In my area (SW Virginia) regular unleaded can now be purchased for less than $3 a gallon. Most people are smiling – the smile of the simple-minded. Or the dazed. Or perhaps, the forgetful. Does no one remember that a mere handful of years ago, gas sold for less than $2 a gallon?
And now, they’re happy about paying less than $3… .
Meanwhile, the average price paid for a new car (as of this past April) now exceeds $30,000 (news story here).
In 1990, it was just over $16,000.
So, we’re paying twice as much for gas – and for the cars we put the gas into.
Hence my not smiling.
Inflation accounts for a lot of this, of course. $16k in 1990′s money works out to an inflation-adjusted $28,630 in 2013 money. And $1.10 in 1990 dollars is equivalent to just under $2 today, in terms of real purchasing power. But, income inflation has not kept pace with dollar inflation.
Especially not since 2008.
Most of us have been treading water for the past five years . . . with one hand.
Before 2008, I didn’t personally know anyone with serious money (or job) troubles. Now, literally everyone I know has money – or job – troubles.
This is anecdotal, of course. But for me it’s a barometer of the true state of the economy – as opposed to the Happy Talk warbling out of the radio, which I regard as not unlike the “good news, comrades!” about the increased chocolate ration coming over the loudspeaker in Orwell’s 1984.
I don’t believe a word of it.
Yet, people are buying cars. The industry reports its best year in years.
Perhaps buying is not the right word, though.
That word (like “freedom”) is much-abused. If one is making payments on something, then one is making payments on something. One hasn’t actually bought it. Because the seller still has legal claim to it. One has agreed to make payments toward its eventual (theoretical?) purchase – and during the interval, the seller merely allows you to retain possession and use (under conditions). Fail to make a payment, and the seller may take back his vehicle.
Perhaps I am being pedantic.
But the point remains: The touted uptick of new car sales is almost certainly another spec-bubble created by financial flim-flams. It has to be – given that new cars cost more than ever – and given that most people have less real financial wherewithal than they used to have.
I will give you two specific examples:
My wife and I know a couple. The man is a part-time manual worker; the wife a part-time minimum wage worker. I doubt their combined annual income is more than $30,000 – if that. We know they are are mortgaged to the Adam’s apple and live paycheck to paycheck..
Both of them drive new cars.