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["Don Bowen" <don.bowen AT earthlink.net>]

> The city of Birmingham, AL is in financial trouble:
Only one among many more.  Several California Cities and the state are 
nearing trouble because of the falling housing market.

There are other indicators, the LIBOR spread is growing again, and 
helicopter Ben is going to shower more money later this month.  Maybe not an 
interest rate reduction but a further loosening of who can tap the fed and 
what they can use to borrow against.  With any amount of luck he will be 
able to dump all that bad paper on the taxpayers lap.

I listened to a very interesting talk by Elizabeth Warren today.  She has 
researched and studied the fall of the American middle class.  I took a few 
notes of the talk and here are some highlights.

Since 1970 American household incomes have risen sharply.  Some expenses 
such as clothing -32% (all those Chinese sweat shops), food -18%, 
appliances -42%, and auto costs -34% have decreased while others such as 
housing +76%, health insurance +74%, cars +52% (two income families usually 
have two cars), child care +100%, and taxes +20%.  Some of the costs have 
unequal distributing for families with children, for example housing costs 
for a couple with children have increased 100% while for those without 
children increases were 50%.  These are cost increases for the period from 
1970 to 2005 or almost one generation, a generation that saw the largest 
increase in family income as more women entered the workforce.

The net result of all this is that fixed costs have risen from 50% of a 
typical middle class income to 75%.  You have to keep in mind that 75% is 
with a two income family.  In the single income family if something like a 
job loss or a serious illness came along, the 50% could be made up by a 
combination of the safety net of disability or unemployment payments, 
cutting back, and the spouse taking on a job.  The modern two income family 
is in much worse condition, the safety net is torn, the other spouse is 
already working,  there are little one can do to cut back on the fixed 
expenses.

Add to that the 1970 savings rate of almost 10% and the revolving charge 
debt of less than 15% to today's savings rate of less than 0 and a revolving 
charge debt 1800% larger.

Don Bowen      KI6DIU
http://www.braingarage.com/Dons/Travels/journal/Journal.html