Money and Debt Discussion

The wife and I had a long discussion this morning about debt, the interest rate and the cost of money. Part of the discussion centered around the fact that short term money rates have been lowered by the Feds and it has not caused a ong term interest rate to decline. I think we really got wrapped around the fact that we both know what the facts are and when she wants things to change I take it personal when I try to explain the "way it is". In a perfect world, the short term interest rates being lowered to 2.5% would drive the long term rate down by a corresponding amount.
In the real world, the volatility of the housing market and long term costs of money have held the 15, 20 and 30 year rates up to nearer 6%. (5.8% today) Cost of money is in the long term expressed in risk and that the higher the risk, the more money will cost. Part of this was due to the fact that the housing market that has been a high flyer over the past 25 years is now showing some softness. In the bad old days, you needed nearer to 20% to buy a house. For the past five years (or so) you could buy a house for nearly nothing down. The housing market in the major markets is now so soft that there had been nearly an 8% decline in the value of houses. Here where the houses cost darned little, it is practically no big deal. In California where a small ranch is $450,000 is is a big deal.
I agree that Barb has the right basis for her thoughts, just that it doesn't always do the same thing in the big picture. The law of unintended consequences will almost always bite a good argument in the butt.
For example, one cure for the problems in education is to pay teachers better. It should attract better teachers in to the field and the kids will get a better education. The net effect today is that teachers would get more money for doing the same job and that higher cost would generally be taken from the education budget somewhere else and the kids would suffer today. In the long run it might be a fix, in the short run it would not.


  1. Anonymous11:46 AM

    You shouldn't have brought teachers pay into the issue. Students now choosing a career will see that teaching will not support them and go elsewhere causing more serious shortages. Shawnee Heights, one of the best systems in Kansas, already has people working in fields for which they are not qualified. Can you imagine what it's like in places like inner city Topeka, Wichita, and KC? Do students suffer because of that? You betcha. The students we educate are the potential taxpayers of tomorrow. It is in everyone's interest to have well educated taxpayers. Sorry, but you get what you pay for.

  2. With respect to the Mrs. and her woman way of thinking, I humbly offer my seven cents worth. What a bargain!

    My diatribe in 1000 words or less: To most it would seem that something seemingly as far off topic as teachers and education would really be unimportant to a discussion on the economy and finance, I wholeheartedly agree with your MUD direction, though. I think that you read my rantings enough to know I believe that virtually NOTHING is mutually exclusive.

    I depart on the higher teacher pay idea though. Teachers make VERY good money with regard to the work. We will never have our best and brightest becoming teachers, that is just a simple fact. Proof is in the history. If you check into who actually does teach these days, it would turn your stomach. College professors (for the most part) are some of the dumbest people that I have ever met. That is terrifying to me.

    Income numbers 2006: US median HOUSEHOLD income was $43,023.00. The top quintile is over $91,705.00. That range is very small in my opinion.

    Teacher income numbers 2006: $47,602.00 nationally. This represents almost 10% more than average HOUSEHOLD income for ONE person. Teachers are not overpaid, because of the importance of the profession, which has been decimated by mediocrity of educators, but clearly, they are not underpaid either. If you want to really cough up your skull, check out your state's registration exam for teachers. Literally, a damn monkey could pass it. Two years ago, I made my son take the Mississippi registration exam at age 16, he passed in the 97% range. What does that tell you? He can't even remember to hang up his damn jacket and do not get me started on some of his ideas about the world.

    As far as the economy is concerned, remove the minimum wage requirements nationally and the economy would explode! To me, that is the root of all economic problems, as well as the criminal immigrant problem. Chew on that for a while.

    Great post, MUD! Reading individual's opinions always have a positive influence on me. I grow my melon with every word.

  3. I struggle with the figures for the "National Teacher's pay" Starting teachers make somewhere near 30,000 and after almost 30 years and a Masters degree the wife never made much over $50,000. Your figures must include the administration. Kind of like figuring the CEO's salaries into the cost of labor in business. They do figure in the cost of doing business but they really add little to the value of labor in the process of making a good or providing a service.
    I think that overall the pay must be below the norm or the best and the brightest would all go there.
    On the other hand, I agree that here in Tecumseh, we have some of the best teachers I have ever met. Our children test in the top 10% Nationwide and our funding is only 28th.
    I agree with Barb that I probably should have come up with another example for unintended consequences. Even if my head didn't hurt she might make it hurt.

  4. I'm not going to chime-in on the education fray.

    In a nutshell- the economy is going down the tubes because the government is spending too much money. It borrows from China (et al) and prints more money which devalues what's in our pockets (aka inflation). Bailouts and stimulus packages are NOT the answer, but the problem. The answer is what you and I have to do when money is tight. The government should tighten the belt and keep outgo equal to or below income (as MUD would say). I think we haven't seen anything yet in terms of hard times. The mortgage crunch is only the beginning. NONE of the current candidates for president are fiscally responsible so I predict more of the same with hyper-inflation then a deep multi-years depression. I'm not a Phd Economist so I'm hoping I'm wrong.

  5. MUD, that is the National average teachers pay, no admin, only individual teachers. Obviously, if you look across the country, the states with the highest average pay always have the highest teachers salaries and they are always higher than median income for a family of four. So, no, teachers are not underpaid according to actual pay statistics and if you average out the hours, teachers generally work 75% of the average worker's yearly time.

    SO, average teachers actually get paid MORE than a average family of four and work twenty-five percent less on average.

    Here's the hiccup in the National stats (I really thought that you of all folks would catch it and ridicule the crap outta me), hidden in this average of teacher pay and time worked, are inner-city teachers that drive average salaries W-A-Y up and bring average hours worked W-A-Y down. Barb would have started in DC at 38k and average is 61k. Guess which school district has the worst test scores in the entire country?

    No, it ain't DC, they are second worse area, it's a district in Arkansas but I'll be damned if I can find that link again on the NEA site.