Consumer spending won't do it. We need (gasp!) the government

Article by Paul Krugman in today's Times in which he explains the paradox of thrift (lower consumer spending, while overdue and in some ways admirable, affects the economy negatively, especially given the liquidity crisis we're seeing now) and recommends a Keynesian solution:

...what the economy needs now is something to take the place of retrenching consumers. That means a major fiscal stimulus. And this time the stimulus should take the form of actual government spending rather than rebate checks that consumers probably wouldn’t spend.

I sure as heck wouldn't. This column also speaks to something I wrote about more on my other blog - sudden rediscovery in the mainstream press of economic theories other than Friedmanist, Greenspanist libertarianism. (Well, Krugman has been beating this drum, but he's been one of the few.) Greenspan's belated recognition that his theories were not related to reality was a pleasure, albeit a bitter one. The long, dark Reaganist night is finally ending. Dawn is breaking, people.

(Hat tip: Daily Kos)

Tofu and "Shrimp" with Black Bean Sauce

A couple of people asked me for the recipe to this. I got it from Food and Wine magazine, September 2005 issue. We use the Dyna-Sea brand Surimi Shrimp, which stands up pretty well as long as you don't rough it up too much. It's about $8 a pop out here, though, so with the tofu (another $2.80 usually at least) this isn't the most frugal meal going. But - we only make it about once a month and it's cheaper than eating out. This recipe serves 3 of us, so if you're feeding more you can either double the recipe or serve potstickers or something like that to stretch it out a bit. There's no veg in it so you'll have to find that somewhere as well. We serve it with rice.

A block of tofu, cut into triangles
A package of the shrimp, cut into thirds
2 cloves garlic
a boatload of ginger
1/3 cup or to taste black bean sauce
1/2 cup each cooking wine and vegetable stock
a touch of sugar

Heat the garlic and ginger in a skillet. Add the black beans and heat through, then add the wine, stock and sugar. Let that heat up, then put the tofu and shrimp in there and heat them through. (It's not a stir fry, so don't keep beating at it.) You could throw some peas in there if you're so inclined. The recipe calls for cilantro but we don't use it and haven't missed it.

That's all there is to it, really. Easy-peasy. B'tayavon (that's Hebrew for "bon apetit")

Some interesting links

A NY Times article today on the growing problems with credit cards, which calls it the next crisis - unemployment and recession leading to defaults leading to raised interest rates and lowered credit limits for everybody else. People can no longer use their home equity loans to juggle their credit card debt, is what it comes down to.

Working off that article, here's a good post from Zen Habits on how to deal with the credit card crisis: it's is worth reading in its entirety, but it's basically to move away from debt, pay down debt (perhaps by using the debt snowflake model I talk about here), and stop spending money. Good advice, like I say.

Consumer Reports has a new Money Blog written by Tightwad Todd which is pretty consistently worthwhile. A couple of days ago I had the oil in the '98 Voyager changed (110,000 miles - I decided to put off the larger service call until it gets to 120K ptui ptui ptui which is what the manual recommends) and at about the same time, Get Rich Slowly happened to have a post saying that he thought the 3,000K recommendation for oil changes was a con cooked up by the likes of Jiffy Lube. He doesn't exactly say not to do it, instead saying to rely on the owners manual rather than a general guideline. Which I guess is okay, but my owner's manual says to do it every 3,000 miles and anyway, Tightwad Todd says that one is foolish to ignore this simple and routine procedure, that any American car should be able to get to 200,000 miles if it's treated well and part of being treated well is regular oil changes.

Mike Quincy, one of our long-time auto writers, says the most important trick to keeping a car performing properly is to follow the manufacturer's recommended maintenance schedule and make any repairs promptly. If you think you’re saving money by skipping an oil change, you’re wrong, Quincy says. Missing even one oil change can accelerate premature engine wear and cause engine damage, reducing long term reliability.

And if you can't believe Consumer Reports (no advertising) who can you believe? I sometimes push it to almost 4,000 miles, but I need this car to last for a while so I want to be nice to it.

Third, I've been noticing a bunch of hits on this site from a blog called "justice desserts." It's part of what it calls the "urban homesteader" movement, pretty hardcore DIY and back to the land. I've been sort of looking at it for the last month, there's s a bit of a survivalist vibe that I find myself reacting to negatively but that may be more about me - there's a lot of good information on there and it's definitely worth a looksee. And they put my link under a heading, "Blogs of those who eat and love Justice," which I am proud to say is true.

Article in this week's Newsweek on frugality - the title says it all: Thrift is the New Fashion:

Thrift, like the repossession business, is one of those classic countercyclical industries. When the gross domestic product shrinks and bulls grow mute, Americans are called to rouse themselves from a consumption-induced daze and start saving and investing rather than borrowing and splurging. At about this time in the economic cycle, we hear a lot more from Warren Buffett and a lot less from Donald Trump.

Well, that's one good thing, anyway. (Maybe the Apprentice will be shown clipping coupons this season, and Team A will point a finger at Team B and say, they bought the toilet tissue that wasn't on sale!) The article poses the hope that the current economy crisis will somewhat swing the pendulum back to savings from the spendthrifty ways of the past ...how many years? Since the last recession, I suppose. But he also makes time to drop the hoary "wisdom" that thrift is bad for the economy:

Clearly, we need to save more. But as John Maynard Keynes taught us, thrift can be counterproductive in times of weak demand. Consumer activity accounts for about 70 percent of economic activity. Spending money heedlessly—traveling, redecorating, eating out—keeps our friends and neighbors employed.

Well, not anymore, I guess. Speaking as one who was trying to be frugal when frugal wasn't cool, basing the entire world's economy on the spending habits of lavish Americans is foolish - it is unsustainable, it is unenvironmental, and it is unfair to others who will certainly be tempted to replicate it and then will be told, no you can't, it causes global warming. The economy of the future will have to be based on green technology and the development of renewables, and not on reigniting consumables. Thomas Friedman is quite right about that, and I think Obama thinks that way too, as far as I can tell.

And finally, here is the most foolish sentence I have read in a while, from that bastion of inconceivable overconsumption, the Times Sunday Style section:

In an economic climate in which buying a handbag with a four- or five-digit price tag is starting to seem gauche, the free-spending style hounds formerly known as “fashionistas” are rebranding themselves.

"Starting to seem gauche" - you like that? Note to the Times: It was always gauche. Just ask Sarah Palin and her Neiman Marcus charge card.

This week's mealplan

Sunday - the tofu and fake shrimp in garlic, ginger and black bean sauce that is one of our house favorites.

Monday - carrot mushroom loaf (Moosewood): stirfry a minced onion and some mushrooms, grate a bunch of carrots, mix it together with breadcrumbs and cheese and italian spices, and bake at 400 for 45 minutes. We didn't feel the need to make any side dishes, since it's already bread, cheese and veg.

Tuesday - Veggie chili and corn bread

Wednesday - Lentil soup and a crusty bread. Yes, it is officially the time of year to start making soups and stews! But I can't understand why when I make the pumpernickel recipe in my bread machine, it never rises properly. I never have that problem with the wheat bread.

Thursday - Veggie fried rice, from the Hippie Gourmet. It calls for asparagus, but I'm not the kind of guy who buys asparagus in October. I did splurge on the red peppers, though, because I thought it would make the dish look nice.

This weekend we're going to KC for the weekend because we have tickets to see Lion King. (This is our combined anniversary/Hanukkah present from DW's folks, so props to them!) So this meal is on DW's mom, although I think we're bringing a challah. And yes, Sunday is 11 years for DW and me on. Life's bumpy path indeed, but we're still a good, if "quirky" team.

Debt snowflake

There's a concept in the on-line frugality community of the "debt snowflake." I think it was developed by Dave Ramsey, but I found out about it through Get Rich Slowly, which is about my favorite of the many frugality sites on the net these days. As explained here, the idea is that you set a certain amount to apply to your debts every month above the minimum payments , and all of that extra money gets put into one priority debt: it could be highest interest debt, or the one with the lowest balance, which seems counterintuitive but the idea is that success at eliminating "low-hanging fruit" will be a positive reinforcement toward continuing to pursue future goals.

Then, whenever you come into some money - whether it be a repaid $5 loan from a person at work or a tax rebate check, a high holiday pulpit, whatever - you apply it to the priority debt. That's the snowflake, which builds, presumably, into a snowball. This gets the priority debt down faster, and then once you have paid off that debt you take all the money you've been paying toward that debt and apply it to the next priority debt, and so on.

It sounds pretty smart to me, so I've been trying to adopt it for the past several months. I also found, probably through GRS though I don't really remember now, software for an Excel spread sheet that helps make this a visible, workable plan. You load in all your debt numbers, interest rates, and the amount you pay each month, and prioritize which debt to attack first, and it figures out how long it will take you, and how much money you will be able to apply to other debts once the priority debts are resolved. There's a place for you to enter in any additional money that you can snowflake, and it automatically readusts the calculations to take that additional money into account.

So I have 4 major, priority debts: two credit cards of about $7,000 balance each, one at 19.9% interest and one at 13%; a car payment of $340 over 72 months, which we're a little more than 24 months into; and about $7K to one of my brothers-in-law, which was mostly to buy our way out of the house in IL. (I also have my student loan debt, which is $400 / month but which I'm leaving off here for right now because the interest rates are low and the other debts are higher priority.) Given that there isn't any one particular debt that has a significantly lower balance than the others, I'm prioritizing the 19.9% credit card. So I pay $400 monthly to that, $200 to the other card, the $340 for the car, and $100 to the brother in law.

According to the calculations, if I don't incur any additional debt, the first card will be paid off in June of 2010, and the second one, taking into account the additional $400 per month that I will then be able to add to the payments, will be paid off in January of 2011. Then we apply the two additional amounts to the car payment, etc. etc. If nothing else changes, these 4 debts (again, leaving aside the student loan) will be resolved in November of 2011.

Which doesn't really seem that far away, when you think about it. The problem, of course, is that many things will happen between now and then to complicate these calculations. We have the looming orthodonture issue that I wrote about earlier; we want to send DK1 to Jewish summer camp next year; and we have a bat mitzvah on the horizon for August of 2011, right in the middle of all of this. (Stay tuned for a large expansion of the "frugal bar mitzvah" tag starting in about a year or so!) We also haven't been saving for retirement or for college for over a year now, since we got to Wichita.

I suppose the unexpected could happen in a positive way as well, such as DW getting gainful employment which would allow us to raise the numbers, or at least not add to them because of tight circumstances. Right now we have about $2500 in our savings account, which means we wouldn't have to go to the credit cards if we had an unbudgeted expense, such as needing to do a repair on the car, for instance.

So it is what it is, it seems like a good tool, and I think in this case it's useful to have things written down. It makes the thing less liable to vagaries of my mood or the balance in the checkbook. I'll let you know down the road how it's working out.

Oh, and one other thing: every once in a while I find myself moaning because things are tight at the end of the month and it seems that we're not being frugal enough. But one thing I've realized through paying closer attention is that I am paying about 25% of my monthly net income in debt service, so it's no surprise that things can get tight. That's no reason to let up, and I still think there are more economies to be found, but I also think relief will have to come on the income side, if you get my meaning.

Grandma knew better than this

Once in a while, whenever I'm feeling flush at the supermarket, I buy a copy of Mother Earth News. I have an ongoing fantasy about having a couple acres in the country with a big garden and chickens, the whole Barbara Kingsolver thing, and this is basically the only way I have to scratch that itch. (I'm really a city boy, and wouldn't know what to do with a chicken that didn't come already plucked and quartered.) I bought the new issue last week - the cover story was "Expert Tips for Simple Living" which is a sale for me right there - the story was written by Wanda Urbanski, whom I've never heard of but who apparently has a simplicity show on television, and another one on the Nearings' house in Maine.

There's another article in there called "Good Calories, Bad Calories: What really makes us fat" and the apparently the answer is: carbohydrates.

If you had asked your mother or grandmother for diet tips, you might have heard, "Every woman knows that carbohydrates are fattening." In fact, that's from a 1963 article in the British Journal of Nutrition, co-authored by one of the leading nutritionists of the era. And for the previous 100 years or so, this was the conventional wisdom: carbohydrate-rich foods such as bread, potatoes, pasta, rice, sweets and beer make us fat, and, by implication, foods rich and fat and protein do not.

Now, I'm the kind of person who always looks askance at conventional wisdom and hype, and am fairly (over-) sensitive to conspiracies, so I'm perfectly willing to accept the growing conventional wisdom that the focus on fat in the diet over the past 30 years has been overblown. (Especially since it formed a prominent part of Michael Pollan's latest book.) I've never been afraid of cheese, for instance, and the idea of low-fat cookies always struck me as rather an abomination.

But there's a difference between recognizing the anti-fat hysteria was so much hype and simply swapping carbohydrates for fats and making them the new bogeyman. This article recommends a protein- and fat-rich diet that lacks virtually all starches and sugars, with a special focus on unlimited quantities of red meat.

If you actually look at the fat content of a piece of red meat (or eggs and bacon), you'll find that the principal fat is not saturated fat - which is supposedly bad for the heart - but the same monounsaturated fat as in olive oil, which is supposedly good for the heart. And much of the remaining fat is still what nutritionists would call heart-healthy.

(snip - a discussion of the various levels of HDL and LDL cholesterol in red meat)

... animal products happen to contain all the amino acids, minerals and vitamins essential for health, with the only point of controversy being vitamin C. [And even then] the content of meat is more than sufficient for health, so long as the diet is indeed carbohydrate-restricted, absent the refined and easily digestible carbohydrates and sugars that would raise blood sugar and insulin levels and so increase our need to obtain vitamin C from the diet.

So in other words, if it wasn't for the fries and buns, McDonald's would be good for you! Forget the orange juice, for vitamin c eat more red meat! In fact, OJ ruins the health benefits of the red meat!

This Atkins-ist nonsense is pernicious in a number of ways. First of all, meat is high in B vitamins, zinc and iron, and not much else. It's ridiculous to claim that you could get all the vitamins - C! - you need this way. Not even the industry claims anything like this.

There's also actually some benefit to the eating of grain, like fiber, and if you ate as much meat as this you would basically never poop again. The model proposed is opposed to many of the the more healthy diets in the world: the Mediterranean diet, for instance, held up as a uniquely healthy way to eat, does not focus so exclusively on protein and fat. (He does say that we should eat leafy greens, so that covers some of it.)

And this doesn't even take into account the costs of a meat-based diet, not only on health but on energy usage and climate change - it takes more calories to produce the meat than you get from it - and the problems inherent in the CAFO system that would only have to be expanded if everyone were to take this advice.

The problem is not grains as such but processed grains that have had the living element removed - processed grains such as you find in most processed and supermarket-baked goods. And anyway, my grandmother never said not to eat pasta and potatoes. She said not to eat soda and candy. For everything else, she was a great believer in moderation - especially when it came to eating meat. I'm surprised that a decent and fairly crunchy magazine like Mother Earth News would have forgotten that lesson.

Frugal links

Business Week's cover story this week is "the new frugality" (meet the new frugality, same as the old frugality) and features Leah Ingram of Lean Green Family. Good for her hits, I think.

From yesterday's Times, a report about having to all of a sudden be more frugal with your teenager. I'm not overly sympathetic to this - fortunately, the report wasn't focused on the Upper West Side - but must remember that the peer pressure at that age can be brutal:

[The teenagers interviewed] all felt the pressure and the desire to acquire: their knowledge of brands and prices was encyclopedic. “The stuff it takes for them to be perceived as middle class is extraordinary,” said Tom Murphy, who teaches the high school’s “Economics and Society” seminar. “Laptops, Xboxes, iPods, phones — and it’s nonnegotiable.”

Even so, they probably don't want you to work more to have to afford all this stuff:

And yet, she added shyly: “I love the gifts but I’d really like to spend time with him. But my parents are working harder than ever and they’re so worried. I don’t want to force him to spend time with me. I can be a real earache.”

And from today's Eagle: easy credit may be a thing of the past. The article points out that as nice as it is to be able to fund affluence by credit card, it has a lot of bad consquences as well, like a terribly low savings rate and fixed obligations that form a high percentage of monthly income, which is the situation I'm in.

"A strong golf game is good for business"

How will this generation handle the next Great Depression? Tom the Dancing Bug has the answer.

A bit of a windfall

I led high holy day services for a small congregation in KC. It was fine: they were nice, and I gave them two of my best (and in IL, most controversial) sermons and no-one ran out of the room screaming. Those of you who are hoping that a reasonably good experience will whet my appetite for pulpit work again (DW), don't hold your breath.

Be that as it may, I was paid $3,000 for the work. That's a nice little windfall in a difficult financial time. Here's where I expect the money to go:

$400 to my Visa, in addition to the regular monthly $400 payment I make out of my salary.
$200 to DW's Visa, also in addition to the regular payment.
$300 to pay off my Federation pledge for the year.
$200 for my tax accountant, which is overdue.
$500 (a guesstimate) for routine service on my car, which is also overdue.
I'm probably going to spend $200 or so on some clothes from Land's End, a couple of pairs of winter khakis and a couple of sweaters. Land's End is good value for money, I find.
$100-ish for a rack for my bike, so I can carry my laptop to work without killing myself.
And $800 to savings to make up for the steady attrition in that account over the past several months.
If there's any left over, I may buy a new watch - I'm wearing a $15 job from Target since my nicer one crapped out, but it's not nice enough for someone in a job like mine. We also have a bat mitzvah out of town in November, any additional leftover will go to keeping the expenses of that off the Visa bill.

And thus it goes, like unto a wisp.

Oy vey - orthodonture

DW took the the 2 girls (ages 10 and 8) to a long-dreaded visit to the orthodontist yesterday and the news was rather what we feared - they both need extensive work, to the tune of about 7 grand.

Wow.

In case I haven't been clear, I don't have $7,000. We are just barely making ends meet. In fact, we're really not - I just put $300 from savings into checking so we could pay our rent this month. I suppose the orthodontist will have a handy dandy payment plan that I could pay off in, oh, 70 months or so, but I just took on $5,000 in additional debt to buy our way out of our second mortgage and I'm hesitant, to say the least, to take on another 7K! I'm supposed to be paying down our debt, and here I am, prospectively adding greatly to it.

On the other hand, of course, I'm a middle class Jewish father and I want my children to have what they need. (Should I put "need" in quotation marks there?)

It's times like these that cause unrest.

Closing

The house in Illinois is scheduled to close at 11:30 this morning. Hopefully, this will be the last posting I will make with the "house disaster" tag.

Because tomorrow night is Yom Kippur, just about my entire work this season has been on letting go of my residual bitterness about this whole situation. I think I've mostly done so. It will be a great relief to be able to go into the new year with this situation resolved, without the fears of lawsuits and foreclosures and everything else.

I now need to call Nicor (the power company) and the city of N-ville to indicate my intention to pay all the utilities that we've accumulated since we moved out of the house. So it's not completely over, and it's not like I have an extra $50 a month or whatever it's going to be to devote to this, but you do what you gotta do, I guess.

A couple of days ago there was a post on Get Rich Slowly about his brother who bought a house before he had sold his other house and is now likely to foreclose on both of them. There was a lot of talk about how irresponsible he was, and I suppose that's true, although I think we were brought up with the idea that the bank wouldn't give you the money if they didn't think you could pay it back. (I also think he's incorrect to say that the amount forgiven by the bank via the short sale is taxable income - I've had legal advice telling me so.)

But anyway, I'm fairly confident this criticism doesn't apply to me - we played by the rules, but the rules changed in the middle. It's common to look for a reason that something like this happened to someone, some personal flaw within them, because it makes people feel it won't happen to them. Or because it justifies their political me-first-ism. But of course it could happen and it does happen, every day. Not because people are bad actors, but because they acted under a certain set of circumstances and the cirumstances changed.

I'm not happy, I'm not relieved, I'm just exhausted. And poor. Where's my bailout, Henry?

There's pain - but will there be gain?

From today's Times, a report on consumer spending going down as Americans look at their declining 401K statements and, one might add, express their lack of faith that the bailout is going to solve anything. You could see a similar report in any newspaper in the country this week.

For some Americans, the pain is already acute: jobs disappeared at a faster clip in September. For many others, day-to-day finances are fine for now, but the financial outlook is uncertain: 401(k) accounts are dwindling, loans are hard to get and house prices continue to fall.

What this understates is that lot of people have been doing their spending on credit, whether it be home equity loans that have been pulled back or credit cards that might have skyrocketed in fees and interest rates.

I'm somewhat of two minds about this. The economy is driven by consumer spending and a lot of people will get hurt if that goes down for any length of time. This is a common criticism of simplicity - that if everybody did it we'd be in the deep doo-doo. But we're in the deep doo-doo already, the getting-and-spending economy is proving unsustainable, and (oh by the way) materialism and living-to-buy is spiritually ennervating.

We must re-order our economy so that it is more focused on developing green technologies and less on private consumer spending. I only hope that this economy helps get us (force us) to that point. As I've said before, if we only go back to our old gettin'-and-spendin' ways as soon as conditions ease, the opportunity will have been wasted. If the current economy helps us make the changes we need to move to a new mode of living, that's the only possible way it could be considered worth it.

Three things I probably shouldn't be buying

1 - Spectrum brand organic canola oil, $9.99 for a 32 oz bottle. Why I buy it - conventional canola oil is GMO. Alternatives - conventional Mazola, about half as expensive. Likelihood I'll change - 50-50. We basically only use it for stir frying and bread making, and a bottle will last usually a couple of months. On the other hand, such a small amount somewhat undermines the advantages of organic.

2 - X brand bread flour (I forgot to write it down, and I can't find it on line. It's not a famous brand. I'll let you know when I find it). About $8 for 5 pounds. Why I buy it - it's good! It's got all sorts of nuts and seeds in it, and it's organic and whole grain. Alternative - regular bread flour, not as crunchy but less than half the price. Likelihood I'll change - pretty high. I bought the store brand this week, I'll try it out and see if it works. If it does, I might still buy the expensive kind once in a while, but it's probably not worth the expense of having it in the house all the time.

3 - Kroger 100% pure maple syrup, about $8 for a 12 oz bottle. Why I buy it - the other brands all have high fructose corn syrup as the first or second ingredient, and that's a deal breaker for us. A bottle lasts a month or two, depending on how often DW makes pancakes. Likelihood I'll change - not very high.

And for a bonus -

4 - The Sunday New York Times - approx. $30 a month. Why I buy it - The Wichita Eagle sucks. Plus, Frank Rich rocks! (Give 'em hell, Frankie.) When I called the last time to cancel, they gave me the intro price for another 16 weeks, which has now run out. Likelihood I'll stop - it remains to be seen. It's tough to imagine living without it, but considering I have trouble paying my bills, this has to be considered a luxury item. And besides, it's cheaper to go to the store to buy it.