The Microeconomics of Suburban Subsistence: Three Years Later (February 4, 2008)
40 wasn’t a red letter year for them. They are deeply in the red this year. [See the e-ssay dated February 7, 2005 entitled “The Microeconomics of Suburban Subsistence” for background]. He can only find part-time work for a company that does not provide any health care or contribute to a pension fund. Their $175,000 house is now worth $150,000 even with all of the improvements financed with an equity line of credit and sweat. The City still appraises it at $200,000 because the polis wants its pound of flesh. The price of a pound of (bovine) flesh has risen about forty percent (40%); the meat may be tainted. The Fed’s reduction of the Federal Funds Rate has not been passed on or trickled down to them or to prospective buyers of their home. Interest rates to consumers are “sticky” and “ratcheted.”
The calls start like clockwork, because the callers start with the clock. He can set his watch by the first call. At eight o’clock, they start. They would start earlier except for . . . federal regulation. The Fair Debt Collection Practices Act, a federal regulation, sets limits on the amount of harassment that can be inflicted by a creditor on a debtor. And the wake-up calls continue unabated all day, even after the consumer is wide awake. From 0800 hours until 2100 hours. Caller id is now a necessity rather than a luxury. The credit card companies that cooed and wooed him are now cajoling and whining. The companies devised a Bankruptcy Code that is expensive and burdensome. The “Hope Now” program does not offer much hope now. Try it; call the number yourself. However, Congress now is considering a variety of legislation including a bill that allows the Bankruptcy Courts to adjust the amount owed on a home loan to reflect the current market value of the property. That approach has some possibility.
Not only is the value of the house down. Of note, the note for the car is now greater than the retail Blue Book value of the beast. Each 25 cent rise in the retail price for gasoline lowers the market value of the gas guzzler by about one thousand dollars. The rational course of action may be to give their car back to the bank and walk away from the house.
Bumper sticker of the week:
Greed isn’t always really good