Thursday, March 19, 2009

Trillions and Tax Credits

In The News

The NY Times coverage of the new New Deal today bluntly referred to the fed as making up money it doesn't have and potentially destabilizing the currency. True.

Did everyone miss when Warren Buffet called the USD the next bubble? Or maybe I just imagined that one. The worst part about a rapid USD devaluation would be, as usual, the ripple - smaller countries that use it as a reserve currency, and potential reactions from China who has already been warning the USA to run things a little tighter in order to secure the value of it's investment. Ruh roh.

The Joy of Refundable Credits

On a lighter note, as taxes come in I was delighted to discover what I'd assumed was a non-refundable credit was actually refundable, to the tune of about $1000. If you can bring your taxes owed down to $0, as many recent grads can, refundable tax credits essentially meant the government pays you above and beyond what you've put in. A nice general explanation is, of course, provided at Wikipedia.

Obviously I plan to use the $1000 to offset student loans, putting me in an even better position after working for a year than originally assumed.

On Wealth

It was funny to read this post over at Brunette On a Budget.

Last night I was talking to my mom about how her business in the small city I grew up in remains very busy and in fact the whole area appears 'recession proof.' One of her clients, who has always been a multi-millionaire, was purchasing something substantial but doing so frugally and they started talking about how things are where we're from.

Where I grew up, there is no real upper class. There are "rich kids" but it really is so relative there is no discernible class difference. Similarly, there was a low level of real poverty comparable to what I've seen after leaving. You cannot now, nor could you ever, buy designer jeans of any kind within hours of the city.

Growing up there, people were taught to patiently save for a rainy day. Expensive purchases - clothes or homes or cars - become the subject of gossipy derision. Even if you could afford it, most people would consider it inappropriately showing off. Even if your parents could help you out, you were expected to work in order to access opportunities. Salt of the earth people were respected, laziness was not.

Obviously, there are contradictory examples, but overall it was an isolated community where the kind of values that breed stable, long term wealth were fostered. As a result, even with net worth declines there are few people who have to change their spending habits.

Entering the real world, especially during my second degree, was completely disorienting. I dated a guy whose parents gave him a new car to bribe him to attend school, he often complained how insufficient that was. Unemployed students would buy rounds of drinks for twelve friends. Everyone dressed well whether they could afford to or not. Rather than adopting the habits of my new friends, I went into the frugal closet. Sometimes it was hard. I had a roommate who would drop two hundred dollars on two litres of hair product as I was figuring out how long I could go between cuts. There were times I felt I was living in Edith Wharton's House of Mirth where money and opulence and corruption were a necessary accoutrement of my new social stratification.

And then, I graduated.

Unfortunately, the place I grew up is exceptional. We've made wealth too important and values too relative.

It's a tragic irony Ms. Wharton could have written that those who bought into image, entitlement, consumption and a lack of personal substance in pursuit of The Dream are those who can no longer afford the cost of living.

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