For the last three decades millions of Americans have been living in Beverly Hills. How can this be? Only 35,000 people reside in Beverly Hills, California. Millions have acted like they live in Beverly Hills, where the median household income is $125,000. The median household income in the United States is $50,000. There are 116 million households in the United States. Only 12 million households have income of $125,000 or more. There are 60 million households making less than $50,000.
Why shouldnât the 60 million households be entitled to live like the top 10%? This is America, where the American Dream of wealth and riches is achievable. Just one small problem. Millions chose to live like the privileged Beverly Hills elite without doing the difficult work to earn their way into the top 10%. They made these dreadful decisions of their own free will. No one forced millions of Americans to borrow and spend like drunken soldiers.
It appears that the psychology of the nation transformed in the early 1980âs. Was it the optimistic message of âMorning in Americaâ preached to the country by Ronald Reagan? Was it the fact that the youngest Baby Boomers were turning 35, entering their prime spending years? Or, was it the long-term decline in interest rates from 18% to 1% over two decades? Whatever the rationale, millions are now drowning in deep pool of debt.
I spend 500 hours per year in my car commuting on the Schuykill Expressway to and from work. In my spare time, Iâve calculated that I will spend at least a year of my life in traffic before I retire. While commuting at 5 mph on the Schuykill, I canât help but survey the cars Iâm sharing the road with. There are thousands jamming the highways in the Philadelphia area. There are 230 million cars in the U.S. and approximately 200 million drivers. We are a car crazed nation, with the number of cars per person 40% higher than Europe, 500% higher than China and 6,200% more than India. In 1970, when I was seven years old, the number of cars per 1,000 people was 529. Today it is 765, a 45% increase in three decades. Suburban dwellers have a love affair with their cars.
The average price of a new car exceeds $30,000 today. That is a nice chunk of change. I have a mental block paying that much money for an asset, that losses 20% of its value in the 1st year of ownership. My price limit is $20,000. I finance my cars over 4 years and try to get 10 years out of them. The 6 years of no payments goes directly into savings. My frugality regarding cars probably harks back to my father buying used cars during my entire childhood. Cars were a means of transportation, not a symbol of success. It appears to me that expensive luxury cars are an attempt at filling a psychological or emotional void in peopleâs lives. We spend half our lives in cubicles or offices and the other half in our shielded houses with gates and fences to keep people at a distance. The only time we are seen by others is on the highways and byways. An expensive sports car tells the world you are a success. A luxury car is a futile attempt at increasing your perceived happiness. Your fashion sense may be a little whack, but your car isnât a piece of crap.
This brings me to the conundrum that has confounded me as I drive to work each day. There appears to be many more BMW and Mercedes vehicles on the road than people with enough income to own one of these vehicles. How can this be? I was befuddled. After a little research it became quite clear. The graphs below tell the whole sordid story. Borrow today, live like a Beverly Hills hotshot, roll the loan or lease into the next loan or lease in 3 years, and donât be troubled about the future. According to the Federal Reserve, consumer non-revolving debt grew from $300 billion in 1980 to $1.6 trillion today. About $1 trilion of this is auto loans. The average automobile loan today is for 63 months, with some going as high as 84 months, compared with an average of less than 48 months in the early 1990s. In 1997 banks financed an average 89% of a new vehicle's price. The average loan amount was $17,000. In 2007 banks financed 101% of a new vehicleâs price, since consumers borrowed to cover the amount they were upside down on their trade-in. The average loan amount is now $29,000. A full 40% of all trade-ins involve upside-down car loans. The average American car âownerâ is in debt up to their eyeballs and upside down on their loan, but at least they look like a million bucks in the eyes of their neighbors and co-workers. Looking marvelous is what passes for achievement today.
Complete big article-: http://www.marketoracle.co.uk/Article13294.html
Why shouldnât the 60 million households be entitled to live like the top 10%? This is America, where the American Dream of wealth and riches is achievable. Just one small problem. Millions chose to live like the privileged Beverly Hills elite without doing the difficult work to earn their way into the top 10%. They made these dreadful decisions of their own free will. No one forced millions of Americans to borrow and spend like drunken soldiers.
It appears that the psychology of the nation transformed in the early 1980âs. Was it the optimistic message of âMorning in Americaâ preached to the country by Ronald Reagan? Was it the fact that the youngest Baby Boomers were turning 35, entering their prime spending years? Or, was it the long-term decline in interest rates from 18% to 1% over two decades? Whatever the rationale, millions are now drowning in deep pool of debt.
I spend 500 hours per year in my car commuting on the Schuykill Expressway to and from work. In my spare time, Iâve calculated that I will spend at least a year of my life in traffic before I retire. While commuting at 5 mph on the Schuykill, I canât help but survey the cars Iâm sharing the road with. There are thousands jamming the highways in the Philadelphia area. There are 230 million cars in the U.S. and approximately 200 million drivers. We are a car crazed nation, with the number of cars per person 40% higher than Europe, 500% higher than China and 6,200% more than India. In 1970, when I was seven years old, the number of cars per 1,000 people was 529. Today it is 765, a 45% increase in three decades. Suburban dwellers have a love affair with their cars.
The average price of a new car exceeds $30,000 today. That is a nice chunk of change. I have a mental block paying that much money for an asset, that losses 20% of its value in the 1st year of ownership. My price limit is $20,000. I finance my cars over 4 years and try to get 10 years out of them. The 6 years of no payments goes directly into savings. My frugality regarding cars probably harks back to my father buying used cars during my entire childhood. Cars were a means of transportation, not a symbol of success. It appears to me that expensive luxury cars are an attempt at filling a psychological or emotional void in peopleâs lives. We spend half our lives in cubicles or offices and the other half in our shielded houses with gates and fences to keep people at a distance. The only time we are seen by others is on the highways and byways. An expensive sports car tells the world you are a success. A luxury car is a futile attempt at increasing your perceived happiness. Your fashion sense may be a little whack, but your car isnât a piece of crap.
This brings me to the conundrum that has confounded me as I drive to work each day. There appears to be many more BMW and Mercedes vehicles on the road than people with enough income to own one of these vehicles. How can this be? I was befuddled. After a little research it became quite clear. The graphs below tell the whole sordid story. Borrow today, live like a Beverly Hills hotshot, roll the loan or lease into the next loan or lease in 3 years, and donât be troubled about the future. According to the Federal Reserve, consumer non-revolving debt grew from $300 billion in 1980 to $1.6 trillion today. About $1 trilion of this is auto loans. The average automobile loan today is for 63 months, with some going as high as 84 months, compared with an average of less than 48 months in the early 1990s. In 1997 banks financed an average 89% of a new vehicle's price. The average loan amount was $17,000. In 2007 banks financed 101% of a new vehicleâs price, since consumers borrowed to cover the amount they were upside down on their trade-in. The average loan amount is now $29,000. A full 40% of all trade-ins involve upside-down car loans. The average American car âownerâ is in debt up to their eyeballs and upside down on their loan, but at least they look like a million bucks in the eyes of their neighbors and co-workers. Looking marvelous is what passes for achievement today.
Complete big article-: http://www.marketoracle.co.uk/Article13294.html
