By Bill Bonner
BUENOS AIRES, Argentina – Tired of running out of time and money? Scrimping and saving just to make ends meet?
Try moving to Harlingen, Texas. The cost of living there is only about 40 percent of the cost of living in Manhattan.
Here’s “Real Time Economics” with a report:
Obama has spoken about having the rich pay their fair share, and $250,000 is a lot of money. But to characterize those households that earn that sum as “rich” depends very much on where they live. Thanks to regional differences on costs, $250,000 does not go so far in places like New York City and Honolulu, compared with cities in Texas or Tennessee.
The Council for Community and Economic Research calculates cost of living indexes for U.S. cities based on goods and services bought by households in the top-income quintile, which nationally covers incomes of about $100,000 and above according to U.S. Census data.
What the data show is that the cost of living in Manhattan is 118 percent higher than the national average. On the other hand, a household in towns like Harlingen, Texas, or Memphis, Tenn., has a cost of living 15 percent less than the U.S. average.
What the differences do mean is a New York household earning $250,000 is not nearly as “rich” or has nearly the buying power as a Memphis household bringing home, say, $150,000 a year.
You can live more cheaply in a place like Harlingen. You’re almost guaranteed to lower your spending, because there’s not much there to spend money on.
We’ve never been to Harlingen, so maybe we’re wrong, but we imagine it is a pretty slow place. Few fancy restaurants. Few theatres. Few luxury shops. Which makes it hard to part with money.
Of course this improves your cash-flow. But it also allows you the glorious privilege of doing nothing.
As our friend in Florida reminded us, most people can’t stop. Money in; money out. They have to work to pay the bills. No question of taking time off. No time to think. No time to sit still … and wait for the storm to pass.
Back in the time of the Great Depression, millions of Americans were still not completely caught up in the money economy. Many still lived on the land. They kept pigs and chickens. They tended their own gardens and “put up” their own canned goods. They cut their own wood to heat their houses. They pumped water from their own wells. Many still made their own clothes.
When the Depression came, they could hunker down and wait it out.
But today, the developed world is in a Great Correction. And it shows no sign of coming to an end. Japan is already in a slump that has lasted – off and on – longer than most marriages. Europe is headed into a slump – with half of all young people jobless in many countries. And in the U.S., at this stage in a typical recession/recovery cycle, the economy should be growing at an 8 percent rate. Instead, growth is below 2 percent.
Why? This is no typical recession/recovery cycle. Instead, the private sector is cutting back on debt. At the present, household debt is going down (mostly via mortgage foreclosures) at about 5 percent of GDP per year.
At this rate, it could take 10 years or more to get household debt down to more comfortable levels, say, around 70 percent of disposable income.
But the average household can’t wait 10 years for de-leveraging to do its work. Heck, it can’t even wait 2 months. Both parents work. They’ve got two cars. And two mortgages. Money in; money out. 24/7…
No garden. No firewood. No chickens. No time to wait. No time to sit still. Just bills…bills…bills…
They’ve got to work…they’ve got to earn money…they’ve got to spend…
They can’t do nothing.
They should move to Harlingen.
In 1999 Bill Bonner created “The Daily Reckoning” eletter, which now offers over 500,000 global daily readers economic and market commentary. Bill is the driving force and a regular contributor to the Daily Reckoning.