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Thursday, March 6, 2014

Comparing Economy Then v Now using Movies..

This morning we read that Staples office supplies is closing 225 stores..

When you add that number to the 1,100 Radio Shacks announced to be closed earlier in the week, that brings the total to 1,325

Then just to be conservative and for purposes of super-simple math, let's say each store employs 10 people..

1,325 x 10 = 13,250 people basically found out in the last 3-4 days they will ultimately lose their jobs..

Theoretically of course..
~ An ad from the good ole' days of Radio Shack

We say that because specific store locations haven't been announced but we're sure employees can tell based on lack of customers and ample dead-boredom time they experience if their on the chopping block.

This does not happen in a recovery..

Nor does it happen so soon after a successful Christmas shopping season unless of course retail sales weren't as booming as the 'heavily dependent upon advertising to survive' mass media trumpeted..

But the market goes up and that's all that matters isn't it..
Monday they were scared over Russia and the Ukraine and dropped 185 points or thereabouts..  And by Tuesday somehow everything got magically solved and/or confidence restored and it went up 250..

And still going up.. Just as Fed Chair Janet Yellen and those who've sit on the throne before her have always wanted..

You know its a funny thing when you watch movies of the past to see very tiny glimpses of a time and place that no longer exists..  And we're not even speaking of hair styles or fashion..

For instance, yours truly was watching a fun cult classic film from 1976 called "Car Wash" to pass the time and relax those "little grey cells" in the brain as literary sleuth Hercule Poirot would often express
At the very beginning of the film right after opening credits, you see at a distance a gas station with its prices per gallon..  Regular was 59 cents and Unleaded was 69 cents...

Yesterday I put premium gasoline in my vehicle.. $3.86/gal.

So I spent $3.17 more a gallon in 2014, and since I needed 16 gallons to completely fill the tank, I spent $50.72 More in gas than someone in 1976 driving those large gas guzzlers..

We won't even do the math over the course of a full year..  Too Depressing..
But did our paychecks really rise by the same percentage as the increase in the price of gas?  Or do we just find ourselves more and more dependent on credit cards as the buffer?

Now interest rates were much higher then than today.. For mortgages, the average fixed mortgage was in the 8.75% to 9% range..

Of course that meant as a saver, you got 4.5% to 5% back

Today:  $100,000 in bank  x  0.005 (half of 1% interest)  = $500

1976:   $100,000 in bank x 0.05 (5% interest)  = $5,000
So a person with $100k in the bank in 1976 generated $4,500 more of a return from banks than someone today..

We know $100k was a lot more then vs today so let's do another example..

$10,000 savings in a bank in 1976 x 0.05 interest = $500

In other words it takes someone leaving $100k in a bank today to generate the same annual interest accrued as someone leaving $10k back in 1976.

Now let's get to mortgages a moment..  OK, yes the interest rates were double back then what someone gets today..  But let's really look at who is paying more..
The average price of a new home today is $250k.   Forty-five years ago, the average home price was around $45k.   That means the price of a home has gone up by 555%

To keep this example extremely simple, we will ignore the reality that home buyers must put a certain percentage down on their own before receiving financing and pretend for the moment its possible to finance 100% of the cost of a home with zero down...

Based on a 30 year loan...

Today:  $250k  x 4.0% Interest x 360 pymts =  $1,194 approx/mo.

1976:  $45k x 9.0% Interest x 360 pymts = $363 approx/mo
Differential --  $831

So a person or couple buying an average, typical home will be spending $831 monthly in mortgage More than the person or couple in 1976 while receiving $4,500 Less in interest per $100k saved..

Maybe the 1970's weren't such a rotten time after all...

For a brief period the other day I had also watched a few minutes of "Thelma & Louise" which originally came out in 1991.
It was a scene somewhere in the middle of the film where Thelma is driving to pick up a wire transfer.. The specifics of the film aren't what's important here.

But what was interesting was as the camera shows her driving, a radio voice over says that stocks dropped 12 pts to close at 1,650..

1991 -  Dow 1,650
2014 - Dow 16,448  as of this writing

So in 23 years, the stock market has grown just about 10x or 1000%
Has your income?

Someone's profits have expanded 10-fold that's for sure..

When you take money that both in theory and reality belong to the American people and siphon it up to the top 1% continuously while the bottom 99% merely grumbles then gets absorbed in sports and awards shows, the people are bound to be screwed.

In 1991, the National Debt was approx, $3.2 Trillion

Today its over $16.7 Trillion
So a market that is up 10x (1000%) and a debt burden increased 5x (500%) in the same 23 year period..  Wow..

Meanwhile the minimum wage in 1991 was $4.25 and today barring any Congressional passage of raising it further, it stands at $7.25..  A percentage increase of about 60% in the same period

Are you kinda sorta getting the picture?
The middle class is being systematically and meticulously slaughtered and like the lobster cooked in the pot, its a very slow boil that few really are understanding yet gradually feeling the burn..

Maybe yours truly should watch a futuristic film instead..  Something cheery and optimistic

Ahh.. Good ole Star Trek..  And NOT that F***ing remake!  LOL
~ That...  IS real Acting..  {grins..}