire and that includes free shipping.

More power to the consumer!

Additional Reading:
1.)Greg Perry wrote this about eBay and Free Markets...it's a good read (especially if you don't like Economic jargon).
2.)Adam Smith - the father of free markets.

Exploitation and The Lotto

One of my favorite songs of all time is "Big Poppa" by Notorious B.I.G. In this song there's a line

"Tremendous cream. Fuck a dollar and a dream."

Up the street from my apartment is a 7-Eleven and every time I walk into this store, there is a line of patrons from the register to the back of the store buying Lotto tickets. Some are picking their own numbers (birthdays, lucky numbers, same numbers, etc,etc), while others are anxiously waiting to get their quick picks.

All of these patrons have the same expressions; anxious, hopeless and tired. They are dreamers who can't wake up and who rely on random numbers to fix their situation.

I recently spoke to the manager of this 7-Eleven about what type of customers come in and purchase Lottery tickets and he told me the following:

"People come in here and spend $40-80 on lottery tickets. It's the same people; the uneducated, African-Americans, the poor, the elderly, the ones on welfare that need their money the most yet they are spending it on lotto tickets."

The criticism about the lottery is that state revenues from lotteries are drawn disproportionately from the more disadvantaged members of society. By disadvantaged I mean those with lower incomes, less formal education, blacks, and the aged.

Although the lottery does contribute, by Law, to the Common School Fund (Illinois students and schoolrooms receive nearly $623 million per year in Lottery revenue), skepticism remains.

“Lotteries are, in essence, a form of regressive taxation that distributes wealth and resources away from those who can least afford to pay...it extracts wealth from communities of color, and most particularly from African Americans.” said Paul Street, vice-president for research and planning at the Chicago Urban League.

But the lottery has created even more games to receive more revenue. During the recession, some state lottery sales have risen providing false hope to the unemployed/underemployed. Illinois has even seen its revenue stream of lottery sales rise during the recession.

Unfortunately this makes sense. When you're poor, broke and out of work it's easier to play the lotto with hopes of winning it big then taking control/ownership of your economic situation and doing something to improve it.

Maybe this is part of the human condition; taking the easy way out and hoping for a better tomorrow.

I'll walk into that 7-Eleven tomorrow and I'll see the same people lined up. They'll have the same expressions on their faces.

For some people, all they have is the dollar and a dream.

But I tend to side with Biggie on this one.



Some Statistics
a)You DO NOT have a greater chance at winning the lottery by playing the same numbers each time. Why? Basic randomness. The lottery is built off of randomness. People try to make a connection or see a pattern when there isn't any. You have the same odds at winning with your same numbers each week as the guy in front of you who has his quick picks.

b)You DO NOT increase your chances of winning by buying more tickets. Why? Because you increase the sample size when you do this when it only takes one ticket/combination to win. Having 50 tickets in your hand (and $50 less in your pocket) actually decreases your odds.

Additional articles:
1.)U.S. studies: poor, minorities most likely to play lottery often
2.)Where do Lottery profits go?
3.)‘Instant’ gratification: Illinois residents still buying lottery tickets

5 New Rules for a Healthy Credit Score

Thanks to my friend Bobby for sending me this article. I was going to just post a link but instead pasted the entire article (with a JUMP!).
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5 New Rules for a Healthy Credit Score
by Aleksandra Todorova
Tuesday, March 16, 2010

The rules that credit-card companies have to live by changed dramatically with the enactment of new regulations last month. Now, some of the rules for consumers striving to maintain good credit are changing, too.

For the most part, card holders would still do well to pay on time, keep their balances low and refrain from applying for too many credit cards at once. But some of the old tenets may not always hold up, as credit-card companies continue to adapt to the new environment and look for ways to run their for-profit businesses.

Case in point: Many issuers introduced annual or inactivity fees in the weeks leading to or immediately after the Credit Card Accountability, Responsibility and Disclosure Act went into effect. "Now folks have to decide -- do they want this card badly enough to pay the fee, or do they close it," says Barry Paperno, the consumer operations manager at FICO (FICO). It's a question of more than just losing a credit line. Closing a credit card can have a big impact on one's credit score. That is, unless you do some groundwork in advance.

With the help of some easy -- if often counterintuitive -- steps, you can improve and retain a healthy credit score even in today's fast-changing credit environment. Here are five:

The Warning

FRONTLINE producer Michael Kirk unearths the hidden history of the nation's worst financial crisis since the Great Depression, explore...



"For those who haven't seen it, you can view a very excellent PBS documentary called "The Warning" that was broadcast this evening. You can watch it on the web here. It is the story of Brooksly Born (do a Google search if you are not familiar with her) who was the Commodities Futures Trading Commissioner in the Clinton administration. She first warned the public about the dangers of the unregulated OTC derivatives market and was ruthlessly silenced by powerful government officials and a host of congressmen who knew nothing about derivatives. Brooksly Born was far more intelligent and courageous than her opponents. 10 years later, as she predicted, the derivatives market brought down Bear Sterns, Lehman, and AIG and precipitated the ongoing financial crisis. The video is instructive and underscores the continued need for regulation of these as yet unregulated markets."-Felix, Morningstar forum

A Review: Credit Karma

A friend recently referred me to Credit Karma. Don't worry-I did not hear of them either before this. I thought to myself "Self, great, another credit score company." But he caught my eye when he said

"...wanted to recommend Credit Karma, the website gives you free credit scores. Check it out..."

I admit, I still had some trepidation as I thought to myself "Self, great, another "FREE" credit score company."

But my friend is legit (meaning he's been in banking/finance all of his adult life, holds a Masters in Accounting, CPA, currently pursuing his CFA and he reads good books).

So I check it out. And surprisingly it is FREE!!!

One thing that impressed me with Credit Karma is that the signup was painless and it was relatively easy to use once logged in. Everything was pretty self-explanatory and I received my credit score (along with a nifty graph as soon as my homepage appeared). It kind of reminded me of Mint.

So after I received my credit score I immediately went to myFico and paid for my "actual" credit score and to no surprise, I found a slight variance between the two companies. But in the world of credit scores, a slight variance can cost you many dollars in higher interest rates. Another draw back is that it does not provide credit reports (which is absolutely pivotal to understand your past and present credit history).

I would recommend Credit Karma to anyone who are first-timers when reviewing their own personal credit information. But I would immediately follow that if they want to know ALL of their information, to just go with myFico.

All in all, I rate Credit Karma a 'B'. They showed up for class, did some homework and studied for a couple of tests.