The Upside of 2025

 Many people are on edge these days. World tensions are heightened, leadership is suspect, personal and governmental debt is soaring globally, and we could be experiencing a trade war soon.

So, in this post I would like to bring up some examples of our lives these days which many seem to forget or take for granted.

A key is that entrepreneurship fosters innovation and that drives prices down over time. There is a wonderful book about this issue called SUPERABUNDANCE by Gale Pooley and Marina Tupy.

Here are some wonderful examples expressed in man-hours to make or pay for something. Their thesis is that “we buy things with money but pay for them with time.” Hard to argue with that!

In no special order, we find:

1) Air conditioning—one of the first accounts that I ever worked on was Carrier Air Conditioning. In a review session, I learned that Willis Carrier invented the air conditioner way back in 1902. At first it was used for industrial purposes in factories and upscale homes but then it jumped to hotel and stores. As a kid in a rare impossibly hot summer day in Rhode Island, it was great fun to go to an air-conditioned movie theatre. As a child, it took a Blue-collar worker up to 170 hours to earn enough to buy a room air conditioner. Now, it takes an average worker about six hours. I have often given air conditioning credit for the growth of Atlanta, Dallas, Houston, Phoenix and the entire state of Florida. Many disagree with me because they have always had it.

2) Sometime between 1440 and 1450, Gutenburg invented printing. It took weeks and sometimes months to print a book. Only the super-rich (generally royalty) could afford one. Today, books are modestly priced and thanks to Ben Franklin and Andrew Carnegie libraries make them available for free along with on-line choices.

3) In my adopted hometown of Baltimore, the Black & Decker company was founded pre-World War I. They became known for power drills. In 1946, a Black & Decker drill sold for $16.95 so an average worker had to get nearly 15 hours of compensation to purchase one. Now, an improved drill can be purchased with 45 minutes of work.

4) Bicycles—we are not talking about fancy mountain bikes or multiple gear specimens. A basic bike such as the Schwinn that I had as a kid cost 66 man-hours to buy in 1910. Today, 3-4.

So, as improvements in products and production techniques plus strong competition have made many products available to the masses. 

We have more comforts and gadgets that people 100 years ago could not have imagined. Yet, today, they are all part of a middle-class lifestyle. Think of cell phones, laptops and tablets. We can do amazing things with them and they are within reach of most of us.

When I bounced the idea of this post off a European reader of MR who comments to me frequently, he said, “Cole, so what? You Americans simply have and want a lot of “stuff” at an affordable price. Does it really enhance your life?”

I am not sure if my old contact is being spiritual or envious?

But on cold winter nights, I am very delighted to have central heating, hot showers and electricity all at an affordable price and much more reasonably than my grandparents did.

So, as tense as these times are, step back and smell the coffee from your world class brewing machine.

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com

Troubles of the Bottom 30%

 There is no question that there is turmoil going in geo-political circles as I type, and the financial markets are engaging in a bit of roller coaster activity. So, as the airwaves are full of talking heads saying the weakness in equities is the start of a 40% downward spike OR this is currently a normal and healthy correction, another quieter but insidious force is gathering momentum.

I am referring to the growing struggles among the bottom 20-30% of American households. This past week, the media gave fair coverage to new data that showed that 6.6% of subprime borrowers (credit score under 640) are some 60 days overdue on their car loans. This is the highest number since Firth ratings began tracking this statistic in 1994. 

The Federal Reserve Bank of New York weighed in and reported that through December 2024, some 3% of subprime borrowers were 90 days past due which is the highest level since 2010 when we were beginning to emerge from the Great Recession.

The tariffs on autos and auto-parts that seem likely to kick in soon may really hurt the subprime borrowers as projections are, that if enacted as they currently stand, new car prices will increase by $4-10 thousand dollars depending on make and model. It would appear that used car prices would spike upward under that scenario.

Even prime borrowers with excellent credit are feeling a bit squeezed as .39% are 60 days past due. The average car loan payment is about $755 per month to this group.

What about credit card debt? Mark Zandi of Moody’s Analytics described the bottom third of US households as “tapped out”.

The Federal Reserve of New York concurs stating that those making only minimum payments on their credit cards are at a 12-year high. Big deal, you might say? Well, if you have a credit card balance of $8,000 at 18% and never make another charge on that account and dutifully pay the minimum amount each month it will take many years to pay off that charge. And today, many subprime borrowers are paying 21-22% interest. Also, if you may only pay minimum payments the odds are overwhelming that you will have a cash poor month here and there and add to the balance only extending the payback period. 

This appears to be happening more and more. Also, there has been an uptick in recent months on credit card balances that have been “charged off.” What this means is that the debt has been so seriously delinquent (often about six months) that the lender has given up on collection. Usually, they sell the loan to a debt collection agency for pennies on the dollar.

This is a serious issue. The person owing the money remains legally responsible for the debt. Your credit score automatically drops 100 points. More damning, this “write off” lasts on your credit report for seven years. Try to get a car loan, an apartment lease or new credit card. Difficult. You may get a new card but at a very high rate of interest so the horrible cycle may well begin again.

So, many Americans are struggling. They all cannot be dismissed as deadbeats or lazy. Many are hardworking people who are having a difficult time dealing with the current environment. With credit cards, it seems to occur after four years of running up a balance. People who only pay the minimum payment each month eventually get to a point where, with interest charges compounding, they can no longer pay the minimum.

The media does not discuss this increasingly large group of Americans who cannot manage to live within their means. If we do have a recession this year or next, their numbers will swell especially if one member of the household becomes unemployed. It is a serious issue that gets too little attention.

Despite this downbeat post, I wish all my fellow Irish Americans a Happy St. Patrick’s Day! If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com or leave a message on the blog.