Save Money: Haggling and Lowballing

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FEW things suck more than that feeling you get when you overpaid for something. After all, it’s not easy to make money in this economy – I would actually argue that it’s easier to save money than it is to make money. Therefore, what can you do to get the maximum value for your dollar – what can you do to stretch that dollar as far as possible? I’ll focus on the activity known as haggling, or sometimes known derisively as lowballing.

Haggling, as defined by Wikipedia, is when “the buyer and seller of a good or service debates the price and exact nature of a transaction.” Translated into plain English, it’s the process by which you and the potential seller agree how much their stuff is worth. However, in America, haggling has become a forgotten and lost art. Go to any grocery store and the price is often set on the shelf – you can pay it or leave it. However, in almost every other country across the world, haggling is commonplace and in some cultures, failure to haggle is seen as rude, a sign of economic arrogance, or even an insult.

To be fair, we are limited in America to what we can haggle on – one-time or expensive items such as cars, houses, and jewelry or sometimes in more informal settings such as yard sales and flea markets. Even so, there is a significant opportunity for you to save lots of money. For this post, I’ll describe the strategies I use to get the lowest price possible for a car, although the same principles can be used in buying almost anything, from clothing to furniture to appliances to houses.

Outline:
1) Before You Haggle
2) During Haggling
3) When The Seller Says “No”

Before You Haggle
Determine what your price range is, and don’t go a single dollar over it. A helpful example of this is to find out what the Kelley Blue Book value of the car is. Do this before you even talk to the seller for the first time.

When you talk to the seller, don’t even talk turkey within the first fifteen minutes of meeting them. Get some background, dicker around a bit, find a few things in common – whether it’s cars, work, church, friends, or hobbies. Spend the time while you’re talking about the car to inspect for obvious defects or parts that need replaced. Eventually, turn the subject of the conversation around to the car itself. It’s important to find out how motivated the seller is.

1) Why is the car being sold? Ask the seller this question, even if you can determine the reason from reading the ad. This is one of the most important considerations to make, as it dictates how much room for haggling you have. Moreover, getting a conversation going with the seller is important to build rapport and allow you to negotiate later. A few thoughts on the seller’s motivation and pricing to consider:
– A car with a lot of sentimental value (first car, long time owner, first owner, etc.) is likely going to command a premium over the blue book value.
– On the other hand, sellers of cars on behalf of relatives or inlaws (especially deceased ones or estate sales) are likely to be more negotiable.
– Similarly, look for sellers who recently upgraded to a new car and who are simply looking to get the old car out of the driveway. Distinguish this, however, from the seller who needs to upgrade (such as for a growing family) and hasn’t bought the new car yet – that seller needs the money so he or she can buy the next car.
– Another excellent candidate for haggling is if there’s some external pressure on the seller – if bills need to be paid, they are moving, or a significant other demands the car be removed from the property.

2) How long has the seller’s ad been posted? The longer the ad has been posted, whether in the newspaper or especially online, the more likely the seller is going to want the car gone. A good sign of a motivated seller is if the price has been reduced recently.

3) Is there anything wrong with this car? It’s a used car – odds are there’s something currently broken. If not, then something is likely going to be broken very soon. It may be advisable to have a third party mechanic inspect the car and report to you. Test drive the car, have the house inspected, run the appliances before buying them. Bald tires, poorly aligned steering, broken window motors, and A/C that isn’t blowing cold are nuisances – but they are likely fixable, are not deal breakers, and you should certainly factor the cost of repairs into your offer.

Even if you’re not mechanically inclined, research that car’s common issues and be prepared to ask about them. As an example, every GM 3.8 liter engine built between 1995 and 2005 will need the intake gasket replaced, because GM made the gasket out of plastic. Unfortunately for these cars, GM’s antifreeze, Dexcool, eats plastic. If it’s not replaced with an aluminum intake gasket, the gasket will eventually fail and antifreeze will get mixed with the oil, and then the engine locks up. Replacing the intake gasket requires tearing off the top half of the engine to get to it… an expensive repair that will run you about $300 if you do it yourself… and upwards of $1,200 at a shop.

Guess what, factor that into the price of the car. The same can be said about a house or other large purchase if you notice an obvious defect in the house – the roof needs replaced, the appliances are dated, the water heater is broken, etc… those are nuisances but not dealbreakers… lower your offer accordingly.

When You Haggle – A Step by Step Primer in Lowballing
First off, bring cash to the meeting. Bring a friend if you feel unsafe having large amounts of cash in your pocket, but don’t bring a cashier’s check, a personal check, a money order, or anything like that. Those will do nothing to help your negotiating position. Plus, bring a friend so he or she can play good cop/bad cop once you get deep into negotiation.

For this hypothetical, assume that the seller is selling a car for $3,000, but your budget is more like $2,000.

1) The first thing you need to determine is what the seller’s asking price is. Typically in a car or house advertisement (such as Craigslist), the seller makes the first move.
– If the seller hasn’t yet disclosed the price but instead says “Make an offer,” wait him out and politely keep angling for his first asking price. This is important as you don’t want to overpay but also you don’t want to make an offer so low that the seller is insulted and simply walks away.

2) Regardless of what the seller’s asking price is, ask the seller if there is room for negotiation. Communicate that you’re interested in buying the car. If you’ve done your research correctly and have gotten to this stage, you’ve found a motivated seller. If you come off as a motivated buyer too, they are more likely to work with you on the price. Always, always emphasize that you have cash in your pocket and can make a deal today. For instance, you might say the following:
“I’m a student at XYZ school… my budget is pretty limited. I’m prepared to offer cash today, but do you have any room to wiggle on the price?”
“I’ve had a bit of crunch lately with bills and such. But I have cash… is there any room for negotiation?”

2a) A variation on this is if you discover an issue with the car. This is where you bring up anything you discovered on the test drive.
“I noticed the intake gasket hasn’t been replaced… you can see it here. At a shop the job would cost about $1,200 to do. In light of that, do you have any room to negotiate?”
“The tires are getting pretty bald… I’m not sure they’ll make it through the winter.”
“This car has three broken window motors. It’s about $100 each to replace them if I do it myself…”

3) Give the seller a chance to make you a better offer. Let the seller be the first to move down from his asking price… he’s serving your purpose when he does. It’s not guaranteed the seller will lower the price, but the worst he will do is stand firm on his asking price, or invite you to make a move.
“Yeah, I listed it online for $3,000. Maybe I could do $2,500, since this does need to be fixed.”

4) Make your first offer, but phrase it using the Overton window. The Overton Window is a phrase borrowed from political scientists – it’s the tactic by which a politician achieves a policy agenda that may seem repugnant or otherwise out of the mainstream. It’s a two-step process.
– First state a position that is outrageous or otherwise completely unacceptable – a position that is more outrageous than the one you’re trying to advance.
– Once rebuked from that position, “moderate” your position by shifting towards what you actually want to achieve. In the public discourse, that “moderated” position no longer seems to be so repugnant, especially since you had just advocated for a more extreme one not too long ago. That “moderated” position is the one you can now advance with greater credibility, since people are no longer as shocked by it.

The same applies to a sale. Pull out a wad of cash from your pocket in the amount that you know will be rejected. But then begin talking – and reject your own offer, and make a second offer before the seller can even say anything.
– “I was initially going to offer $1,500 cash. But I do like this car, and I’d like to move up to $1,600.”

Having the wad of cash in your hand – and in plain view of the seller – shows the seller that you’re serious. You’ve presented the seller with a dilemma – you’ve given him the dreaded “lowball” offer, but you’re prepared to make this deal today. You stand in sharp contrast to the people who flake out on the seller.

5) The seller is likely to counter-offer somewhere between your second offer (from stage #4) and his asking price (stage #3).
“Is there any way you can do better than that? I was expecting to get $2,500… can you do $2,300?”

6) Move up slightly again from $1,600. Remember, your budget from the beginning of this hypothetical was $2,000, and now you’ve got some room to work. Communicate to the seller that you can go slightly higher, but it would be difficult to do so – and you’d be stretching your budget.
“Well, I’ll tell you what… I have the $1,500 on me right now. If you can make a deal today, I can go into town and go to an ATM and get another $300. I can do $1,800 right here.”

7) The seller will try to get you to move up from $1,800. Now it’s your turn to stand firm.
“I mean, the bank only lets me withdraw $300 a day… That’s not me, that’s the bank.”

8) The seller will most likely waffle a bit at this point, probably shake his head and say:
“Screw it. If you have the cash on you, let’s do it.”

In that case, you win! You’ve just bought a car for more than a third less than the seller’s asking price. That, friends, is the art of successfully lowballing the seller and getting a great deal.

***

When The Seller Says No to $1,800
9) There’s the distinct possibility that a seller will not accept the $1,800. At this point, you have to ask yourself if you’re willing to go any higher. You have one more card to play. This is where your friend comes in – you can ask the friend if he or she is willing to spot you some cash.
“Hey, can you spot me…?”
“Yeah, I can spot you another $200 or so.”
“Okay, I guess with all of that, I can go up to $2,000.”

At this point, you’ve communicated to the seller that you’re out on a limb to make the deal – and the seller’s going to have a hard time saying no to a big wad of cash. If you’ve played it right, you’ve found a motivated seller – and you sound like a motivated buyer. If the buyer accepts at this point, guess what… you’ve still knocked a third off the seller’s asking price.

Moreover, if you really want to put on a show for the seller – advise your friend ahead of time that you’ll be doing this, so he or she can play along. Tell them you’ll be asking them for money if push comes to shove and you’re on the verge of losing the deal.

For a real piece of chutzpah, bring the extra money along for the negotiation – but don’t show it to the seller! Make sure the “extra” money is in $20’s. And play the part if you told the seller you had to go into town to find an ATM and get more money – go into town all right, but get yourself an Ale-8-1 at the nearest gas station instead! It’ll give the seller the impression you actually drove into town to get the money.

When The Seller Says No to $2,000
Guess what, that’s still a possibility, because you are offering significantly less than the seller’s asking price. But relax. It’s not the end of the world. Just say the following and walk away:
“OK, I’m sorry we can’t seem to come to a deal today. It’s what I’ve got… You’ve got my number. The offer will be good for a couple more days, give me a call if you change your mind.”

Put your money back in your pocket and begin walking away. The act of putting the money away has a powerful effect on the seller, and that may cause the seller to waver, say “Screw it,” and make the deal.

***

In my next post, I’ll tell you what to do when confronted with a stonewalling seller and other various things that unwilling sellers will say in response to your lowball offer… and how to keep from getting lowballed yourself!

Posted in All Blog Posts, Automotive, Frugal Living | Leave a comment

Review: 2012 Toyota Corolla

2012 CorollaIT’S been a long time since I posted anything on this blog, automotive or otherwise. So, after that hiatus, I figured that I’m long overdue for another car review. Courtesy of Voss Toyota in Beavercreek, I’m driving a 2012 Corolla LE for free while the Prius is getting worked on. I’m going to try a new format for car reviews, which will involve (1) first impressions including leg room and general feel; (2) handling and performance; (3) electronics and accessories; and (4) my final verdict.

I am driving the LE model, which is the mid-range model – above the L or CE, but below the S or XRS.

First Impression

Actually, I’m quite impressed. Successive generations of Corollas (we are now in the tenth generation, as the Corolla has been continuously produced since the late 1960’s) have gotten larger and larger – first as a subcompact and now approaching midsize car territory. I’m a big guy (6’3”, 260 lbs) and I had no problem sitting in the driver’s seat, and I also had plenty of head room to spare. On the other hand, the back seat is rather disappointing, and if you’re more than 5’8 you’re going to have trouble getting back there comfortably.

IMAG0748(The front seat will fit almost anyone, albeit at the cost of my familiar routine of “cranking the seat back as far as it will go, and then leaning back some just to be sure…”)

IMAG0749(…but as you can tell from my leg, the back seat is pretty much useless when you do that.)

But when you pop the trunk, you quickly see why – you could easily fit four golf bags back there with no problem. And you’d still have enough room for the cooler full of beer, the hot dogs, and other food for a guy’s day on the golf course.

The verdict: A decent four-door car that might be good for a single person, a couple perhaps, but definitely not a family car (at least not when the kids start growing). But the insurance on it is dirt cheap. And like all small Toyota’s this car will probably outlast the new three-month-old puppy you just brought home from the city pound.

Handling and Performance

Maybe my opinion is a bit skewed since I’ve driven a Prius for so long. I’ve already said from a handling standpoint that I would rather drive a bus before taking a Prius out on the track, and that still holds true today. The Corolla’s suspension and handling is quite good, and when mated with the Goodyear Eagle tires that mine has, you feel in complete control when taking a corner. This is only the case when you press up the tires to the maximum sidewall pressure of 51 PSI versus the door placard’s 32 (the car feels quite roly-poly at the placard spec).

However, unless you’re very familiar with how the car handles, you’re going to be winging it – the electric steering seems quite disconnected with the wheels, and almost no feeling whatsoever is transmitted back to you.

Although the 2012 continues Toyota’s odd tradition of front disc brakes coupled with rear drums, it doesn’t feel like you’ve got drums back there – this car stops on a dime and the brakes are consistent no matter how much pressure you put on them.

Performance for a basic four-cylinder is quite good. The basic 1.8 liter engine returns about 140 horsepower at 6,000 RPM with comparable torque in the 4,200 range. Considering the car’s curb weight of around 2,700 lbs, that isn’t too bad. Although the car is mated to a four-speed auto box that’s probably as old as I am, I was able to get from a dead stop to 60 MPH in about eight seconds, and cleared 90 MPH just fine – the engine clearly had more to offer. And the fuel economy is pretty good – no matter what you do, it’s pretty difficult to get below 30 MPG in mixed city and highway driving.

The EPA reckons the car is good for 27 in town and 34 on the highway, and in mixed driving I averaged 35, and I wasn’t exactly driving conservatively. I burned out, I skidded, I drove fast, and I gave the suspension a good workout. I reckon the car could get high 30’s on a purely highway trip, driving the speed limit. Not bad for a four-speed automatic transmission that was built in the Stone Age.

The biggest letdown in the Corolla is the new drive-by-wire throttle control that is becoming increasingly ubiquitous in modern cars. Rather than actually being connected to a throttle body, the accelerator pedal simply sends a signal to the car’s computer which then tells the car to burn some rubber. Coupled with a rather slow-to-react four-speed auto box and it could be a full second after you floor the gas pedal before the car finally decides to accelerate.

So, plan your freeway merges and passes.

Lastly, a bit about Toyota’s traction control – patented TRAC and VSC – I hate it. What’s more, Federal law mandated that all 2012 model year cars had to have at least some form of traction control such as anti-lock brakes. And Toyota’s VSC is one of the most terrifying things I’ve ever encountered on the road when the computer applies ‘differential braking’ to only particular wheels in order to keep the car going straight.

Well, in my case, keeping the car going straight sent me straight… into a snowbank. I disable traction control at all times on all cars I drive now.

The plus side is it can be easily disabled. On the left side of the dashboard near the steering wheel, there’s a small button that can be pressed – press once to temporarily disable TRAC, hold for five seconds to disable both TRAC and VSC for a longer period of time (until the car is started again).

Electronics and Accessories

In general, the Corolla’s electronics are a letdown. The number one thing that jumps out at me when I turn the radio on is how truly awful the speakers are. There isn’t much on the low end, and the speakers generally feel cheap. Even with the bass cranked up as far as it will go, it isn’t going to bring down the roof anytime soon. That is the first thing I would upgrade if I found myself driving a Corolla for any significant amount of time – I’d use the generous trunk space to mount a decent subwoofer and upgrade every speaker in that vehicle.

The second thing is the relatively poor job Toyota’s done in integrating the iPod with the onboard radio. Plug your iPod into the USB port and you suddenly lose the ability to control it via the touch screen – you have to control your iPod exclusively through the car’s radio – and selecting a song requires several button presses, options selected, and then a whole ton of furious knob-twisting as you cycle through several hundred songs to get to the one you’re looking for. In addition to this, it takes several seconds to load the next song when you hit the “next” button on the steering wheel – which is not an issue when you control directly via the iPod’s touch screen.

I know that Toyota’s probably done this to help drivers comply with the increasing number of states that require hands-free devices – but the integration needs some serious work before it replicates the iOS’s functionality.

The Final Verdict

If I didn’t have a 2007 Prius that will probably last me another ten years, I would not mind buying a Corolla. It’s not at the top of my list of favorite cars being offered, but if the price was right I’d get one – after factoring in the additional $1,000 it would take to get a truly hopping sound system.

But I would rather wait until the 2014 Corolla is released – when the transmission gets a much-needed upgrade from its current four-speed to either a six-speed manual or a CVT. Or 2015, once Toyota gets all the kinks worked out from releasing a new car.

Mixed.

Posted in All Blog Posts, Automotive, Mixed, Product Reviews | 2 Comments

Why ABS is Dangerous (And How to Disable It)

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SOMETIMES, an idea that’s brilliant in theory is completely rubbish in practice. These ideas can include, but are not limited to, Marxist economics, Prohibition of alcohol in the ’30s, New Coke, the Ford Edsel, filling the Hindenburg with hydrogen, building the city of New Orleans below sea level, the chump who sued McDonalds over its hot coffee, high fructose corn syrup, and countless others truly terrible ideas over the years.

Add to that list anti-lock brakes on cars, commonly known as ABS. First commonly used in the early 1970’s on cars, the idea is brilliant in theory. The automaker installs a little speed sensor on each of the four wheels  – and when one or more wheels suddenly stops moving (indicating that the driver has pressed the brake too hard, causing the wheel to ‘lock up’), the car’s computer will over-ride the driver’s braking and release the brake momentarily, enough for the wheel to re-establish traction. Once the wheel is turning normally again, the computer will reapply the brake, rinsing and repeating until the car stops moving. This results in an odd “chirp-chirp-chip” sound coming from the wheels and a serious shudder that is often transmitted through the steering wheel – that’s the ABS working properly.

The reasons for installing these systems appear obvious – it’s vastly more difficult to control a vehicle when the wheels are locked up.

But is it safer? The answer is both yes and no. In the case of most drivers (assuming that we are talking about lowest common denominator here), the answer is probably yes. Today’s road driving test (as of 2005 when I took mine, at any rate) consisted of about fifteen minutes in a parking lot along with some time on back residential streets with a police officer riding shotgun. They didn’t teach me how to correct understeer, how to properly rock the car out of snow, or what to do when the car begins to skid.

To be fair to the DMV – it is probably on page 129 of the driving manual that you can pick up as a “study aid” before taking the written test. But does everyone actually take this to heart – and go apply it in a safe, empty parking lot so he or she knows how to react in an actual emergency?

The answer to that is, sadly, a decided ‘no’ and thus, in those cases, ABS is better than nothing. When faced with a low traction situation, an inexperienced driver is liable to push on the brakes harder and his bladder empties as he sails into the embankment. ABS corrects this by pumping the brakes for you and allowing someone to maintain a modicum of steering ability while still braking.

Except that stomping on the brakes and leaving your foot there flies in the face of every instruction ever given to you during a driving course or from any experienced driver.

The driver who knows what he’s doing benefits little from ABS. Time spent in an empty parking lot will quickly educate you on what “threshold braking” is – how fully you can press the brakes without locking up the wheels. Knowing your car’s mechanical limits is just as effective as ABS braking – and far safer, since invariably ABS like all mechanical systems fail at some point.

And in cases of limited traction such as snow, ice, and mud – ABS is actually detrimental to your safety, as it significantly (and needlessly) increases stopping distance. In snow or mud, a locked up wheel will dig into the snow – and provide considerable stopping power. If ABS prevents the wheel from locking in this case, almost no braking will occur. Consider the following situation, which happened to yours truly just today.

ABS Fail

The driver is going down a snowy road at 25 MPH (position 1 on my crude Paint drawing). He wants to turn right into Wal-Mart, so he begins getting on the brakes and after a few seconds begins to turn right into the side street. Problem is, his car has ABS (red line, position 2). ABS prevents the wheels from locking up, so they continue to spin freely – and there’s no braking happening.

In about two seconds, yours truly is still doing 25 MPH, and his right-turn isn’t producing the intended result, because the wheels have insufficient traction to turn the car at 25 MPH in the snow. And traction control – the mirror machinery of ABS that prevents wheels from spinning when you floor the gas pedal – prevented me from gunning it, getting traction, and forcing the vehicle to the right. So he sails directly into the embankment. (Position 3, red line). But-for the ABS preventing proper braking, he would have slowed considerably before the critical moment – and could have made the turn (position 3, blue line).

I spent the next ten minutes with a shovel, trying to clear enough snow to give myself a path out.

You could fairly say that I shouldn’t have taken the turn at that speed – and you would probably be correct. But that doesn’t change that I had the ability to correct any error, any spin, and any wheel locking – and that the ability was negated by a “safety” feature.

And that, friends, is unacceptably dangerous. I wouldn’t mind if the car had an “ABS override” or “traction control override” – but increasingly, cars do not have a button on the dashboard to this effect. In fact, Federal law mandated that all cars model year 2012 and later must include ABS and other “safety” features, ostensibly to reduce crashes.

Which leads me to the final premise of this article – how does the minority of drivers who are actually educated on how to drive in emergency situations defeat these “safety” features that just invariably get us into trouble?

In seven years of driving, I’ve owned three cars – the first lacked ABS, it was broken from day one in the second car, and only the third has functioning ABS. Which I will be disabling as soon as possible. I’ve had many, many close calls with other cars in that seven years – and I successfully avoided them all without the help of ABS. This system will get me into more trouble than it’s worth.

The most effective method (and the crudest) is simply to pull the corresponding fuse. Most cars have their fuse box under the glove box on the front passenger’s side, although this can vary. All fuse boxes will come with an accompanying diagram that illustrates which fuse serves which device on the vehicle. Consider this sample fuse box, taken from a Volkswagen Beetle.

NewBeetleFuseCard To disable ABS in the Beetle, just pull fuse #9 and you’re good to go. The ABS light will likely light up on your dashboard. Ignore it. If it bothers you, then I’ll gladly sell you some electrical tape to cover it up. Now take that car to an empty parking lot and educate yourself on what it can (and cannot) do.

Happy Motoring.

Posted in All Blog Posts, Automotive | 90 Comments

Raise The Minimum Wage?

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LAST night, I watched the premier episode of “30 Days” starring Morgan Spurlock of Super Size Me fame. In 30 Days, Morgan and his girlfriend attempt to spend 30 days living lifestyles completely different from their own. In the premier episode, the well-off New Yorkers who have no financial troubles take a road trip to Columbus, Ohio, and try to live for 30 days on minimum wage jobs. From their low-budget jobs must come all their bills, rent, food, and medical expenses.

Despite Morgan working two different minimum wage jobs and Alex working full-time, the couple finish the month over $1,000 in debt primarily due to medical bills. All of their furniture came from a charity, they had one bus pass shared between the two of them, obviously didn’t have a car, and had rented an apartment in The Bottoms – which is one of the worst parts of town.

And then, not an hour ago, I returned from Wal-Mart after buying a bunch of groceries. The amount I spent – $58.26 – was nothing special. But today was the first time I can recall that $58.26 of groceries was still a small enough load of plastic baggies that I could carry them all in with just one hand.

It got me thinking about the appalling rise in food prices in recent years. You don’t have to look hard to find something that has skyrocketed in price in just the past five years. Ground beef has doubled. Gasoline has doubled in four years. Corn is way up, sugar is way up, and fresh fruits are way up, as well. The “dollar menu” at most fast food restaurants is now the “value menu”, and most items are in the $1.29-$1.69 range.

I remember, as a senior in high school, stopping by Wendy’s for a double stack after class each day, because a double stack was $1. That was 2005.

Just last week, I went to Wendy’s and saw that the double stack has increased to $2.79.

Prices have increased by a minimum of thirty percent across the board in the last four years alone, possibly by fifty percent. The official government statistics – the CPI, known as the consumer price index – do not record this inflation, since the Federal Reserve changed the items measured in CPI back in the 1980’s to exclude both food and fuel. So, while official inflation remains low, unofficial inflation is anything but low.

Which brings me to the premise of the article. The Federal minimum wage has not been raised since 2008, despite continuing price increases across the board. Is raising the minimum wage a good legislative option in order to ensure people can get by?

The Verdict?

Yes and no.

Raising the minimum wage from its current $7.25 an hour to a hypothetical $10 an hour will work wonders in raising the immediate living standard of millions of working poor all across America who have seen their incomes pinched by inflation in recent years. It results in an immediate gross wage increase from $14,500 a year to $20,000 – or about a 30% increase. It would exactly offset the price increases in food, fuel, and other commodities that we’ve experienced in the past four years.

But would it actually lift millions out of poverty? I don’t think so.

As Milton Friedman once said, inflation is always and everywhere a monetary problem. There is only one way bad monetary policy causes inflation – and it’s when the Federal Reserve expands the money supply by printing too much money. The inflation can result in one of two ways: cost-push inflation or demand-pull inflation.

Cost-push inflation happens when rising prices force suppliers and merchants to increase prices for their products and services – hence, the cost is being pushed onto consumers. Demand-pull inflation on the other hand is when too much money chases too little product – the price increases. You can see this when a new electronic toy comes out and it’s in short supply – the price increases rapidly, as some people are willing to pay anything to get that brand-new PS3, XBOX, or iPad.

Ben Bernanke’s policy of “quantitative easing” has been a form of cost-push inflation. As the money supply increases, banks and lenders become increasingly profligate with throwing their money around, fueling economic growth (at least in theory).

Raising the minimum wage on the other hand will be a form of demand-pull inflation. By raising the minimum wage by 30% and increasing income by a similar amount, there is now that much more demand for product. Prices will thus rise correspondingly – although not by the full 30% due to the poor constituting a rather small proportion of the economy’s aggregate demand – and thus eat into that 30% gain that the working poor might have made. Their real gains will be smaller consequently – I’ll throw out a bone and say the real gain is in the 10-15% range.

Ten, Maybe Fifteen Percent, If…

That is, if the working poor manage to hold onto their jobs. Like it or not, a lot of businesses pay their workers minimum wage because they have no choice. This is especially true in small restaurants and retail outlets, many of which are already facing stiff competition and razor-thin profit margins. It’s important to remember that 75% of small businesses fail within the first year of getting started, often because their costs exceed their revenues.

The cost of an employee, to an employer, is a lot more than just making payroll. If an employer now has to pay his or her worker $20,000 instead of $14,500, the employer’s costs rise dramatically. They pay a heck of a lot more than the $14,500 they pay their worker – they pay the government extra Social Security and payroll taxes, they pay extra workman’s compensation insurance, they pay extra city and local taxes and fees – and under Obamacare, they now have to find a way to find health insurance for their employees or face a substantial tax penalty. (That last one is to come in painstaking detail soon, as I finish working on Part Four of The Economic Case Against Barack Obama).

From a business standpoint, if the business is faced with rising costs, the choice is obvious – cut those costs. That is most commonly done by laying off workers or cutting hours. This would run in direct contravention to the intended legislative goals behind raising the minimum wage to $10 an hour – now, that minimum wage worker is completely unemployed.

Does that minimum wage increase sound so hot anymore? I don’t think so. We can debate endlessly the increase in executive pay, the opulent lifestyles of the one percent, how the working poor can’t catch a break in this country, and so on – but the fact of the matter is, the recent rise in poverty is heavily attributable to the rise of food prices. And that, folks, is a problem that we face with the Fed and Ben Bernanke.

If prices had remained stable since 2008, then fewer people would have their incomes pinched in the first place – thus obviating the need to raise the minimum wage at all.

To sum up, I feel like it could be done – but it would be laughably ineffective at solving the poverty issue. It would only kill jobs and stoke unwanted inflation, while not solving the underlying problems.

Posted in All Blog Posts, Economics and Politics | 1 Comment

The Decline of Christmas

THIS marks the first year I’ve managed to make it almost two weeks after Thanksgiving without hearing a single Christmas carol from anyone, anywhere. No roving bands or families going from door to door and no groups at the malls. It makes me wonder: Have we completely marginalized Christmas and what it actually is supposed to mean?

I think the facts speak for themselves. Wal-Mart and other big box retailers have hyped up Black Friday so much that we trample each other on Thursday night to get a spectacular deal on a computer or a big-screen TV. The parking lot is a zoo as people jockey for a spot that is hopefully within a half-mile of the entrance. Inside, lines are forming around skids of shrink-wrapped goods that store employees are forced to guard, lest people take them before the sale begins. Never mind that Black Friday began on 8 PM Thursday – which means that it’s getting too close to Thanksgiving dinner.

Let’s thank the Lord for what we do have – and while we’re still stuffed to the gills, let’s go out and join the stampede to buy all the stuff we don’t have.

Consumerism isn’t the only thing degrading Christmas. You know this is coming – secularization is degrading Christmas, too.

Consider the decline in Christmas caroling that I mentioned in the beginning. Ever wonder why you hear fewer and fewer of them lately? I, raised in the 1990’s, barely know half as many Christmas carols as many of my elders. I had never heard of “Go, Tell It On the Mountain” until a couple weeks ago.  And guess what – here’s why Christmas carols are on the decline:

Joyful, Joyful We Adore You
Joyful, joyful, we adore You, God of glory, Lord of love;
Hearts unfold like flowers before Thee, opening to the sun above.
Melt the clouds of sin and sadness; drive the dark of doubt away;
Giver of immortal gladness, fill us with the light of day!

Come now join a grateful chorus, giving praise to Christ our King;
God’s own Son has come to save us with a love unending.
God the Father, Christ our Savior coming to earth with us to dwell;
now proclaiming God is with us, he is our Emmanuel.

O Come, All Ye Faithful
O come, all ye faithful,
Joyful and triumphant!
O come ye, O come ye to Bethlehem!

Come and behold him
Born the King of Angels

O come, let us adore Him,
O come, let us adore Him,
O come, let us adore Him,
Christ the Lord.

Go, Tell It On the Mountain
Go, tell it on the mountain,
Over the hills and everywhere
Go, tell it on the mountain,
That Jesus Christ is born.

O, Holy Night
O holy night! The stars are brightly shining,
It is the night of our dear Saviour’s birth.
Long lay the world in sin and error pining,
‘Til He appear’d and the soul felt its worth.
A thrill of hope the weary world rejoices,
For yonder breaks a new and glorious morn.

Fall on your knees! O hear the angel voices!
O night divine, O night when Christ was born;
O night divine, O night, O night Divine.

I can continue this all day.

Allow me to be perfectly clear: Christmas is the celebration of the birth of Jesus Christ. You can argue endlessly that we may or may not have the date correct (the Gregorian calendar and all that), but we’ve decided for hundreds of years now to celebrate Christmas on December 25 – that we spend it with our families, in thanks for our blessings, and in celebration of the birth of Jesus. Christmas has absolutely nothing to do with Hanukkah, Kwanzaa, and the other “holidays” that are clustered around the same time. Great for them, and it’s their prerogative to have a holiday somewhere near December 25.

But I’m tired of hearing about holiday trees. I’m tired of watching Christians sit down and roll over and play dead while THEIR day of celebration is marginalized, all in the name of not being offensive. Guess what – the celebration of Christ isn’t offensive, save to those who deliberately have a vendetta and are out to persecute Christians. God doesn’t call us to forsake our beliefs for the sake of other people. He understands that no persecution or temptation that we face is unique to us: it’s something that we all face. See James 1:2.

I’ll tell you what’s offensive: Christianity is unique among all the other world religions that it alone is singled out for more persecution than any other group. Furthermore, Christians alone are unique in refusing to stand up for their beliefs. We stand idly by and watch Islam build a mosque at Ground Zero. We do nothing when we accommodate through our case law every type of religious belief imaginable. (Read up on Santeria and what courts have done to accommodate them.) We tear down Nativity scenes and statues of the Ten Commandments, but have no problem raising the golden crescent over our buildings. We must have “respect” and “tolerance” for everyone else, but we receive neither ourselves.

There is a time to stand up and say that not only are we proud of Christmas and the coming of Jesus, but that we will celebrate it in our own way. We will stand up for our beliefs, we will not roll over, and will not go quietly. There is a national need for Jesus, and it’s imperative that we spread that word!

Posted in All Blog Posts, Luke 10:27, Music, Art, and Books | 1 Comment