I'll show my age here.....

[callmeslick]

when I was a kid, virtually NO ONE bought a car on time/credit. Now, this is the reality:
http://www.msn.com/en-us/money/markets/ ... ar-BBlJXSh

and, in a nutshell, that is a snapshot of one the huge problems with our modern society and economy which CAN'T be blamed on the rich, on the political parties(well, a bit of the mindset goes to Reagan, but....). People are, and have been, buying stuff they really cannot afford, and expecting goods their income doesn't justify for decades. This has led to the demand for cheap goods, hence, outsourcing of manufacture to cheap labor, crap environmental reg markets. The other ills of the mindset can be seen daily, and maybe, just maybe, if people went back to the consumer attitudes pre-1980 or so, we might be able to cope with the REAL needs of society.

[Krom]

Wages have been on the decline relative to inflation for the past 30 years, of course people can't afford necessary things like a vehicle without resorting to credit anymore.

[callmeslick]

sure, they can, Krom, in many cases. They can afford to save and purchase a used vehicle. You see, it's the 'saving for' component which seems to be a foreign concept anymore. When I was young, if you wanted a house, you saved for the substantial down payment. If you wanted a car, a stereo, a vacation, you SAVED for it. Now, it's buy if first, and pay for it later, and folks don't seem to realize what a disasterous way that is to conduct personal finances. I can understand borrowing for a house, borrowing for school costs(although I am in the camp who suggests college and graduate schooling should be free to all who qualify), leasing a vehicle if necessary. The rest is, frankly, irresponsible personal finance, which is both sanctioned and condoned by society and ultimately benefits only those with the money to OWN the banks, or OWN the stock in various manufacturers.

[Spidey]

No, the problem is not buying things on credit, the problem as I have pointed out numerous times is the lack of consumer education in this country.

The problem is not buying now and paying later, the problem is borrowing more than you can afford.

If people would manage their debt properly there would be no problem at all.

And I would have to believe saving up to buy things would create more demand for cheaper goods than using credit, at least using my own experience, where I have chosen the more expensive American made products, because I could.

But yes, there is a serious disconnect in this country between consumer habits and jobs, but this is a political and education failure, not related to using credit.

And GOD FORBID we look to the government to set the proper example, especially with people in total denial as to the relation between public and private debt. (like borrowing 43 cents on a dollar is a good thing)

[Lothar]

Wages have been on the decline relative to inflation

By certain measures of inflation. For example, the CPI.

The problem with those measures is that they include things like "can afford housing", which seems like it should be a constant baseline, but it's not. If you dig through the official government statistics, you'll find something interesting. A "typical middle class worker" in the early 1970s lived in a house that was built in the 1950s or earlier, around 1200 square feet, 1 bathroom, 2-3 bedrooms, without air conditioning or a washer/dryer, and had one vehicle available to the household. That's less square footage and fewer amenities than the average housing for Americans below the poverty line in the 2010's -- we consider middle-class living from the 1970's to be "the projects" now (2011 median: 1700 sqft, 2 bathrooms, 3+ bedrooms, with A/C, washer-dryer, 2+ vehicles. For those below the poverty level, it's 1450 sqft, 3 bedrooms, 1.5-2 bathrooms, with A/C and washer-dryer, one vehicle -- better than the "typical middle class worker" in the 1970s.) And we index inflation to "average" housing, which is itself inflating (I live in my childhood home, which my parents purchased in 1975 for $32,500 -- about 3.1 times the national median household income. I purchased it from them in 2012 for $135,000, a mere 2.7 times the median income.) If you're actually buying the same size/quality stuff as was available in the 1970s, wages have increased relative to almost everything (except for certain types of healthcare) -- it's lifestyle inflation, not monetary inflation, that's making wages appear to decline.

There's a two-sided problem here. People buy things like houses and cars with nothing down, no substantial savings, and wacky financial instruments that let them buy more and bigger and fancier than their parents had even though they really shouldn't borrow that kind of money. And then they have less money left over to buy other things, which drives demand for cheap consumer goods manufactured by low-quality, low-safety, low-environmental-regulation, low bidders overseas, rather than supporting American manufacturing of better consumer goods.

[Tunnelcat]

No, the problem is not buying things on credit, the problem as I have pointed out numerous times is the lack of consumer education in this country.

The problem is not buying now and paying later, the problem is borrowing more than you can afford.

If people would manage their debt properly there would be no problem at all.

And I would have to believe saving up to buy things would create more demand for cheaper goods than using credit, at least using my own experience, where I have chosen the more expensive American made products, because I could.

But yes, there is a serious disconnect in this country between consumer habits and jobs, but this is a political and education failure, not related to using credit.

And GOD FORBID we look to the government to set the proper example, especially with people in total denial as to the relation between public and private debt. (like borrowing 43 cents on a dollar is a good thing)

You can't put all the blame the consumer. The market deserves some of the blame for their share in creating people's financial messes. When the consumer is constantly bombarded by pitchmen blasting forth ads from every medium about their affordable low rates of credit and flashy you-gotta-buy-this-new-thing-before-it's-too-late ads, of course people are going to be tempted to buy products well above and beyond their financial resources. Temptation is human nature and advertising tries to stimulate that in consumers, sometimes to their own detriment. Isn't that what drives capitalism, advertising and getting people to buy things, most of the time stuff they don't need? If you could create a drug that curbs temptation and want, then you'd have a solution.

[Spidey]

I didn’t place all of the blame on the consumer, try reading again…I placed the blame on the education system, and the spineless politicians.

[callmeslick]

No, the problem is not buying things on credit, the problem as I have pointed out numerous times is the lack of consumer education in this country.

fair enough.

And GOD FORBID we look to the government to set the proper example, especially with people in total denial as to the relation between public and private debt. (like borrowing 43 cents on a dollar is a good thing)

borrowing at 0.4%(government) with trillions of dollars in income is not the same as paying 6% for something that costs about the same as your annual income.

[callmeslick]

oh, and while Spidey wishes to place yet another burden on an education system which cannot get reading and math to an acceptable level,and can't afford to do art and music, I'd place the training in personal finance on the family and greater culture. It's education, but not within some school setting.

[Spidey]

I said it plenty of times before…the interest on borrowed money is inconsequential, as the principal is the issue in question.

[Ferno]

sure, they can, Krom, in many cases. They can afford to save and purchase a used vehicle. You see, it's the 'saving for' component which seems to be a foreign concept anymore. When I was young, if you wanted a house, you saved for the substantial down payment. If you wanted a car, a stereo, a vacation, you SAVED for it. Now, it's buy if first, and pay for it later, and folks don't seem to realize what a disastrous way that is to conduct personal finances. I can understand borrowing for a house, borrowing for school costs(although I am in the camp who suggests college and graduate schooling should be free to all who qualify), leasing a vehicle if necessary. The rest is, frankly, irresponsible personal finance, which is both sanctioned and condoned by society and ultimately benefits only those with the money to OWN the banks, or OWN the stock in various manufacturers.

That's exactly what i'm doing for my next car purchase. I just had a buddy try and convince me that I should go down to the dealership and lease a vehicle instead of buying from a previous owner.

I don't want to go down that road for essentially the exact same reasons you stated.

Yes, I'll have a pile of crap. Yes I'll have to pay for repairs if needed. But at least I won't be giving a chunk of my paycheque to a dealership for the next two years.

[Tunnelcat]

I didn’t place all of the blame on the consumer, try reading again…I placed the blame on the education system, and the spineless politicians.

Fair enough. I believe the spineless politician part, but how has the education system failed and caused the problem?

[callmeslick]

I said it plenty of times before…the interest on borrowed money is inconsequential, as the principal is the issue in question.

interest adds up, and instantly constrains future flexibility in finances.

[Ferno]

I said it plenty of times before…the interest on borrowed money is inconsequential, as the principal is the issue in question.

interest adds up, and instantly constrains future flexibility in finances.

Or to put it another way, Interest is basically paying someone for letting you buy on impulse.

[Tunnelcat]

And putting your money in a bank to grow with interest is letting that bank gamble with your money so that THEY can hopefully make even more money.

[callmeslick]

And putting your money in a bank to grow with interest is letting that bank gamble with your money so that THEY can hopefully make even more money.

that is sort of the principle behind banking. I mean, if you wish to call loaning businesses and individuals money gambling. One of the problems we've encountered,though, is the modern expansion and deregulation around making banks all-round investment houses. Then, they can avoid loans and concentrate on short-term stock market profitteering, which, in turn, puts more pressure on corporations to produce near-term profits at the expense of long-term planning.

[Tunnelcat]

I'm talking about the lack of separation between investment banks and plain old, stodgy banks. Most of the large banks that people put their money in are can now legally involve themselves in risky investing to make more and more money. I was thinking of the repeal of Glass Steagall, the 2007 financial crash and the crazy investment gambling by the big banks that caused it.

[callmeslick]

quite true, TC, and that was what I was alluding to in the previous comments at the end of my post.

[woodchip]

[quote="callmeslick"]when I was a kid, virtually NO ONE bought a car on time/credit. Now, this is the reality:
http://www.msn.com/en-us/money/markets/ ... ar-BBlJXSh

Don't know what alternate reality you grew up in but working class people all had get a loan to buy a car. And your article seems to forget (as do you) that a new car was only around $3,000 back then. Same car today is 6x as much. Then factor in there was a population (give or take) a third of what it is today. So until you put all those in context, your article is just another piece of fantastical, lets worry some more, reporting

[callmeslick]

Don't know what alternate reality you grew up in but working class people all had get a loan to buy a car

car loans essentially didn't exist until the late 60s or early 70s, at least via banks. GMAC started financing way back, around 1920, but Ford always avoided it, and so did Chrysler until far later. And, while you dismiss the article, a trillion dollars in personal debt is worrisome, for a population the size we have now.

.

[woodchip]

Don't know what alternate reality you grew up in but working class people all had get a loan to buy a car

car loans essentially didn't exist until the late 60s or early 70s. And, while you dismiss the article, a trillion dollars in personal debt is worrisome, for a population the size we have now.

.

Funny how I got a auto loan in 1966. Again, what alternate reality did you grow up in. And to once again show your complete ignorance:

Auto loans Average automobile loan in 2004 is for 63 months, with some going as high as 80 months, compared with an average of less than 48 months in 1999 and about 24 months in the 1950s. In 1997, banks financed an average 89% of a new vehicle's price. In 2003, it was 101% since consumers borrowed to cover the amount they were upside down on their trade-in. And get this…40% of all trade-ins involve upside-down car loans.

Note In the 1950s normal down payment was on-third cash for a car, with 18 month financing for the balance.

http://www.eurekaencyclopedia.com/index ... Auto_Loans

[callmeslick]

Funny how I got a auto loan in 1966. Again, what alternate reality did you grow up in. And to once again show your complete ignorance:

um, I said they became available in the late 60s. 1966 is late 60s, last I checked. But, keep up with the daily ad hominems.

Note In the 1950s normal down payment was on-third cash for a car, with 18 month financing for the balance.

and the ONLY source, as I noted, was through the manufacturer, and some didn't offer it. Once again, as I stated. I am talking about banks getting heavily into the process.

[woodchip]

and the ONLY source, as I noted, was through the manufacturer, and some didn't offer it. Once again, as I stated. I am talking about banks getting heavily into the process.

You might want to link someplace that show it was the car companies doing the loan instead of constantly repeating a mantra based on your trust factor.

[woodchip]

And to help you out slick, the link compares bank loans for autos in late 1963 to bank loans in 1955.

https://books.google.com/books?id=KZZCA ... ns&f=false

So please stop trying to prove you are right when you are not.

[Ferno]

And to help you out slick, the link compares bank loans for autos in late 1963 to bank loans in 1955.

https://books.google.com/books?id=KZZCA ... ns&f=false

So please stop trying to prove you are right when you are not.

Uh, no it doesn't. I read the entire page. Twice to be sure. Nothing in there is comparing bank loans to manufacturer loans. I know what it's talking about but why don't you tell us?

[woodchip]

And to help you out slick, the link compares bank loans for autos in late 1963 to bank loans in 1955.

https://books.google.com/books?id=KZZCA ... ns&f=false

So please stop trying to prove you are right when you are not.

Uh, no it doesn't. I read the entire page. Twice to be sure. Nothing in there is comparing bank loans to manufacturer loans. I know what it's talking about but why don't you tell us?

Why don't you learn to follow the discussion better. Slick said banks weren't making auto loans until the late 60's:

"car loans essentially didn't exist until the late 60s or early 70s, at least via banks."

My link shows banks were making auto loans in the mid 50's. Now why are you off on the tangent that the link isn't comparing bank loans to auto loans. Of course it is not. Now try and keep up.

[Ferno]

And to help you out slick, the link compares bank loans for autos in late 1963 to bank loans in 1955.

https://books.google.com/books?id=KZZCA ... ns&f=false

So please stop trying to prove you are right when you are not.

Uh, no it doesn't. I read the entire page. Twice to be sure. Nothing in there is comparing bank loans to manufacturer loans. I know what it's talking about but why don't you tell us?

Why don't you learn to follow the discussion better. Slick said banks weren't making auto loans until the late 60's:

"car loans essentially didn't exist until the late 60s or early 70s, at least via banks."

My link shows banks were making auto loans in the mid 50's. Now why are you off on the tangent that the link isn't comparing bank loans to auto loans. Of course it is not. Now try and keep up.

Moving the goalposts! yay!

[callmeslick]

words like 'virtually' and 'essentially' have no meaning in Woody-World. It's all-or-nothing there.

[Lothar]

let's have a useless, tangential discussion about auto loans and totally lose sight of the overall topic!

[Ferno]

let's have a useless, tangential discussion about auto loans and totally lose sight of the overall topic!

A useless, tangential discussion about auto loans while losing sight of auto loans?

[callmeslick]

let's have a useless, tangential discussion about auto loans and totally lose sight of the overall topic!

A useless, tangential discussion about auto loans while losing sight of auto loans?

agreed, the subject was auto loans, in the overall context of excessively leveraged personal consumption. What we've gotten sidetracked over, is the lack of understanding of a generalization, bracketed with the word 'virtually' to describe the old reality(pre-1980), compared to the present situaltion. I really see no need for that nit-picking, save to turn yet another thread into an ad-hominem attack upon me, without dealing with the core issue presented.

[Lothar]

let's have a useless, tangential discussion about auto loans and totally lose sight of the overall topic!

A useless, tangential discussion about auto loans while losing sight of auto loans?

A useless, tangential discussion nit-picking irrelevant details of auto loans in the 1960s (which is mostly serving as an excuse for woodchip and slick to take pot-shots at one another) when the original mention of auto loans was meant as "a snapshot of... buying stuff they really cannot afford, and expecting goods their income doesn't justify". There was a string of around 10 posts that was basically an argument over whether auto loans existed in the 1960s, which completely misses the point that people in the 1960s generally took out a limited number of loans for critical things like "buying a house you can afford" or potentially "buying a car you can afford", after making a down payment, rather than taking on ridiculous amounts of debt to finance everything from a house to a car to school to a new stereo to I-just-gotta-have-those-shoes with no money down and a heavy risk of being underwater.

[callmeslick]

yes, you saw my issue amongst the sidetracks, Lothar. And, the surprise at the sidetrack? You're new around here, right?

[Lothar]

"surprise" is the wrong word. "Criticism" is the right word.

I was hoping someone would address my earlier comments about lifestyle inflation -- about how the average below-poverty family right now lives in bigger housing with more amenities than the average middle-class family in 1970, and how that contributes to the squeeze of feeling (or actually being) unable to afford other things.

[callmeslick]

"surprise" is the wrong word. "Criticism" is the right word.

I was hoping someone would address my earlier comments about lifestyle inflation -- about how the average below-poverty family right now lives in bigger housing with more amenities than the average middle-class family in 1970, and how that contributes to the squeeze of feeling (or actually being) unable to afford other things.

oh, my bad, I thought I had at least touched on that point. You are exactly correct, and you can take it right up the scale to the middle class, or at least folks who call themselves 'middle class'. The facts are that most people who do so have mis-managed themselves onto the brink of a quick descent into poverty, which would require very little by way of a trigger to put in motion. I mean, if one wishes to put it in a larger perspective, an American family making 50-75,000 per year(middle class, and not even that high up in the range) generally has more amenities than a wealthy household in 1940 or before. The only difference would be lack of a staff to assist, but in terms of number of vehicles, access to variety of foods, size of homes, the whole thing has inflated while actual income to pay for it has stagnated.

[Tunnelcat]

I think lifestyle inflation goes hand in hand with our current market's demand for constant growth and expansion, period. That's what's driving things, GROWTH and PROFITS. People today can buy more and more stuff for far cheaper comparable prices than they did in the past because the labor is cheaper, the materials are cheaper and it's mostly on the backs of third world countries. Globalization has made all this massive spending growth in our country today possible. That wasn't the case in the 1960's or earlier because our economy was national, not international and our labor was more expensive, making our products more expensive to buy. It's a vicious cycle that's feeding upon itself at the moment however. People are now craving all these products because marketeers MAKE everyone want to crave them, all to increase sales. BUY, BUY, BUY! We can't escape it. Being able to buy more things for cheap is now the EXPECTED NORM. Even lower income people can afford things that were prohibitively priced in the 1960's.

See this, the first transistor radio built and sold to the public in 1954? It cost a whopping $49 then, which in today's dollars would've cost around $435, given inflation. You can bet if that was built today with modern electronics and cheap foreign labor, it would cost a whole lot less, making it far more affordable to people with far less comparable incomes than in 1954.



The only thing that sustains this constant upward growth and massive production is the constant and successful quest to find cheaper materials and cheap labor to build those products, because OUR wages have stagnated and yet demand has NOT. The current system will collapse if production costs and material costs can't be kept low. If that eventually happens, our economic model is going to have to change to something more sustainable in the long run, which would mean less products sold and less growth in the economy. I don't think that possibility is even a speck in Wall Street's eye right now. On the demand side, would people be able to wean themselves from the addiction of buying all this stuff eventually? It'll take a social change, or a disaster, to make that happen.

[Lothar]

I think it's easy to blame marketers, but at the same time, we have to blame everyday people. It's not like we never had a chance to hear grandparents or other relatives who lived through economic bad times say "you should save money". It's not like we never hear banks encourage savings or retirement planning. It's just that we as a society choose to listen more to the "buy the maximum you qualify for" type of messaging instead of the "buy what actually makes sense for you" messaging.

I know couples without kids, and with no intent of having kids, a few years out of college, who think my house is small. My parents raised 8 kids here. Right now there are 7 people living here and it's plenty spacious. But people have formed this expectation that you should start working and immediately live in a 2500+ sqft home, with a home office and a "man cave" and a guest room and on and on and on. And they buy that sort of house, in a "hip" neighborhood, and then wonder why they're living paycheck-to-paycheck on a pretty good income and why they have no retirement savings.

[Spidey]

Funny you should mention the transistor radio tc, that product produced by Sony (after the Regency) was on the vanguard of cheap imported products.

Forget about “built today with modern electronics and cheap foreign labor,” because that is exactly what was going on at the time.

[callmeslick]

well put, Lothar.

[Ferno]

A useless, tangential discussion nit-picking irrelevant details of auto loans in the 1960s (which is mostly serving as an excuse for woodchip and slick to take pot-shots at one another) when the original mention of auto loans was meant as "a snapshot of... buying stuff they really cannot afford, and expecting goods their income doesn't justify". There was a string of around 10 posts that was basically an argument over whether auto loans existed in the 1960s, which completely misses the point that people in the 1960s generally took out a limited number of loans for critical things like "buying a house you can afford" or potentially "buying a car you can afford", after making a down payment, rather than taking on ridiculous amounts of debt to finance everything from a house to a car to school to a new stereo to I-just-gotta-have-those-shoes with no money down and a heavy risk of being underwater.

when it comes to loans, every detail is important.


As for the lower-income family living with more and larger amenities than a middle class family of yesteryear, yup. Which reminds me of a phone call I had with my parents a few months ago. I was told our family was affluent but something happened between then and now, so I've taken it upon myself to try and rebuild that.