Friday, April 26, 2013

A Very Bad Sign of the Times

If you've ever been to poor 3rd or 2nd world countries, there are often parallel economies:  one for rich tourists and one for natives.  Oftentimes, dollars and the local currency will be accepted for goods, and inevitably the dollar will be "more expensive" using a normal exchange rate.  This, of course, is a sign you are being ripped off and more generally, a burdensome, uncivilized way of doing business.

Thing is, America is like this too, but on a grander scale.

I'm reading a book about the NBA -- most season ticket holders are corporate accounts.  These are tax-deductible and thus inflate the cost because no one is paying full freight.  This drives the costs way up and the regular joe is stuck paying a much higher (post-tax) rate for his tickets.  Where else do we see this?  Everywhere.  Food?  Lunches?  Dinner, drinks?  All these fancy restaurants, many are paid by corporations.  Often, the corporations are individual people with enough juice or a job that needs a corporation -- either way -- they are paying with cheaper money.  Company cars.  Entertainment.  Travel.  Stock purchases.  All these things have parallel ways of being paid for -- making it cheaper for those with tax-advantaged set ups and more expensive for normal people who don't.

Separately, college education is also a parallel economic situation.  Different people are paying different rates.  Full freight is impossibly expensive for private schools now - upwards of 60,000 a year.  Who has that kind of money?  Very few.  So yes, there are many who aren't paying the full tuition based upon the decisions of the financial aid folks.  There job is similar to the vendors hawking goods to tourists and locals - splitting up the cost depending on what they buyer can pay.  Not a sign of economic health, I don't think.  Too much energy expended on both sides haggling and over-considering price and cost -- drives people to frustration and eventually quitting the market.

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