Two pieces that illustrate the same problem. First, from Martha's Vinyard:
But the place he’s leaving is no exception to that fraying. Though presidential photo-ops don’t show it, the island is actually a place where the wealth gap is starker than almost anywhere else in the United States, year-round residents say, and middle-class hopes and dreams are drifting out of reach.
Drifting? No, driven.
The availability of "cheap credit" has made everything from houses to furniture to TVs to cell phones to cars more expensive. Virtually everyone shops a "payment" now instead of a price.
Why else would you hear all the car dealers telling you how they can get you into a new car for "two-ninety-nine!" instead of telling you the price is $24,923?
That's simple -- everyone buys a payment.
House -- same deal. Do you qualify for a house or for a payment? You know the answer -- and the big scam nowdays (and has been for the last decade) is finding ways to get around the down payment -- actual cash on the table has been reduced to record lows, with the goal for many being zero.
Then there's student loans, as Taibbi recently went off on and which I've been covering for years. They are alleged to make college "more accessible." Nonsense; what they do is enslave young people who are our most-vulnerable due to lack of life experience and being that these debts cannot be discharged except under extraordinary circumstance they're one of the worst forms of debt slavery.
The truth is that the basic laws of economics tell you that when there are more buyers willing to pay a given price irrespective of how or why the price of that item will tend to rise. This is true whether the thing is a car, a house, health care, college tuition or anything else.
Ultimately this forces anyone who wants said thing to use credit to obtain it as the ability to pay cash dwindles away.
And that, ultimately, destroys the middle class by making the true cost of such pulled-forward demand rise so high that it cannot be afforded at all.
So long as the government coerces this behavior for its own benefit so it can hand out money to its favored few, whether those be "poor" people (with iPhones of course) or defense contractors this cycle continues until it is either voluntarily abandoned or it is forced to stop by impact with the zero boundary.
Oh wait..... where are we now? Hmmm...
The only way this destruction of the economy will stop is when the subsidy for ever-cheaper credit, including things such as demanding financial information and sign-offs from parents at colleges, back-door (and front-door!) bailouts for lenders and manipulation of the credit markets by both Congress and The Fed (doing Congressional bidding) stops.
This will force the bankruptcy of many firms that simply cannot compete in a free market and offer their goods and services at a price where people can pay without said subsidies. These bankruptcies will include car dealers, colleges and phone companies among others. But all those bankruptcies are healthy as they will drive down prices while clearing all the excess debt from the economy at the same time.
There are many who claim that such "deflation" would be ruinously bad. They're wrong -- it would be a huge boon to everyone other than those who have their so-called "wealth" tied up in these over-levered bastions of scam.
And that is most of America.
Consider health care at one tenth of today's price. It's achievable; hell, you can have surgery today at 1/5th of today's price in the United States for cash. I've written about the Surgery Center of Oklahoma repeatedly.
Consider college education at less than one half of today's price. It's achievable. Easily so.
Consider cars at materially less than today's price. They're achievable.
Consider houses at half of today's prices or less. That's achievable too, and so is a 50% reduction or more in municipal spending.
Oh sure, we have to accept that along with this there will be a reduction in municipal services. There will no more gold-plated pensions for cops at $100k+/year including full free-ride medical benefits starting at age 50. There will be no more "school administrators" collecting six-figure pensions (and in some cases two or more of them!) either. There will be no more gilded crap on University campuses -- unless you can afford to buy it with cash, and most people both can't and won't. And there won't be any more medical monopoly games, because there will be a market and if you try to restrain trade you'll go to prison as you should have a decade ago.
The only remaining question is this: Will you rise, right now, and demand all of these changes?
Or will you opt to do nothing, be a slave and worse, enslave your kid(s) as the inevitable secular change in the interest rate environment unfolds right before you?
I ask this because that change is happening now and there is nothing anyone can do to stop it.
The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.2 percent in July on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 2.0 percent before seasonal adjustment.
The rise in the seasonally adjusted all items index was the result of increases in a broad array of indexes including shelter, gasoline, apparel, and food. Despite the gasoline increase, the energy index rose only 0.2 percent as the natural gas and electricity indexes declined. The increase in the food index was caused by a sharp rise in the fruits and vegetables index; other food indexes were mixed.
I love this so-called "report" every month.
The problem with it is that I can't find how it matches with reality.
Let's just take one example. Bacon.
Until a month or so back it was trivially easy to find a pound of bacon, as a name brand, for about $4. You had to shop because one store would have it but another would want $5 or $6 for the same thing, but if you made any sort of effort at all you could find the store selling the identical product for $4.
That's now gone; the "best price" is now around $4.50.
That's more than a 10% increase -- in a month.
What does the CPI claim for Bacon? +2.6% on the month and ~10% annually.
But the reality in the store isn't annually, it's what has happened over the space of about three weeks.
There are so many of these instances that one has to come to the conclusion that whatever they're "measuring" they're doing it in a way that doesn't reflect what people actually buy.
After all, if Hormel Bacon is $4/lb in one store and $6 in another, the average between the two is not what gets sold, by and large. If you visit both stores in the same week or month you won't buy the $6 product when you can buy the same product for $4!
But statistically collecting the change in price between the two if the $4 bacon goes to $5 while the $6 remains at $6 understates what you actually see in your grocery basket by a factor of half.
You don't think they're actually doing that..... do you?
Consumer credit increased at a seasonally adjusted annual rate of 6 percent in the second quarter. Revolving credit increased at an annual rate of 2 percent, while nonrevolving credit increased 7-1/2 percent. In June, consumer credit increased at an annual rate of 6 percent.
It did eh?
Let's look at the raw data as usual.
Revolving credit is basically doing nothing on an unadjusted basis; it is up, but no more than it has been (annualized.) The run rate is 1.15%, indistinguishable from last month's 1.14%. There has not been a rate over 1.2% since May 2012 and that was for only one month -- prior to that month the downturn began in November of 2008.
Let me repeat that: There has been no material increase in revolving consumer credit on an annualized basis since November of 2008.
The picture is a little better on non-revolving credit ex Federal Government (meaning all but Student Loans); that's up 3.58% (annualized), up from 2.98% last month. With student loans it's up 8.03% from 7.74% so in fact non-student loans increased more than student debt (as shown in the chart.)
Debt levels are rising slowly for non-student loans, much faster when student loans are included, and for revoliving credit -- effectively not at all.
The new package, called AT&T Next, lets customers buy a new device for a monthly installment, depending on the price of the phone, with no down payment or activation fee. After 12 payments, customers can trade in the phone or keep the device after 20 months of installments, Dallas-based AT&T said in a statement today.
So you get the same monthly price (which includes a ~$30-40 a month subsidy for the phone) and then you get to pay the full price for the phone anyway in the form of additional installments?
I've heard of people signing up to be willingly screwed but this takes the cake.
Now maybe there's a reduction in the monthly service price for this plan. But if there is, it wasn't announced. There is apparently no contract requirement, which is a positive -- but in fact you still are paying 20 installments of 5% of the full retail price of the device and still paying the imputed subsidy via the jacked-up cost of service.
Comparable to (or even competitive with) T-Mobile and the no-contract plans from the MVNOs?
Not a snowball's chance in hell.
Don't voluntarily take it in the butt.
There's dumb and then there's really, really stupid. This falls into the latter category:
Tim Nixon, chief technology officer of General Motors Co. (GM)’s OnStar service, knew something was amiss when he saw his two sons taking the “suction-cup approach” to in-car navigation. They would turn their iPhones sideways, stick them to the windshield and use a free map app to find their way.
That represented a rejection of their father’s life’s work: Convincing car buyers to pay $1,500 or more for a dashboard navigation system with an 8-inch screen and elaborate graphics. Rather than scold his young-adult sons, Nixon came up with an answer: GM (GM) now offers a $50 map application for iPhones that can play on the dashboard touchscreen of a $12,170 Chevrolet Spark.
A $1500 or more device added to a car that (1) has out-dated maps the day it's released, (2) if it can be updated at all costs a fortune to do so on a regular basis, (3) is slow, buggy and frankly has a user interface designed by Frankenstein?
You're surprised that people buy a $20 suction cup or airvent clip and use their phone instead?
Where the hell have you been?
I've been using my phone as a navigation device since I owned the original T-Mobile MDA. I paid for TomTom on it. Why? Because I always have it and I own more than one car. Because the user interface was reasonable. Because it is not a theft magnet as it goes in my pocket when I get out of the car. Because if I fly somewhere and rent a car I have it with me. Because it's far cheaper and is not a sunk cost in the vehicle; it goes with me, and even better, the maps are updated with some reasonable degree of frequency.
Nowdays smartphones all come with mapping applications. That has been true for a long time now too. But I'll spend an extra $10 or $20 for an app that runs on the phone locally, with all the maps stored in the phone's memory (or on an SD card) because there is not always a signal when traveling, and without network availability an "online" app doesn't work. I also see little reason to give Apple, Google or anyone else (like the NSA, natch) an exact track of everywhere I go -- including my intended destination hours or days before I get there!
“It’s a very lucrative, profitable option for carmakers,” said Niall Berkery, executive director of the automotive business for TeleNav, a provider of the Scout navigation system for smartphones which can be operated through Ford Motor Co. (F)’s touchscreen controls. “Carmakers push those kinds of packages with navigation because it’s a higher margin package for them.”
Ripping the customer off is indeed profitable. But it's still ripping the customer off.
Especially when for $20 I can have an offline app on my BlackBerry or Android device (or iPhone) that comes with updated offline maps and thus is current to within the closest few months.
Oh, and as for the car systems? Interconnectivity problems such as not being able to control Bluetooth audio streaming properly (AVRCP is a standard) is an outrage. My $100 Bluetooth headphones can do this but my $25,000 car can't?
You want to sell me this car? Well then you will make damn sure that the standards that are built into all these devices work and interoperate with my device -- no matter which brand I own.
Or I walk out of your dealership.
PS: Careful with this one folks:
Eisnor sees a time when Waze is plugged into the functions of a car and can crowd-source information on a rain storm when Wazers turn on their windshield wipers. Providing information on braking and wheel speed to the social network would reduce traffic and get people off the road quicker, she said.
I'm sure the NSA finds this not only interesting but an actual goal. Remember, if you never do anything wrong (like visit a hooker, smoke a joint, have one too many beers, etc) then you don't care if big government knows literally every single thing you do -- right?
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