economics Me

Rental Inflation

It isn’t just food. The hardship that was imposed upon landlords during the COVID eviction moratorium, combined with the massive migration of migrants from the large cities of the north, who are fleeing lockdowns and high taxes, is affecting rents in lower cost areas of the country. For example, South Florida is seeing skyrocketing rents.

Even here in North Central Florida, rents are rising. In the area where I own my rental, there isn’t much to rent. What there is, is becoming more expensive. I am renting out my three bedroom, 1,900 square foot home with a fenced in yard and two car garage for $1,700 a month ($0.89 per square foot). That rent includes lawn maintenance and a washer/dryer.

A new apartment complex that is nearby recently began renting a three bedroom 1,000 square foot apartment for $1,600 a month ($1.60 per square foot), and that doesn’t include a garage or washer/dryer). They are fully rented with a waitlist at that price.

My current tenants have been living in my rental for two years without an increase. In that time, my costs for insurance, property tax, and lawn maintenance have increased by about $120 a month.

What this means is that I should be increasing my rent by at least $200 a month. I could probably get $2,000 a month. The tenants would have little choice- it isn’t like they could go anywhere else and find a better deal. My wife and I have discussed it, and we don’t want to do that. At the same time, we have a business to run. We decided to compromise and will be raising the rent to $1,800.

Inflation continues.


Remote employees

The website asks: “Should pay be adjusted for remote employees?” The real question isn’t whether it should, the question should be “Is pay adjusted for remote workers?” To which the answer is: “Yes, yes it is.”

This is just reality. When a business is hiring from a local pool of workers, the cost of living and tax climate of the local area dictates what amount of pay workers will be willing to accept. A person in Manhattan or Oahu, where the cost of living is high, will demand a higher salary than a person in Biloxi.

It isn’t just that, however. Labor is a product to be sold, and is thus subject to supply and demand, just like any other product. Expanding the labor pool from the local area to the entire nation increases the supply and thus the value of the labor.

One of the things that COVID and the lockdowns did to the business climate was to show businesses that expensive office space on Park Avenue in Manhattan wasn’t strictly necessary for success. Most office workers are capable of doing their jobs remotely. It won’t be long before businesses begin recruiting employees from places like Des Moines because they will soon realize that the employee pool there doesn’t need to be paid as much as the employees from Manhattan who are having to pay $3500 a month for a studio apartment after paying a quarter of their salary in state and local taxes. Places like Tulsa will soon host remote workers in the same way that India and the Philippines now host call centers.

This is why cities like Nashville and Clearwater Beach are seeing population booms as cities like Chicago and New York City see massive relocations.

The employment reality is changing.

economics Economy

Minimum Wage

Last November, the voters of Florida passed an amendment to the Florida state constitution that raised the minimum wage. As a result of that, the state minimum wage will be raised from $8.65 an hour to $10.00 an hour, effective at midnight tonight, October 1, 2021.

However, there is also a provision in that amendment restricting the amount of “credit” on the wages of tipped employees paid by employers who assume that some of their wages are paid in tips. The amendment sets that amount as what the FLSA allowed in 2003. In 2003, the allowable employer tip credit was $3.02 an hour.

What this means is that the minimum wage for tipped workers will increase from $5.44 to $6.98 an hour. Every restaurant in the state just saw their tipped labor costs rise by 28%. That will be passed on to the consumer, plus those workers will still expect tips.

Anyone not making minimum wage is probably just out of luck and won’t be getting a raise at all. I know I am not getting a raise.

So I recently had this discussion with some people while I explained my new tipping policy.

  • For bad service: 5%
  • For decent service: 10%
  • For great service: 15%

Next year, when the law gives you another 14% raise, to $7.98 an hour (plus tips) I will be cutting tips again. Probably to zero for bad service, 5% for decent, and 10% for great service. (Ask me what happens in 2023, when you get another 12.5% raise, to $8.98 an hour.)

The hate that I got back was legendary. I was told that if I can’t afford to tip, I shouldn’t eat out. It isn’t that I can’t afford it. It’s that I am receiving a service. Let’s list what service that is:

  1. The server writes down what food I want
  2. The server brings me a beverage and (sometimes) refills it. In the case of a cocktail, someone else who isn’t the server mixes that cocktail
  3. Someone else (not the server) provides the food and prepares it
  4. The server (sometimes, but other times it’s a food runner) carries that food to the table
  5. Someone (maybe the server, maybe the busser) cleans the table
  6. Someone else (not the server) washes the dishes

Anything else that is done is done (such as folding linens, setting the table, rolling silver) are done on the restaurant owner’s behalf, not mine. It’s a limited, minimum skill position.

Frankly, I am totally against tipping. I think restaurants should pay their own employees and not rely on customers to do it, but this is the system we are stuck with. So I get to decide what that service is worth, and to me it isn’t worth a quarter of the cost of my meal.

Here is the deal, skippy: You may have voted for a raise, but that law doesn’t apply to me. If your raise is causing me to pay more to dine out, then that additional cost will be deducted from your tips.

Communism economics

Who knew?

If everyone has more money, money is worth less. Who knew?

Let’s say that I gave every single person in the world a million dollars. We would all be rich, right? Of course not. How would I buy a sandwich? No one would be willing to sell me one for $5, because they don’t need $5. They have a million. Money would be so commonplace, it would be worthless.

This concept seems to escape those who push for a higher minimum wage, who are all now surprised that the massive government money giveaways and higher wages have reduced their purchasing power. What they don’t understand is that higher wages aren’t reduced by inflation, higher wages CAUSE inflation.

There will always be some who have more than others, because some are smarter, some work harder, some are just more fortunate. You can’t change that by handing out money, because money isn’t wealth.

Criminals economics Economy


The rats are fleeing the sinking ship that is the US economy. The regional Presidents of the Fed, who affect the economy far more than POTUS does, are busy dumping US dollar denominated securities ahead of the Fed’s expected decision to taper off on buying bonds and securities. This policy saw the Fed propping up Wall Street by purchasing stocks, bonds, and securities using dollars that they were creating out of thin air. Worse, they were purchasing those items from their own personal accounts.

This policy of using money created out of thin air has artificially propped up stock prices for years. It has also apparently been lucrative for the officials at the Fed. Now that this policy is coming to an end, the market will take a hit.

Now the officials at the Fed have decided to come clean and get out, coincidentally at the same time the Fed is to stop buying. I have a friend who is an executive at a large New York bank. He is prohibited from doing this, and his stock purchases are watched closely by the SEC to prevent insider trading to the point where he doesn’t bother because the bureaucratic hoops are too onerous. The people in the government are apparently exempt. (Yes, I know the Fed is an NGO, but that is smoke and mirrors)

I only have a few assets still in the market. A 401K, and a couple of stocks that pay dividends at the end of the quarter. I am waiting until the dividends pay out, then those stocks are gone as well. I’ve held them for over a year, so I only pay the long term capital gains rate on the profits.


401k in an inflationary period

Redcabinsteve asks:

My wife is a high earner with substantial amounts in a profit sharing acct and a 401 acct. If anyone has the words to convince her to at a minimum take some $ off the table I’d appreciate it. She deflects my words like reverting back to mean, things go down, etc.

If you have a 401k with employer matching, she might be correct. Let’s look at a 401kas an example. Her employer matches her contributions, up to 7% of her income. Let’s look at the math to see what happens if she deducts 7% from her pay:
Let’s say she has an income of $50k per year. That means a deduction of $3500 a year. Her employer matches that with another $3500, for a total of $7000 put into her 401k.
Assuming that the two of you have a taxable income between $81,050 and $172,750, your marginal tax rate is 22 percent. What this means is that In exchange for this $7000, her take home pay is only reduced by $2,730 because she doesn’t pay tax on that money, since it is deducted before income taxes are calculated.
So she ‘loses’ $2,730 in take home pay, but turns that into $7,000 in retirement savings, which translates into an instant 154% return on investment.

The larger her employer match, the better off she is. If her employer doesn’t have employer matching for the 401k, the advantage is much less, and inflationary periods really hurt you. In the example above, if there were no employer matching, that $2,730 becomes only $3,500, which lowers the return to 28%, which in this inflationary environment doesn’t help as much the inflation is hurting you.

In my case, once I have worked there for a year, my employer offers a 4% match. I plan on deducting that maximum 4% as soon as I am eligible.

EDIT: Comments have devolved into nonsensical gobbledygook. I normally leave them open, but I’ve had enough. Comments closed.

economics Economy The Collapse


In a comment to a recent post on signs of the collapse, HomePlace asks:

When I see reports of shortages from what I believe are credible sources, I’ve been making sorties to see what I see locally. These trips in the last several weeks have been limited to grocery and home improvement stores. I haven’t seen evidence yet here in the midwest of shortages. Are shortages regional at this point? Thoughts, theories?

There are shortages, but they are being stealthy about it. My local grocery store isn’t doing anything so obvious as to leave shelves bare. A great example:
The canned soup section was most of one side of an entire aisle just before COVID began. Now the selection is much smaller, and the soup section has shrunk down to less than half the size that it was. The produce doesn’t look as good as it used to- more blemishes, more wilting on the leafy greens, that sort of thing. There are other signs, let’s take a look:

economics Economy The Collapse

Signs of the collapse

Back in 2007, there were hints that a financial disaster were coming, it’s just that many of them were simply missed, even though they were obvious in hindsight. As a firefighter, I saw them: Multiple families living in brand new, expensive homes without a stick of furniture. They could barely make the payment on their adjustable rate balloon mortgage, so they certainly couldn’t afford furniture. All it took was an increase in gas prices to set off the entire mortgage collapse.

There are again signs of an impending financial disaster, and they are everywhere. For example:

My in-laws were in Maine for the summer. They returned last week. Just before they returned, my wife went over to their house to prepare it for their arrival. While she was there, she smelled something odd, like rotting garbage. The smell was coming from the refrigerator. Even though the display on the door said it was cold, it was not. All of the food had rotted.

After a rather nasty cleaning session, the in-laws returned home. They went shopping for a new refrigerator, and there were not many to be had. It turns out that there is no supply coming from overseas, where most of them are made. The ones that ARE getting through are not enough to meet demand. There are lengthy backorders.

Yet another sign that the economy is grinding to a halt is coming from the auto industry. GM and Ford have suspended the production of pickup trucks because of the shortage in computer chips. This is a disaster for Ford Motor Company. All Ford makes is trucks, SUVs, and the Mustang. Ford reports that its sales are down 32 percent.

Total Ford Motor Company sales during July 2021 decreased 32 percent from last July, selling only 120,053 units. Sales of cars were hit hardest, with a 78% reduction to 4,365 units. Trucks were down 38 percent to 72,574 units, and SUV sales dropped 35 percent to 43,114 units.

That news was bad enough, but was ever worse for August, as Ford sales dropped 33 percent in August from the same month last year.

If this is a disaster for Ford, it is also a disaster for the US economy. Ford is the 21st largest company in the USA, and GM is the 22nd.

We are seeing shortages in all sorts of things: supplies are hard to find. Chicken, lumber, microchips, gas, steel, metals, chlorine, and ketchup packets are all in short supply. We shut down the world’s economy, and it is not wanting to restart. We can’t even get people to return to work.

“Experts” can argue about it for months, but no matter the cause, the result is the same. This slowdown of the economy is going to continue for months, perhaps several years. How many businesses will fail as a result is anyone’s guess. One thing is for sure, though. The economy is going to get much, much worse. Inflation is going to increase markedly as the law of supply and demand begins to take hold. Once Suzy Soccermom figures out that there is a problem, expect panic buying and even more shortages as she begins to panic shop for things.

The things that begin to skyrocket in price and see scarcity will probably not make sense. Remember the toilet paper shortage of last year? Like that, but with more products being involved.

I am getting completely out of the stock market. We began a complete sell off last week. As soon as funds are released, we are moving into other investments, things that are not based in the US dollar.


Take advantage of minorities

Facebook recently decided to buy outstanding invoices from businesses owned by women and minorities. The way it works is the business sells an outstanding invoice to Facebook, then Facebook has the debtor pay them what is owed. In return for this, the business pays Facebook 1% of the value of the invoice.

There is a catch– the invoices have to be “eligible.” Invoices must have a minimum value of $1,000 and the customers must have an investment-grade rating. In other words, the invoices ARE going to be paid, making this a no risk endeavor for FB.

Businesses eligible for this program must be certified by an approved partner organization as majority-owned, operated and controlled by racial or ethnic minorities, women, U.S. military veterans, LGBTQ+ people or individuals with disabilities. This makes FB look “woke,” but what is happening here is that they are taking advantage of gullible small business owners.

In other words, Facebook is making no risk loans at a rate that varies from 4% to 12% APR to gullible companies and making itself appear to be “woke.” I wonder how many people will think that FB is doing people a favor.


A lesson in economics

A commenter to a recent post seems to be confused as to what the problem is. If a person tells me that they don’t understand a concept that I am putting forward, I will always take the time to fully explain my position.

Let’s start with my original statement:

CVS announces that they will no longer have education requirements for jobs that don’t require a government license. They will also be increasing wages by 36 percent for the uneducated morons they will be hiring. Those who DID get an education? Not so much.


Guy then replied (after a bit) with this:

I guess I’m lost on where this is bad. If they’re no longer requiring a degree where not required by law they’re allowing people with actual life skills who may not have gotten a useless degree (useless as in, not required for a job) to get employment they could be qualified for.

And not saying they’re heroes, or that I want minimum wage increases, but a company voluntarily giving more money to people in the low end of their payscales seems to be good, unless you’re assuming they’re all fat black shaniquas. Some might be just, ya know, people.


So to understand why I have a problem with this, you need to understand what is happening. The company has announced that they are going to pay people without skills $30,000 a year simply for showing up to work, where they used to pay $22,000 a year for the same skillset. That represents a 36% increase. For reasons that you should already understand, this policy is inflationary.

The people who already work there and who already have skills and experience will receive the same minimum. This is known as pay compression. It isn’t happening because of the free market, and CVS isn’t doing it out of the kindness of their heart. It is happening because of the nationwide push for a $15 minimum wage, and because the Federal government is demanding that anyone getting Federal dollars do so. Remember that Medicare and Medicaid rule the medical field in this country.

This completely removes incentive for anyone to gain in skills or experience.

In 2000, a new paramedic in the Orlando area was starting at $14 an hour. New medics now are starting at $13 an hour. As these minimum wages increase, it will soon be that there is no reason for a person to go to the two years of school that it takes to become a licensed paramedic. Why? To get the same money as a person who didn’t even finish high school?

Some would argue that, in a free market, paramedics would get more money. The problem is that it isn’t a free market. Ambulance companies are paid by Medicare and Medicaid. The reimbursement rates for ambulance rides haven’t increased to keep pace. There is no room for pay raises.

So to sum it up, increasing pay at the bottom end without a corresponding increase above that means higher prices, stagnating wages, and is overall bad economically. It also serves to remove incentive for an educated workforce. This is the reason why the Indians and the Chinese are kicking our asses when it comes to the STEM and medical fields.

Guy, your earlier attack on education by equating all education with gender studies tells me that you likely don’t have an education. (If I am mistaken, please accept my apologies, I am not trying to offend.) All education isn’t gender studies. There are plenty of STEM, medical, and other degrees that are needed and important. Not only those, but trades and skills are important if this nation is to not slide into third world shithole status. We can’t all be high school dropouts who only work at retail and service jobs, but that is exactly where policies like this one will take us.

Policies like this tear at that educational foundation and will see this nation slide into savage obscurity.