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Old 03-16-2020, 10:19 AM
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The need for a savings culture in America (for rainy days)


America has long been a nation of spenders rather than savers (and I say that being as guilty as anyone in this regard, having been saddled by credit-card debt for eight years.) This Covid-19 epidemic is likely to bring about the ruin of many individuals and businesses who didn't save anything for a rainy day.

Granted, there are big factors that cause many Americans to not be able to accumulate a stash of savings - ripoff healthcare costs, high student loan debt, a minimum wage that hasn't kept pace, etc. But - even among many Americans who do have it well in terms of income and other life factors, there still is this culture of "spend, don't save." Someone described it as, "Have a thousand dollars in savings? Better take a thousand-dollar vacation."

How to encourage a savings culture once this Covid-19 is past? Merely getting more money into the hands of private individuals won't suffice; many simply spend it as soon as it comes.
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Old 03-16-2020, 10:29 AM
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Good question. I tend to save rather then spend, but I don't know why this comes easy for me while others have a hard time with it. Perhaps schools should include financial literacy education as mandatory.
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Old 03-16-2020, 10:42 AM
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It's the same old inability to delay gratification that we keep hearing about. Some people spend it when they have it, because if they save it, it'll only be mooched by needy friends and relatives anyway. Some just can't manage to NOT spend it for whatever reason. And some of us actually can save money without too much issue.

Probably the easiest way to save money is to get yourself in the mindset that your savings account is inviolate except in times of crisis/need, and then set up an automatic direct deposit straight to it. Or maybe an automatic account transfer from your checking account to it. The idea being that if you get in the mindset that your savings account money isn't free to be spent, and you automatically deposit some amount sight-unseen, it'll steadily grow without any actual effort on your own part.

The hardest part for most people I suspect, is seeing that they have $750 in the account, and NOT deciding that they need that new TV/game console/leather coat/shoes that they've been eyeing, but instead letting it ride. That's not to say that if your hot water heater needs urgent work that you don't dip into it- that's exactly what it is for. In other words, it's not a temporary accumulator for buying bigger stuff, but rather a contingency fund not to be spent except on stuff you couldn't handle normally.

Last edited by bump; 03-16-2020 at 10:43 AM.
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Old 03-16-2020, 10:44 AM
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I try to save, and to put about $50 into my savings every month. The account was started by my parents and mostly built on money I received from my great grandmother when she passed. My parents have always been big savers, and it's been drilled into me pretty well since I was a kid. Unfortunately, I don't have as much now as I once did, having withdrawn a lot for rent and bills when I was living in an apartment I couldn't afford (my room mate had moved out and I looked for a replacement but didn't find one). I'm living in a much cheaper place now and it's starting to build up again, but it's a very slow process.
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Old 03-16-2020, 11:24 AM
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If you want people to save, people need to be paid enough to save.

The current research indicates millenials (the roughly ~20-40 year olds) already do a better job than their parents of saving, and this includes having at least some kind of an emergency fund.

But they started way behind due to reasons (they're not paid as well as their parents in general and got hit by recession early in their careers and cost of living higher than the last few generations).

It's easy to blame the latest gadget or whatever, but seriously, the research indicates the younger set actually does better, on average, but still lags for reasons outside their control. Maybe start with the actual data instead of stereotypes?
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Old 03-16-2020, 01:47 PM
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What do you want to go around fucking up the economy for? The whole house of cards is supported by people buying shit they don't need with money they don't have. If people start buying things only when they need them everything's going to collapse.

Last edited by Bill Door; 03-16-2020 at 01:48 PM.
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Old 03-16-2020, 01:49 PM
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Good question. I tend to save rather then spend, but I don't know why this comes easy for me while others have a hard time with it. Perhaps schools should include financial literacy education as mandatory.
The notion that people need financial literacy is so commonplace, and yet it doesn't really make a lot of sense.

"Financial literacy" has never really been a thing people have been taught, and yet here we are. The problem is not that the common person doesn't know about the difference between savings and debt. Everyone knows that, and most people don't deliberately get into debt trouble.

The problem is that Western economies - the USA is the worst, perhaps, but all of them have some of this - are STRUCTURALLY built on an unprecedented amount of debt.
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Old 03-16-2020, 01:54 PM
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The notion that people need financial literacy is so commonplace, and yet it doesn't really make a lot of sense.

"Financial literacy" has never really been a thing people have been taught, and yet here we are. The problem is not that the common person doesn't know about the difference between savings and debt. Everyone knows that, and most people don't deliberately get into debt trouble.

The problem is that Western economies - the USA is the worst, perhaps, but all of them have some of this - are STRUCTURALLY built on an unprecedented amount of debt.
I've known some people don't understand how banks, bank accounts, and interest work. Or even if they understand the very basics, they don't trust them. That's a serious problem that perhaps could be addressed by education.

In my understanding, lots of Americans don't have bank accounts and have to rely on predatory check-cashing businesses. Policies could address this -- make every post office a bank, and outlaw those predatory lending businesses (check-cashing, "need cash now" car loans, etc.).

Last edited by iiandyiiii; 03-16-2020 at 01:58 PM.
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Old 03-16-2020, 01:58 PM
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The notion that people need financial literacy is so commonplace, and yet it doesn't really make a lot of sense.

"Financial literacy" has never really been a thing people have been taught, and yet here we are. The problem is not that the common person doesn't know about the difference between savings and debt. Everyone knows that, and most people don't deliberately get into debt trouble.

The problem is that Western economies - the USA is the worst, perhaps, but all of them have some of this - are STRUCTURALLY built on an unprecedented amount of debt.
Oh no, it is absolutely needed. As well as classes called "CREDIT CARDS ARE THE DEVIL" to get through to the religious folks. Other classes called "Revolving lines of credit and compounding interest 101"
Immediate gratification is rampant. I remember seeing toaster ovens for sale late night tv. and their sales pitch was "Only 3 easy payments of $14.99.

My immediate thought was that if you needed to break up a payment schedule to handle a $45.00 purchase, you don't fucking need it.
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Old 03-16-2020, 02:10 PM
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It would be better if we had an economy that encouraged savings in an actual bank, but in order to do that, you first need enough people with reliable incomes and incomes that allow people to save. Real wages for most people have stagnated since the 1970s: a good two generations of no real income growth. People have to take on decades worth of debt in order to enter or remain part of the middle class. It works until the spigot of cash flow is turned off. People can "invest" in the market, but the last few decades the market has become a pump-and-dump 'boom-to-bust' scam.

I don't care if we do eventually "recover" from this recession. Ever since the Great Recession of 2007-9, much of the global economy finds itself trapped in a situation in which central banks are under tremendous political pressure to pull out all the stops in order to keep cash flowing through the economy, and that's because the capitalist political classes provided relief to the "job creators" but woefully under-supported households. I was never ideologically against supporting the banks and industries as the economy went into free fall - it was vital. But no less vital was giving households debt relief, incomes, and immediate spending power, and we never totally figured that one out. I guess the political will just wasn't there. Consequently, and what many people don't seem to realize until perhaps now, is that we never really completely recovered from the last recession. If we had, we'd have better economic parity. But what happened is that some people in the working class sank into the under-class, and some in the under-class just faded out of sight altogether (probably moving from one homeless shelter to the next).

And so here we are, having had more than a decade to correct this problem, convincing ourselves in the US that we've had a good decade of economic growth, which is factually true but doesn't really tell the truth about the state of our economy. We've had wage gains that have been nullified by rising rents, rising healthcare costs, and even rising costs of goods thanks to global trade conflicts. We're now in another economic free fall, and we're still trapped by central bank policies that have now run out of bullets to put in the chamber. And if that's not bad enough, we've got rising household debts, rising corporate debts, and rising national debt. Americans are increasingly leveraging themselves toward an economic crisis that will make 2007-9 look like just a bad day on Wall Street.
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Old 03-16-2020, 04:00 PM
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My immediate thought was that if you needed to break up a payment schedule to handle a $45.00 purchase, you don't fucking need it.
Exactly. Someone ought to be able to handle saving $45 rather than having to work out a payment schedule. I mean, CHILDREN can handle that by the time they're somewhere between 9-10, if they've been taught well by their parents (i.e. given some amount of money and coached in the benefits/drawbacks to both spending it immediately and saving it for later, and allowed to fail/succeed on their own).

There are just a lot of people in the set of people who actually DO earn enough to save, who still don't do so, because they have inadequate impulse control.
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Old 03-16-2020, 04:20 PM
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I am surprised nobody brought up the Marshmallow Test.

Its basically a study on the differences in "rich" kids vs "poor kids" and why people may have a hard time delaying instant gratification. I see this in my daily life, and its evident in my town during the corona virus reactions at the super market. On the "hourly" side of town, the supermarkets are bone empty. On the "salary" side of town, they look just about normal, toilet paper and everything. Perhaps the people that work hourly are more afraid of their jobs than not, and are spending the money now on things that they think they won't have the money for in the future.
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Old 03-16-2020, 04:21 PM
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In my understanding, lots of Americans don't have bank accounts and have to rely on predatory check-cashing businesses. Policies could address this -- make every post office a bank, and outlaw those predatory lending businesses (check-cashing, "need cash now" car loans, etc.).
People who can use banks for the most part already do. People who use payday loans literally have no other options. Nobody patronizes a predatory lender for fun. When you take those options away, it doesn't make anything better for the payday loan customers. It makes things worse. They will seek out loan sharks and dangerous black markets instead.

You have to fix the underlying issues, not the superficial results that are easy to see. Perhaps one prong of this approach would be to mandate that banks accept everyone as a customer and only offer them no-fee accounts. Just spitballing here. "Ban payday loans" is a nonstarter (not that governments don't frequently try).
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Old 03-16-2020, 04:24 PM
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Exactly. Someone ought to be able to handle saving $45 rather than having to work out a payment schedule. I mean, CHILDREN can handle that by the time they're somewhere between 9-10, if they've been taught well by their parents (i.e. given some amount of money and coached in the benefits/drawbacks to both spending it immediately and saving it for later, and allowed to fail/succeed on their own).

There are just a lot of people in the set of people who actually DO earn enough to save, who still don't do so, because they have inadequate impulse control.
I think that the "payments of [tiny amount] for [not big amount] is more of a sales gimmick than anything else. If some people were set to spend $45 bucks on a toaster oven, and found out that for the same $45, they could get a stand mixer and salad chopper gizmo for the same total $45 bucks, they might get it, even if they would be billed $45 bucks again the next month. Does that make sense the way I'm explaining it?

The people that I have noticed that do the "flex pay" crap are generally older folks on fixed incomes, not young people. Young people don't buy shit off of TV.
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Old 03-16-2020, 04:28 PM
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People who can use banks for the most part already do. People who use payday loans literally have no other options. Nobody patronizes a predatory lender for fun. When you take those options away, it doesn't make anything better for the payday loan customers. It makes things worse. They will seek out loan sharks and dangerous black markets instead.

You have to fix the underlying issues, not the superficial results that are easy to see. Perhaps one prong of this approach would be to mandate that banks accept everyone as a customer and only offer them no-fee accounts. Just spitballing here. "Ban payday loans" is a nonstarter (not that governments don't frequently try).
Exactly. Taking away a moderately bad thing often just drives people to worse things. Like how Charlie Baker (governor of Massachusetts) responded to illnesses caused by illicit vaping devices by restricting/banning legit vaping devices, thus ensuring that even more vapers would turn to dangerous black-market vapes.
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Old 03-16-2020, 05:01 PM
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I see this in my own household. I am a natural saver, always have been. My partner is a natural spender, always has been.

Now in our case, this disfunction causes me to double down on saving to make up for the partner's spending. But that's not my main point.

My main point is that we are nearly identical in background, education, work ethic, income level, and general value system - except for how we relate to money and saving. I could play arm-chair psychoanalyst and tease out some underlying motivations, but I really think that would be engaging in post hoc reasoning. My conclusion, instead, is that it is just inherent, a genetic trait. Yes, education about debt and saving is useful, to a degree. But ISTM the differences really seems to just come down to a character trait, much like political leaning.

I would suggest that even in cultures where savings is more predominant, there are those who save better, and those who spend more freely.
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Old 03-16-2020, 05:16 PM
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People who can use banks for the most part already do. People who use payday loans literally have no other options. Nobody patronizes a predatory lender for fun. When you take those options away, it doesn't make anything better for the payday loan customers. It makes things worse. They will seek out loan sharks and dangerous black markets instead.

You have to fix the underlying issues, not the superficial results that are easy to see. Perhaps one prong of this approach would be to mandate that banks accept everyone as a customer and only offer them no-fee accounts. Just spitballing here. "Ban payday loans" is a nonstarter (not that governments don't frequently try).
That's why I suggest post office banks -- basic banking services available to everyone, everywhere there's a post office. Including cashing checks with no predatory fees/interest.
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Old 03-16-2020, 05:18 PM
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I am surprised nobody brought up the Marshmallow Test.
Maybe because the results are not quite debunked but certainly in question. The test couldn't be successfully replicated when they took a larger (and more statistically relevant) sample.

But people like it because it provides a "just so" morality story. The results may still be valid, but this test certainly doesn't show it and indicates that if it is, the effect is smaller than originally thought.
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Old 03-16-2020, 05:20 PM
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Old 03-16-2020, 05:26 PM
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I see this in my own household. I am a natural saver, always have been. My partner is a natural spender, always has been.

Now in our case, this disfunction causes me to double down on saving to make up for the partner's spending. But that's not my main point.

My main point is that we are nearly identical in background, education, work ethic, income level, and general value system - except for how we relate to money and saving. I could play arm-chair psychoanalyst and tease out some underlying motivations, but I really think that would be engaging in post hoc reasoning. My conclusion, instead, is that it is just inherent, a genetic trait. Yes, education about debt and saving is useful, to a degree. But ISTM the differences really seems to just come down to a character trait, much like political leaning.

I would suggest that even in cultures where savings is more predominant, there are those who save better, and those who spend more freely.
It's possible to work around those natural inclinations a bit, though.

I'm a natural spender - money in my hands vanishes. For years I lived paycheck to paycheck. I'd get raises, and my spending would expand proportionately.

One day I decided to do something about it - and had my work deposit a fixed sum each month in a separate account, at a separate bank, that I deliberately made somewhat difficult to get money out of and made a point of basically ignoring. The remainder of my money went into my main account. The functional effect, from the standpoint of that account, was to roll back the previous several of my raises. And I continued to spend pretty much everything in that account, living paycheck to paycheck just like before. Give or take that second account quietly growing, out of sight and out of mind.

This approach certainly wouldn't work for anybody who was literally living paycheck to paycheck, but if it's a case of spending by habit rather than by need, giving yourself a separate account to spend dry while leaving the rest untouched can be an effective way to protect your money from yourself - or at least, it was for me.
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Old 03-16-2020, 06:47 PM
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Maybe because the results are not quite debunked but certainly in question. The test couldn't be successfully replicated when they took a larger (and more statistically relevant) sample.

But people like it because it provides a "just so" morality story. The results may still be valid, but this test certainly doesn't show it and indicates that if it is, the effect is smaller than originally thought.
Uh, you posted the same thing that Transluscent Daydream did.
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Old 03-16-2020, 08:26 PM
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That's why I suggest post office banks -- basic banking services available to everyone, everywhere there's a post office. Including cashing checks with no predatory fees/interest.
Japan has done this for a long time.

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Old 03-17-2020, 11:33 AM
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I think that the "payments of [tiny amount] for [not big amount] is more of a sales gimmick than anything else. If some people were set to spend $45 bucks on a toaster oven, and found out that for the same $45, they could get a stand mixer and salad chopper gizmo for the same total $45 bucks, they might get it, even if they would be billed $45 bucks again the next month. Does that make sense the way I'm explaining it?
Only if I turn my brain off. It's not "the same $45", it's $90, just spread out.

I mean, I realize that there are situations of restricted cash flow where people may need to pay less up front- everyone runs into that- the only difference between a mortgage and something like this is the scale.

But people need to know what they're getting into- they're likely paying $90 for $60 worth of stuff, just spread out over a couple of payments.
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Old 03-19-2020, 04:25 PM
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If you want people to save, people need to be paid enough to save.

The current research indicates millenials (the roughly ~20-40 year olds) already do a better job than their parents of saving, and this includes having at least some kind of an emergency fund.

But they started way behind due to reasons (they're not paid as well as their parents in general and got hit by recession early in their careers and cost of living higher than the last few generations).

It's easy to blame the latest gadget or whatever, but seriously, the research indicates the younger set actually does better, on average, but still lags for reasons outside their control. Maybe start with the actual data instead of stereotypes?
If you look at savings rates around the world, clearly income and wealth have something to do with it (a lot of very poor countries at the bottom of that list), but it's not at all clear to me that savings rates are primarily driven by income. There are many many poorer people than the US millennial generation that save at much higher rates.

Saving probably has a lot more to do with culture and experience than income.

I don't have a lot of insight on what the essential part of that culture might be, since I am also a natural saver and always have been, long before I learned about finance or interest.

I think that postal banking is a great idea, but I'm skeptical that it will make much of a difference in savings rates. The hard part of saving is not having a savings account to put money into, it's not spending money on stuff you want!
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Old 03-19-2020, 05:28 PM
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Oh no, it is absolutely needed. As well as classes called "CREDIT CARDS ARE THE DEVIL" to get through to the religious folks. Other classes called "Revolving lines of credit and compounding interest 101"
I've no doubt these would be useful things but you're missing my point.

Western countries have never been so indebted before. Why is that? It's not because of a lack of humorously named financial literacy classes because we have never had that sort of thing, not on any meaningful scale. It is not that long ago, historically speaking, when your credit card class would have made no sense because there were no credit cards. Credit cards did not exist at all until the 1920s, and didn't become universal (e.g. not store-specific) until decades later.

We live in a system that is structured to expect people to have debt. It is exceptionally difficult to exist as an adult WITHOUT credit cards. In part because of incredibly low interest rates, it's effectively impossible for all but the extremely wealthy to own a home without truly staggering debt, and for all but the very well off to own a car.

Is there any evidence that only stupid people get into debt trouble? People with graduate degrees and high IQs get into terrible debt trouble. People who totally understand how compound interest works get into debt trouble. We have created an economy where borrowing is not only encouraged but deliberately made as cheap as possible - at least at first - to let you get into it. Once you're in serious trouble then the system sends people to the payday loan joints. What was the first thing any part of the apparatus of state in the USA did in response to the COVID-19 panic? They made it easier to borrow money. There was hardly anything else that could have been done, because nothing that did not involve borrowing money would have had any hope of restoring confidence.
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Old 03-19-2020, 07:38 PM
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What was the first thing any part of the apparatus of state in the USA did in response to the COVID-19 panic? They made it easier to borrow money. There was hardly anything else that could have been done, because nothing that did not involve borrowing money would have had any hope of restoring confidence.
That's not true. The CDC started working on a test months ago. They screwed it up and apparently got bound up in regulatory squabbles, at least in part because there's a moron at the tiller of state, but it's not like no one did anything.

The Fed cut rates when the market crashed because that's what the Fed does. It was hardly the only or first thing that happened.
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Old 03-20-2020, 12:52 AM
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I like using my credit cards and I pay them off in full each month, and of course the reason the credit card company is willing to do this for me is because for every user like me, there's at least one user who carries balances, pays fees, and generally does not use the card to their own benefit. Those users are basically subsidizing my convenience, god bless 'em.
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Old 03-20-2020, 06:00 AM
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There's a fee each time you swipe too.
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Old 03-20-2020, 07:36 AM
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There's a fee each time you swipe too.
Well, to the merchant, but with the exception of a few razor-margin retailers who give discounts for cash or debit, I'd be paying that price anyway.
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Old 03-20-2020, 09:38 AM
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The point is that the "reason the credit card company is willing to do this for [you]" is that your use of the card generates revenue.
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Old 03-20-2020, 10:35 AM
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America has long been a nation of spenders rather than savers . . .
I might not be neither here nor there, but I don't think this is accurate. I believe that in the WWII era, Americans were one of the most saving people in the west. Not sure when that changed, but it would interesting to know.
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Old 03-20-2020, 12:31 PM
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How to encourage a savings culture once this Covid-19 is past? Merely getting more money into the hands of private individuals won't suffice; many simply spend it as soon as it comes.
One possibility would be to redirect our tax policy. Enact a national sales tax and reduce income taxes by an equivalent amount. The point would be that people would pay taxes when they spend money rather than when they receive it. This would encourage less spending and more saving.
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Old 03-20-2020, 12:37 PM
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I think that the "payments of [tiny amount] for [not big amount] is more of a sales gimmick than anything else. If some people were set to spend $45 bucks on a toaster oven, and found out that for the same $45, they could get a stand mixer and salad chopper gizmo for the same total $45 bucks, they might get it, even if they would be billed $45 bucks again the next month. Does that make sense the way I'm explaining it?

The people that I have noticed that do the "flex pay" crap are generally older folks on fixed incomes, not young people. Young people don't buy shit off of TV.
Tell that to the people who use layaway for a $50 purchase ...
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Old 03-20-2020, 12:43 PM
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I've no doubt these would be useful things but you're missing my point.

Western countries have never been so indebted before. Why is that? It's not because of a lack of humorously named financial literacy classes because we have never had that sort of thing, not on any meaningful scale. It is not that long ago, historically speaking, when your credit card class would have made no sense because there were no credit cards. Credit cards did not exist at all until the 1920s, and didn't become universal (e.g. not store-specific) until decades later.

We live in a system that is structured to expect people to have debt. It is exceptionally difficult to exist as an adult WITHOUT credit cards. In part because of incredibly low interest rates, it's effectively impossible for all but the extremely wealthy to own a home without truly staggering debt, and for all but the very well off to own a car.

Is there any evidence that only stupid people get into debt trouble? People with graduate degrees and high IQs get into terrible debt trouble. People who totally understand how compound interest works get into debt trouble. We have created an economy where borrowing is not only encouraged but deliberately made as cheap as possible - at least at first - to let you get into it. Once you're in serious trouble then the system sends people to the payday loan joints. What was the first thing any part of the apparatus of state in the USA did in response to the COVID-19 panic? They made it easier to borrow money. There was hardly anything else that could have been done, because nothing that did not involve borrowing money would have had any hope of restoring confidence.
No I grok your point. My point is a simple one, no intelligent people (ones who know about compounding interest) DO NOT get into debt trouble, at least not without a significant bad life event happen.

It is entirely possible to live on cash, but as bump said in an earlier post. People are really bad at delaying gratification. This is where the "stupid" kicks in, not because they aren't smart in other areas but for some reason when it comes to money and debt, people are incredibly stupid.

And a part of it, you allude to. It is an almost built in mechanic at this point. The way we live in our society is built on being in debt. House, car, cards, I mean what is an extra $45/month minimum payment. Who cares that its going to take 45 years to pay off that 9K credit card.

People should care, and that is precisely WHY they are stupid in this regard.
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Old 03-20-2020, 01:18 PM
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The point is that the "reason the credit card company is willing to do this for [you]" is that your use of the card generates revenue.
Still pretty trivial compared to the people who don't or can't manage their credit. For me, it's like enjoying an inexpensive casino buffet, knowing that the building itself was paid for by the suckers shoveling their money into the slot machines.
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Old 03-21-2020, 11:23 PM
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So, I have little understanding of Business 101: What would be the ramifications of laws requiring businesses (especially, big corporations) to maintain savings of a certain size, specifically to shield them from things like disasters and pandemics, so that the federal government has less need to bail them out?
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Old 03-21-2020, 11:58 PM
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It is entirely possible to live on cash, but as bump said in an earlier post.
It's possible but it can cause difficulties.

I've never owned a credit card. I never borrow money. If I want to buy something, I pay for it. I always felt like I was being responsible and demonstrating good financial sense.

Then about ten years ago, I wanted to start shopping for a house. And I discovered that banks are shocked that a person my age effectively has no credit history - and they have minimal interest in starting one with me.

So I had to intentionally go into debt and repay those debts so I could build up a credit history. I'm now in my fifties and I working on building up the kind of credit history that most people build when they're in their twenties.
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Old 03-22-2020, 12:12 AM
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So, I have little understanding of Business 101: What would be the ramifications of laws requiring businesses (especially, big corporations) to maintain savings of a certain size, specifically to shield them from things like disasters and pandemics, so that the federal government has less need to bail them out?
What form would these savings be in? I'm guessing you don't expect major corporations to have big bags of cash stored in their basement.

So if a corporation is going to have "savings" it's probably going to do it by having some valuable assets on hand that it could readily cash in if needed. And the most obvious asset would be for them to own stocks. Which means we're expecting corporations to maintain their financial stability by owning shares in corporations. Such a plan seems to defeat the purpose. Even if we just force them to avoid the stock market and put their money into savings accounts at banks, that's not really any different - banks are just another form of corporation.

And even if you could devise some good place for corporations to put this money, you'd still have the issue of missing capital. Good corporate management involves taking your profits and developing the corporation. If you tell every corporation it has to take a share of its assets - let's say ten percent - and set it aside, then you have ten percent of the corporations assets sitting idle rather than being used to expand and improve the corporation. That means corporations will be doing less building of new plants, less hiring of new employees, less training, less research, less development of new products - all things which good corporations should be doing.
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Old 03-22-2020, 09:00 PM
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Back when I had a job that naturally created a savings account I didn't think about it. My lifestyle didn't increase with pay increases.

Now I think about it. I take out all my insurance and property taxes on a weekly basis. I keep an HSA account that currently will cover all costs for a year and I'll continue to feed it as a retirement account. I won't use it unless it's a major health event.

So while I didn't have to think about money in the past I definitely think about it now.

A wise person once taught me a valuable lesson on spending. He said you should look at how much money you have every week after paying all your bills and divide that by hours worked. So if you have $100 left over and work 40 hrs then your spending money is based on $2.50/hr. If you are thinking of buying a giant TV and it cost $2000 then it will take 20 weeks of labor to pay for it. The $300 TV starts to look better because it takes 3 weeks of labor to pay for it. I can move closer to the TV for free.
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Old 03-22-2020, 10:05 PM
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I'm old enough that I remember having a savings account that gave 4.5% interest. It was easier to save when I could see tangible results. Now regular savings doesn't keep up with inflation. It's kind of a disincentive.
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Old 03-22-2020, 10:42 PM
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What form would these savings be in? I'm guessing you don't expect major corporations...
It's pretty telling that any discussion of 'savings' culture rapidly comes up with excuses for why corporations and businesses in general should not participate. The actual corporate savings plan adopted by the airlines appears to be to spend as much as possible in ways that boost CEO profit (not even corporate profit), then ask for a bailout if anything goes wrong. I don't actually expect major corporations to behave responsibly, but expecting them to actually be capable of handling 'rainy days' without a massive handout is not unreasonable, and I don't understand people putting in so much effort to defend the idea that rich people should get government handouts to compensate for poor planning, but poor people should join 'savings culture'.
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Old 03-22-2020, 11:44 PM
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It's pretty telling that any discussion of 'savings' culture rapidly comes up with excuses for why corporations and businesses in general should not participate. The actual corporate savings plan adopted by the airlines appears to be to spend as much as possible in ways that boost CEO profit (not even corporate profit), then ask for a bailout if anything goes wrong. I don't actually expect major corporations to behave responsibly, but expecting them to actually be capable of handling 'rainy days' without a massive handout is not unreasonable, and I don't understand people putting in so much effort to defend the idea that rich people should get government handouts to compensate for poor planning, but poor people should join 'savings culture'.
I'm seeing this as two separate issues. I have no problems with holding corporate executives responsible for their mistakes. I'd be happy to see a law that enacts a special high tax rate on exorbitant executive salaries and another one that would require the management of any corporation that accepts public money as a bailout to lose their jobs as a condition of the agreement. Save the corporation and the low-level jobs; fire the people who caused the mess.

But then there's the separate issue of ordinary economics. Investment in general is a good thing. It stimulates economic growth. The reason for wanting to encourage more savings is because it would increase the amount of investment capital in the pool. Requiring corporations to reduce their internal investments would be the opposite of this.
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Old 03-23-2020, 12:27 AM
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But then there's the separate issue of ordinary economics. Investment in general is a good thing. It stimulates economic growth. The reason for wanting to encourage more savings is because it would increase the amount of investment capital in the pool. Requiring corporations to reduce their internal investments would be the opposite of this.
Corporate investment is based on RoI. If the RoI is less than what can be gotten from cash investments, cash is a better deal - or returning money to shareholders. Since the return on cash is so small, not being able to beat it with investments either means the company is not looking hard enough or it has reached cash cow status and is unlikely to grow.
What companies did do with their money recently was to put it in their own stock, which no doubt was sold based on eternal share price growth, but which really helped the execs. We've seen how that turned out. Basically, the companies spent their tax cut windfall on hookers and blow.
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Old 03-23-2020, 12:41 AM
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I'm old enough that I remember having a savings account that gave 4.5% interest. It was easier to save when I could see tangible results. Now regular savings doesn't keep up with inflation. It's kind of a disincentive.
Regular savings has never kept up with inflation. If you had an account that paid 4.5%, I bet inflation was 6% at the time.
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Old 03-23-2020, 12:46 AM
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Thing is, real corporations don't act like Econ 101. Yes, they could reinvest in the business, give workers raises, expand, drive other businesses with their own CAPEX, create more jobs while saving for a rainy day and generally be financially virtuous. But look at Boeing- they didn't do any of that. They let the quality of their product slide to the point of mass casualties, all while blowing their income on stock buybacks, benefits of which have now vanished into the ether. Suddenly it is hard for them to borrow money! And they blew years of income! So now the taxpayer is asked to bail them out. Nationalizing would be better- bail them out, but now the people own the business, the people are issued stock in the company and the people get paid the dividends from now on.

Don't bail out. Buy out.

Yeah I know it probably isn't that simple. But these airlines especially don't deserve support. They need to be taken over and their leaders fired.
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Old 03-23-2020, 04:19 AM
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It seems to me all the little people in the U.S. are expected to live by a purely capitalistic way of life they should of thought ahead and saved. While corporations want to live by socialism standards where they can fuck up and drive the company in the ground because they will get bailed out and give their CEO's a raise at the same time. Fuck 'em, let them fail that's the capitalist way right?
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Old 03-23-2020, 11:45 AM
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I'm seeing this as two separate issues. I have no problems with holding corporate executives responsible for their mistakes. I'd be happy to see a law that enacts a special high tax rate on exorbitant executive salaries and another one that would require the management of any corporation that accepts public money as a bailout to lose their jobs as a condition of the agreement. Save the corporation and the low-level jobs; fire the people who caused the mess.
If you call it 'mistakes', you're buying into and supporting their propaganda. Exectuives at large companies buying back corporate stock to increase their personal profit is not a 'mistake', it's a deliberate decision to reduce the corporation's ability to survive a 'rainy day' for personal profit. I would be happy with putting the lot of them to the guillotine (not hyperbole), but that's not likely to happen anytime soon. Failing the appropriate punishment, they should at least be stripped of all of their assets to fund the bailout, not just fired. Again, not likely to happen, but 'the people who caused the mess should be fired, probably invoking their golden parachute clauses and letting them keep their ill-gotten gains' is not even a meaningful punishment.

Quote:
But then there's the separate issue of ordinary economics. Investment in general is a good thing. It stimulates economic growth. The reason for wanting to encourage more savings is because it would increase the amount of investment capital in the pool. Requiring corporations to reduce their internal investments would be the opposite of this.
Completely disagree, again. If individuals saving up 'for a rainy day' is something that should be encouraged, businesses (especially corporations) should be expected to do the same thing. Your position is just shaming poor people for being poor while absolving rich people of responsibility at all. If we expect regular people to be able to handle a crisis without a bailout, we should expect companies to also - period. The argument you're making, that somehow individual savings are great because they function as investment capital, but business savings don't falls apart because businesses can use the EXACT same saving mechanisms as individuals (and have other options). It also fails to explain how buying back stocks to increase the individual profits of shareholders increases investment capital, which sounds like a variant of the 'job creators' myth.

Last edited by Pantastic; 03-23-2020 at 11:45 AM.
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Old 03-26-2020, 01:37 PM
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A large portion of Americans have no concept of what it means to live within your means. And this is not based upon income levels. Many people that have high incomes don't live within their means. People feel that satisfying wants is just as important and in many cases more important than satisfying needs.

The American Dream and feeling that all people are entitled to it contributes in many ways to fiscal irresponsibility. When I say the American Dream, I'm not referring to "opportunity", "fruits of hard work", "blessings of liberty", etc. I'm referring to the economic American Dream of a house, two cars, 60" flat screen TV, eating out 3 times a week, name brand clothing, all the trappings of appearing successful, etc. Keeping up with the Jones's...This kind of behavior occurs across all income levels.

It's not just low wage earners that can't absorb an economic shock...something like 60-80% of the people in the US live paycheck to paycheck.
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Old 03-26-2020, 02:09 PM
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If you call it 'mistakes', you're buying into and supporting their propaganda. Exectuives at large companies buying back corporate stock to increase their personal profit is not a 'mistake', it's a deliberate decision to reduce the corporation's ability to survive a 'rainy day' for personal profit. I would be happy with putting the lot of them to the guillotine (not hyperbole)
A less bloody and more effective method is to let their companies die.

The problem with beiling out the likes of American Airlines - well there are a lot of problems but this is the biggest one - is moral hazard. It is effectively paying them to keep doing the same thing. If given the $10-15 billion they want, they will simply do the same shit until the next disaster. It's perfectly rational behaviour.

If the US government allows American to go belly up, and refuses to help other airlines weather a storm they should have been prepared for, then when someone buys their airplanes and hires most of the same people and starts up a new airline, they will save money for a rainy day because they'll expect the government to lie them die if they don't.

The free market works. You just have to make big corporations actually play by its rules.
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Old 03-26-2020, 02:37 PM
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Yeah bankruptcy doesn't mean the planes all get scrapped. My stock shares do but that's an assumed risk when purchased.
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