Life’s Little Money Mysteries

January 21, 2009 by  
Filed under Economics, Money and Behavior

Periodically I encounter a situation in my money and personal finance life that causes me to scratch my head and rhetorically ask how that can be.  I guess you can call them life’s little money mysteries.  I decided to start a list of them, beginning with one that we all have heard often:

1. If you are so smart, why aren’t you rich?  This mystery hits me in the face constantly.  What makes it worse, is that there are a lot of really stupid people who are rich.  A lot of these rich pea brains work in Hollywood and then appear on Oprah, Larry King, or the View and tell us what we should be doing or thinking.   Gosh that annoys me.

2.  If we are in a recession, why is Starbucks so busy?  Some of the biggest money wasters in our consumerist culture are the overpriced caffeine drinks at Starbucks.  With millions of Americans unemployed or otherwise broke, shouldn’t a retailer like Starbucks – which sells zero products that fall in a “definitely need” spending category – be in bankruptcy?

3.  Why is economics still called a science?  If you tally up all of the fuzzy, inaccurate and just plain dumb predictions made by highly educated economists in recent months, how can you call what they do “science”?  There should be a special category established for fields of study that cause us to roll our eyes when practitioners in those fields make predictions.  Clearly, meteorology would be in there, since even predicting rain is a crapshoot.  (Let’s not even talk about hurricane predictions.)  Economics is right behind in its level of predictive accuracy.

4.  If the government wants us to stop wasting money and growing landfills, why doesn’t it ban bottled water?  Seriously people, is there any cultural phenomenon in the past century any more wasteful than bottled water?  The way some folks robotically wander around embracing their personal plastic water supply, it makes you wonder if earlier generations were constantly dehydrated.  Maybe that’s why we are also so fat.  When you actually had to walk to a source of drinking water, you burned calories.  Now we just reach for the bottle sitting in one of our 47 vehicle cup holders.

5.  Why doesn’t the Federal Reserve have “reserves”?  As best as I can determine, the only “reserves” the Fed has are balance sheet entries and printing presses.  The U.S. Mint has Fort Knox but those gold reserves are hardly large enough to be effective. 

6.  Why do we still call it a “piggy” bank?  It seems to me that we have been consuming and spending more like pigs the past ten years, not saving.  Since the pigs are spending, not saving, we need a new name for our coin banks.

7.  Why don’t we have a proper name for the non-taxpayers?  According to the Tax Foundation, at least 33% of all tax filers owe no federal income taxes.  Some actually get more money in the form of refundable tax credits.  That number may increase to 44% when Obama gets finished with his selective tax cuts a/k/a income redistribution plan.  Yet all those who receive a paycheck seem to get lumped together as “taxpayers” whether they pay taxes or not.  I want those who don’t pay taxes to have their own label.  “Non-taxpayers” doesn’t sound right to me – too vague.  “Moochers” may be a little crude.  “Tax freeloaders” may be too harsh.  How about “tax pretenders”?  That would describe people who file tax returns, brag about their refunds, but don’t actually admit that they paid zero taxes.  Lots of businesses would be “tax pretenders” as well.  This makes me think of a related money mystery:  Why don’t votes from actual taxpayers count more than votes from tax pretenders?  In most aspects of life, if you don’t ante up, you don’t get in the game.  

8.  Why can’t a new car be new for more than five minutes?  You know how they say that a new car depreciates 10-20% as soon as the buyer drives it off the lot?  It turns out to be true.  Why is that exactly?  After all, that “new car smell” sticks around for at least a few weeks.  Is it because new cars generate a substantial emotional purchasing component causing them to be overvalued by most consumers?  I’ve got an idea.  Maybe in addition to requiring estimated EPA mileage stickers on all new cars, dealers must post a sticker that provides the “estimated value of this car five minutes after you drive it home.”  That might scare some reality and common sense into prospective buyers.

9.  Why do they call it the Social Security Trust Fund?  First, there is no actual “fund.”  Instead, it’s a pile of government IOU’s.  Second, very few young people “trust” that it will be there for them anyway.  How about we call it the “Hypothetical Collection of Social Security Obligations?”

So those are a few of my little money mysteries.  I’m sure there are hundreds of others.  Let’s hear about them in your comments.

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13 Responses to “Life’s Little Money Mysteries”
  1. Matt SF says:

    “”Why is economics still called a science?””

    To me, economics is more a science like psychology or sociology. It’s all about the individual behaviors, which later turn into mass behaviors that are more easy to predict. You can create a few equations, and define mathematical tendencies, and build a fancy economic model to make a few brilliant looking charts. But at the end of the day, it’s still a model.

    Look back at 2008 and tell me what tendencies could possibly overshadow one key variable that models don’t account for… fear.

  2. Is this Andy Rooney under a PF pseudonym??

    Love your top 3 – thanks for making me smile on a bitter January morning.

  3. TMN says:

    “Why don’t votes from actual taxpayers count more than votes from tax pretenders? In most aspects of life, if you don’t ante up, you don’t get in the game.”

    Because the United States is founded on the principle of equality between people, and the idea that a nation’s fate should be dictated by a representative democracy in which every citizen has a voice, rather than an oligopoly composed of only the very wealthy.

  4. kitty says:

    “You know how they say that a new car depreciates 10-20% as soon as the buyer drives it off the lot? It turns out to be true. ”
    No it’s not, not for all cars. Compare prices for 2009 Toyota Corollas to used 2008 Corollas. Or Honda Civics. When I totaled my 2003 Corolla in 2006, I got about 20% less than I paid in 2003. But that was in 3 years. Similarly, if I look for what I can get for my 2006 Honda Civic, I don’t see 20% loss in value. And this is in 3 years.

    This statement may be true for American SUVs, but it is most definitely not true for Toyotas and Hondas, at least some Toyotas and Hondas. So why make it as a blanket statement?

  5. Matt: Agreed – predicting and controlling fear is always the wild card.

    TMN: Well I can’t argue with you. I can ask for some token benefit for taxpayers that non-taxpayers don’t receive, other than the privilege of paying for 100% of government operations.

  6. Kitty: Good point but you have singled out fuel efficient vehicles that have become more valuable in recent years. Also, you really need to compare prices paid for on the lot new cars with recently purchased resales. That drop is significant and then flattens out for some cars, like yours. It also depends on how much extra stuff you have loaded into the new car price (options, delivery charges,and dealer add-ons.) I still believe 10-20% is a good range for the average US new vehicle purchase. Terry Jackson at puts it at 20-25%.

  7. Andrea says:

    I majored in Economics and loved it. I also majored in Finance and hated it. Economics is a social science, ultimately, and in that sense, is not the same as, say, Chemistry as a “science.”

    I actually get physically irritated when I see people waiting in the drive-thru at Starbucks (which is even worse than a walk-in place – can’t even be bothered to get out of your car to spend $5 on barely-coffee?) or putting a case of shrink wrapped, boxed bottled water in a shopping cart. It really makes my blood pressure hitch for a moment.

  8. GettingUp says:

    As for the tax pretenders, you underestimate the people who brag about their refund, and don’t say anything about not paying any taxes. Most of them just don’t know that they are actually not paying any taxes!

  9. Andrea says:

    Why should people pay income taxes if they have legal deductions or credits? It’s absurd.

    People who say they don’t pay taxes are not counting property taxes (even if they rent – somebody’s paying for them, it flows through) and sales taxes. Nobody gets out alive …

  10. MasterPo says:

    For #1 – When it comes to making money (especially with investments) I definately think you can smart yourself out of good profits! I feel I made a lot better investment decisions when I was younger and didn’t know as much as I do today. 😉

    For #2 – 100% agreed.

    For #4 – I’ve seen the TV commercials too for water filters instead of bottles.

    But what happened to the “boom” of plastics recycling? My town *forces* me to recycle my plastics – that is, put them out for recycling every 2 weeks. So why isn’t it actually being recycled instead of just dumped? Could it be the hoop-la over recycling was just that? Could it be there is no green in being green? Nah, couldn’t be any of that…

    For #9 – Also 100%

    And, out of sequence, for #7 – You’ve stumbled on to an important issue. I Obama gets his way (and if not him, someone after him most likely) then millions of Americans will forever be removed from the tax-payers column. As it is the top 25% of earners pay 80%+ of the income tax burden.

    The point is, when we reach the point where the majority of Americans (over 50%) do NOT pay ANY income taxes then the majority of Americans won’t care about tax hikes or cuts! In fact, they will probably oppose tax cust because then THEY may have to start paying taxes and/or wills top receiving “refunds” out of thin air!

    Who is going to lobby for the rights of “the rich” when it comes to taxes?

    It’s a VERY dangerous road!!

  11. TFB says:

    1) Rich vs Smart: Because you weren’t as lucky or because making money is not your only goal in life.
    2) Starbucks: Because the products they sell isn’t that expensive in absolute dollars. People are still willing to spend a few dollars for some pleasure.
    3) There is more to economics than macroeconomic predictions.
    8) Try buy a 3-month old Honda and see if you can get it for 20% less. I doubt it.
    9) Government IOUs are called bonds. I have some. They are worth money. You probably have some too.

  12. I love this post. Had me laughing from #1 on. I couldn’t agree more and love the thought on the “piggy” bank.

  13. kitty says:

    ToughMoneyLove: I don’t disagree about the average car; you also make good points about immediate drop in value issue. But just because something is true on the average, doesn’t mean it is true in all cases. This is my main problem with “only used cars” statement. I chose Corollas and Civics because these are my cars of choice and because of personal experience. Besides – in math when you want to prove something doesn’t hold for all cases, you only need to show one counter-example. As to fuel efficiency issue, out of curiosity I looked up today’s prices for a new 2009 Honda Civic Ex and a used 2006 Honda Civic Ex. MSRP for 2009 Honda Civic EX is around 19K. EX includes all of the options, by the way. The asking price for 2006 used Civic is in range 15-17K depending on conditions. So you have 19K MSRP for a new 2009 Civic vs 17K asking price for a good quality low mileage 2006 Civic. You can bargain both of these down as it is asking price; you have to add taxes to both. IMHO, 2K is a reasonable premium if you get a new 2009 car vs a used 2006 car.

    BTW – I am not disagreeing about having a stickers with the car value after you drive off. This will clearly show how well or badly a car holds its value and is very useful for comparison purposes.

    I do agree with your other points.

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