Brain Dump: Recession Edition

Luxury vehicles in Affluent Neighborhood getting their daily hand wash

Something about this recession is bugging me but I’m not exactly sure what it is. I sort of feel like I’m playing with a connect the dots puzzle that’s missing some dots and possibly has some dots in the wrong place. It’s times like these I wish I’d followed my dreams to go into journalism. But, I didn’t.

So, instead of investigative journalism, you’re getting a brain dump of the things that bother me.

Is it just me or is this recession/depression full of stories of the lower and middle classes struggling, losing homes, and jobless? Where are the stories of the rich losing their fortunes?

One of the popular theories of the Great Depression was that inequality was the root cause of the depression. From Wiki: “According to this view, the root cause of the Great Depression was a global over-investment in heavy industry capacity compared to wages and earnings from independent businesses, such as farms. The solution was the government must pump money into consumers’ pockets. That is, it must redistribute purchasing power, maintain the industrial base, but re-inflate prices and wages to force as much of the inflationary increase in purchasing power into consumer spending. The economy was overbuilt, and new factories were not needed. Foster and Catchings recommended[33] federal and state governments start large construction projects, a program followed by Hoover and Roosevelt.”

Companies are sitting on huge piles of cash. I’m not just thinking about Apple and their $76B in cash reserves. Check out this quote from a MarketWatch article: “A MarketWatch and FactSet Research review of second-quarter regulatory filings shows that as of June 30, the overall amount of cash and short-term investments for 24 of the 30 companies that make up the Dow Jones Industrial Average had surged 18% to $256 billion from a year ago.”

I literally live on the borderline of one of the affluent suburbs in Miami. Let me give you some statistics from CityData on the differences:

  • Affluent Neighborhood has 94% of their homes occupied. Miami has 90%. In Affluent Neighborhood, renters make up 34% while in Miami, renters make up 65% of the population.
  • In 2009, the Median Gross Rent in Affluent Neighborhood was $1,388. In Miami, it was $838.
  • In 2009, 35% of households in Affluent Neighborhood had incomes of $100k and up. In Miami, it’s only 7%. As a matter of fact, in Affluent Neighborhood there were 2,616 households with incomes of $200k and up. In Miami, there were 2,661. Miami has more than ten times the number of households in Affluent Neighborhoods.
  • In Miami, 21% of households are run by single parents. Only 7% of households in Affluent Neighborhood are in the same situation.
  • In Affluent Neighborhood, 41% of females 25 years old and up have a Bachelors, Masters, or Doctorate. In Miami, it’s only 12%. To contrast, in Affluent Neighborhood only 37% of males 25 years old and up have a Bachelor, Masters, or Doctorate. In Miami, it’s 12.4%.
  • 43.1% of residents of Affluent Neighborhood speak English at home. In Miami it’s only 25.4%. Not surprising when 59.5% of Miami’s population is Foreign-Born and of those only 41.6% are naturalized citizens. Compare that to only 37.9% of Affluent Neighborhood’s population being Foreign-Born and of those, 64.3% are naturalized citizens.
  • The unemployment rate among males in Affluent Neighborhood averages 7.4% while in Miami it averages 10%.

Ferrari sightings like this one are a daily occurence for me driving through Affluent Neighborhood

In Affluent Neighborhood, one of the most prestigious car dealerships sits a block away from at least two more luxury vehicle dealerships. They’re not suffering. As a matter of fact, they’re expanding to include McLarens in Fall of 2011. You know—the car with a starting price tag of $229,000 for their base model with zero options. In Miami, car lots are mostly abandoned, shuttered, or demolished.  Some have been converted to empty strip malls.

My newspapers are rich with stories of unions being forced to big concessions, libraries possibly being shuttered, programs being slashed or shut down, and huge payouts to local government officials among termination either via layoff, retirement, or being fired for violations not to mention six figure salaries for new hires in the top echelons.

What’s going on?

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10 thoughts on “Brain Dump: Recession Edition

  1. I have the same uneasy feeling about the recession. I can’t even phantom the amount of influence that upper society and corporations have on our economy. If they don’t want to pay higher taxes, they have the ability to hire a lobbyist or donate to a politician who has similar ideals. Every vote counts, but so does every dollar, it seems. It’s so saddening.

    Reply
    • Yeah that’s a whole other dimension to this that is bugging me big time. Something just doesn’t feel right. I feel like we started to see it when the banks were exposed and wall street was getting raked through the mud. But then suddenly everything went quiet. Banks are putting out ads about how involved in the communities they are. And the government players are tearing each other to pieces. It just feels like there are way too many distractions and the real problem is hiding or being hidden.

      Reply
  2. Hi, I’m new here. Check out my blog please 🙂

    Also, I am employed in an industry which is nearly unaffected by any downturn in the economy. If anything, we benefit from a downturn. I value portfolios and do consulting, so when the economy goes down, the affluent pretty much come running to me because they want any kind of tax break that they can get.

    I went to Miami for my vacation around a month ago, and everyone drives such nice cars, it’s crazy.

    Reply
    • Welcome! I’ll check you out 🙂

      That’s a really interesting career to be in and one I understand has a lot of demand. I find it so strange to have so much cash and value and crave tax breaks like crazy. At some point, don’t you feel obligated to contribute to the society around you?

      Reply
  3. Hmmm…We have a whole nother layer of rich here. In the town I live in, the median income is $35K. By salary alone, we are considered affluent even though we hide it well most of the time. The next town over is filled with 20 room country estates that are filled with NYC tourist’s summer homes. If you look in our real estate book there are dozens of properties in the 2-10 million dollar range that were built back when the industrial revolution was in full swing.

    I was told that some people who moved to that town for the good school system ended up moving their kids back out to our town because of the classism. Apparently if you’re parents only make a 6 figure income instead of 7, you’re considered trailer trash and the students, teachers and other PTO members discriminate against you because of who your parents are or are not. I really can’t believe it myself but I know the mom it happened to and they were a good family with solid white collar careers.

    My other friend’s brother lived in a very posh part of atlanta where all the basketball players and rappers lived. They were in a $400K house which was at the bottom end of the homes there. The kid came home one day and asked “dad, why are we poor?” Sorry, but my middle of the road neighborhood suits me just fine. I don’t want my kid ever thinking that a 1/2MM home is anything but rich.

    I have no structured thoughts on this except that if possible I always want to be in a neighborhood that is well within reach because I don’t want my kids to get spoiled or feel that somehow we’re failures because our house isn’t 5000ft2 and we don’t make $1MM a year.

    Reply
    • I have a feeling the neighborhood I live in is close to that. Notice how many households make the highest bracket. It doesn’t identify what those amounts are. Most of the homes in my neighborhood are worth a ridiculous amount of money. There are other neighborhoods like it too and of course, there’s Miami Beach which is a whole other crate of fish.

      I live in a situation like your friend’s brother.

      My house is worth $360k according to Zillow. The house behind me? Is worth twice that. And the one next to that is a $1.2M home. As a matter of fact, there are 7 houses on the block behind our row of houses. Four are worth over $1M, one’s almost $2M. The other three are all over $600k. Two blocks away there’s a $4.5M home. As you go East finding homes under $600k is rare. My children go to a private school in another Affluent Neighborhood. The students come from affluent families. We have a lot of children from consulates and have had children of athletes and politicians. As a matter of fact, Eldest just went to the house of an athlete a couple weeks ago to play with his son.
      The thing is, I’m not ashamed of what we have. And I’m not ashamed of what we don’t have. And I don’t think they are either. It’s something I hope to work with as they get older, but I do think it can be taught and that value for money can come from this. I wouldn’t move my or change their schools because they’re the “poorest” family there. I think they have so much more to gain, it’s not worth it.

      Reply
  4. Yup no signs of recession here in Texas, the malls are packed, a few weeks ago I couldn’t even find parking! The restaurants and bars are also packed and all have waits. Everywhere I look I see new cars on the roads, even my co-worker this morning came by my desk and she’s like check out my new car, it was Mercedez brochure, she’s like it was only $50,000!

    Apple, yep, everyone I know has a iPad or iPhone even I’m guilty of helping Apple LOL

    As a nation I’m not sure what will happen, I said this on another comment, I think we can be compared to a household that makes 75,000 a year, spends 100,000 a year and is in debt 400,000 so will see what happens.

    Reply
    • Well, that’s the problem. There *are* signs of recession here- just not among the wealthy. I think that is what disturbs me. This isn’t an equal recession it seems. And the solutions being sought by Congress are opposite to the solutions that worked to end the Great Depression. I’m concerned we haven’t learned anything are making things much worse for the majority of the people for much longer.

      Reply
  5. I spent some time in Miami 11-12 years ago. Then I visited a lot throughout the past 10 years. I’ve always had the impression that Miami is subject not only to the US economy, but to Latin American countries economies. During the past 10 years, I also got the feeling that Miami was experiencing a housing bubble, in a way that I never thought of in other parts of the US (all the country was experiencing a housing bubble, obviously, but for me it was apparent in Miami). Am I right? Maybe the fact that most Latin American economies are actually growing affect Miami in some way? I don’t know, I’m just hypothesizing.

    Reply
    • We are *very* tied to Latin America. Sometimes, we are more affected by Latin America than by things that happen in the US. The housing bubble that happened here was most likely unlike what happened everywhere else. We had a HUGE influx from Latin America about 10 years ago– especially from Venezuela not long after Chavez came into power and started drastically changing things. At first, it was the extremely wealthy that fled here and so the housing market shot up big time (before the rest of the country’s bubble). After that, upper middle class members fled here and that also helped it keep picking up. When the rest of the country got in the act, we were already inflated. Right now, whatever resuscitation we’re receiving would be due to the wealthy Latin Americans picking up properties here and there. The only industry that has not really felt a hit in Miami is exports. As a matter of fact, those luxury cars are often sold here and shipped right out. The wealth is NOT trickling down. That’s I think what’s worrisome. Money is flowing in but it’s also either flowing right back out again into Latin America or it’s sitting in the bank accounts of the elite. Most likely, a combination. We’re a tourist city too which also makes it difficult to keep dollars at home. They come, they spend, they leave. No investing. No taxing. You tie this up with Florida which is also a huge haven for retirees because of our tax breaks and you see the millions of problems unique here. I love Miami but it’s got a mess in its hands that is made worse by the fact that the politicians we have more often that not come from Latin American countries where politics are often aided and abetted with bribes and such things. The joke here is if you want to be super rich, go into politics. Strange times in a stranger place.

      Reply

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