If you have ever heard talk of Quantitative Easing (QE) and "tapering," you may have been left wondering what it is exactly. The terms are bandied about so frequently these days that it is rather difficult to parse out the facts from the political hype that surrounds every move the Federal Reserve Board, or Fed, makes.
Another, more pointed question to ask might be, "Does Quantitative Easing or tapering really even affect me?" And to answer that question you would need to know:
- What's behind the Fed's thinking
- How to interpret what the Fed says
- What a rate-hike means for the economy
- How to judge what the multitude of talking heads say whenever they report this stuff
When "Old Guy" made the comment that it might be a good idea to explain Quantitative Easing for the readers of Get Rich Slowly, I couldn't have agreed more. So this post is an attempt to explain not only what Quantitative Easing is, but also how it can affect each of us -- because, esoteric though it may sound, QE is something which affects us all.
A few weeks ago, we asked the question "What is your investment strategy?" and described the survey Get Rich Slowly did of attitudes toward investing and a few related subjects. In that post, we noted, with a degree of surprise, that over 40 percent of respondents did not invest at all -- and that the youngest respondents were the largest group of non-investors. What follows might help explain why young people are more reluctant to invest at this point.
Recovery from the Great Recession
Economists have taken the view that the economic recovery has been going on for five years or more now. That's because their definition of a recession is simply two consecutive quarters of negative growth in the GDP. However, the survey we conducted in the middle of 2014 also probed opinions about the economy -- asking specifically if it has recovered -- and it appears that mere mortals like us don't feel it that way. It's probably because it takes a while for the recovery to "trickle down" to us.
So, how did the mere mortals we surveyed feel about the recovery?
My mom passed away a little less than a year ago. All her life she was the picture of health: She walked every day and ate super-healthy. The extended family dreaded going there, because they knew there would be no sugary goodies, only healthy (boring) eats. We used to joke and say she was so healthy they'd have to shoot her on the Day of Judgment ... because she was never going to die. What took her in the end was breast cancer, and the fact that she didn't notice it until it was too late. You just can't account for everything in life, can you? October, as you may know from the pink shoes football players wear this month, is Breast Cancer Awareness Month. As one of the slogans says: "Big or small, let's save them all!"
Mom was just over 85, and, young as she was when she had to go, she still beat the odds. The Centers for Disease Control and Prevention's National Center for Health Statistics just published its latest report on expected mortality in the USA. Female infants born in 2012 can expect to live 81.2 years; males, 76.4. This is higher than it's ever been, largely because of progress in the fight against disease: "The death rates for heart disease and cancer, the two leading causes of death that account for 46.5% of all deaths, have been falling since 1999," the report says. The chart below shows the age-adjusted death rates for the ten leading causes of death:
Increased awareness of healthy diet and progress in cancer screening and medication have made a noticeable difference in the two leading causes of death. Breast Cancer Awareness Month has played its part in helping to reduce fatalities from the disease.
It's both fascinating and useful to calculate the value of your time. Financial freedom gives you options and flexibility. But without time, that means nothing. Time is a precious resource that we should spend wisely.
Knowing the value of your time is helpful for a variety of reasons:
If you're a freelancer, it can help you decide on gigs.
Last week I was out walking with a friend when she admitted she was scared she would never have kids.
"We'll never be able to afford them," she said as we made our way around the block and up the next street. She and her husband are about our age (and not getting any younger), and I could tell she was worried.
"Oh, I'm sure you'll figure it out," I said as I tried desperately to change the subject. That was terrible advice and I knew it, but it was the same advice someone had given me several years before. (And probably for the same reasons.)
Ever hear someone say, "You can't trust those government statistics"? When they say inflation is 1.6 percent, do you feel they might be fudging the numbers to bamboozle the masses? Many people, even the highly educated, feel there is a government conspiracy to doctor the numbers and make them look better or maybe just make us feel better. Investopedia, one of the more respected sites, has a particularly harsh view of these numbers.
Is that true, though? Is your government "cooking the books," as it were? Let's take a look at one of the most quoted, and disputed, sets of statistics people look at -- the Consumer Price Index, or CPI.
The goal of the Consumer Price Index is to get an idea of whether inflation went up or down. The agency which gives us the CPI is the BLS (Bureau of Labor Statistics, an agency of the Department of Labor), which also happens to be the agency which compiles unemployment statistics. (At that, critics nod their heads sagely: "Hmmm … it figures.")Continue reading...
The post a couple of weeks ago about the whole income inequality thing brought out some good insights and raised several new questions.
We love to play board games, and one of our favorites is Acquire, a great money game which seems to have acquired (no pun intended) quite a cult following through the years. (Good luck trying to get a good one on eBay for under $40.) Anyway, when John loses (which isn't all that often) he always consoles himself with, "Well, at least I have a lot more than when I started."
That echoes one of the comments to the aforementioned post. Regardless of which side of the inequality divide you're on, we're all making about 3.5 times what our grandparents made back in 1913.
The face of getting rich slowly is changing right before our eyes, even as the status quo is failing. Before this year's State of the Union address, the President's media supporters, fretting about his low approval rating, fumed: "…never during his time in office has the state of the economy been better -- yet rarely has he gotten such low marks from the public for his handling of it."
The main reason for the paradox is unemployment. The reporter above was correct when she said it's never been better during Mr. Obama's time in office … but she unwittingly nailed the problem: The incumbent Chief Executive has been in office quite a while already and never in the past century has it taken this long for employment to recover, prompting experts to dub this "the jobless recovery." A recent Gallup poll shows unemployment is America's number one problem.
This is a guest post from Joanna Lahey, an associate economics professor at the George H. W. Bush School of Government and Public Service and a faculty research fellow at the National Bureau of Economic Research. The opinions expressed in this post do not necessarily reflect those of the aforementioned institutions. This is the final article in her series on health insurance. Here are the first, second and third articles.
Remember way back when in my first post when we talked about what the "ideal" health insurance would look like given human beings' unfortunate tendency to moral hazard? Basically, the idea was that health insurance would not be complete: There would be strong cost-sharing early on, but it would protect people from a catastrophic loss of money. (Note: This is "ideal" only from a certain theoretical efficiency standpoint -- there are many ways in which it is far from ideal.)
High Deductible Health Plans (HDHPs) follow that basic model. The idea is that the client is responsible for all health care costs up to a certain high deductible, at which point the insurance kicks in, either with a coinsurance amount or paying 100 percent, depending on the plan. Frequently preventive care is provided for free prior to meeting the deductible (and under the provisions of the Affordable Care Act, we will be seeing more free preventive care). The size of the deductible is what makes it a "High Deductible" plan. In 2013, the minimum deductible for a HDHP is $1,250 for a single participant plan and $2,500 for a family plan. There's also an out-of-pocket maximum requirement for in-network providers, $6,250 for a single participant and $12,500 for a family. So a single plan at the legal limits would force you to pay $1,250 of your medical expenses upfront, and then a percentage of any remaining expenses until you hit the $6,250 out-of-pocket limit, at which point they pay the rest. Each year these numbers reset and you have a new deductible to meet and a new out-of-pocket limit.
This is a guest post from Joanna Lahey, an associate professor of economics at the George H.W. Bush School of Government and Public Service at Texas A&M University and the National Bureau of Economic Research (NBER). The opinions expressed in this post do not necessarily reflect those of the aforementioned institutions. This is the third of four articles on health insurance. The final part will be published next Saturday. Here are the first and second articles in the series.
I got married relatively young, at age 22. There was a gap between my marriage which kicked me off my parents' insurance and getting put on graduate school insurance. My father-in-law gave us short-term gap private insurance as a wedding present. It was expensive from my perspective (I was looking at an annual stipend of under $20K), but for private health insurance it was cheap.
Private Health Insurance Options
Private health insurance is one method that people use to get coverage when they're self-employed or unemployed. Because the private health insurance market is broken, it can be prohibitively expensive, if available at all. Private coverage can be affordable if you are young, healthy, single (or male) and only need it temporarily. But if you don't fall into all of those categories, it can be difficult and expensive. Fortunately, under the Affordable Care Act (ACA), private insurance can no longer kick you off if you get sick after paying for private coverage. Children with pre-existing conditions cannot be denied coverage. In 2014, insurance companies will no longer be able to deny adults coverage based on pre-existing conditions. Also in 2014, states should have their Affordable Insurance Exchanges set up, allowing individuals and small businesses to better shop for health insurance plans.