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View Full Version : FIRE in action: 1970s (FIRE start) vs. 2004 by Elizabeth Warren



c1ue
08-02-09, 08:55 AM
I was considering putting together an example of FIRE in action, but Elizabeth Warren already has a pretty good one:

http://privatizationofrisk.ssrc.org/Warren/

1911

1912

Note the change in fixed expenses: mortgage, child care, health insurance, car expenses, and taxes

1970s: 54% of total income ($22890/$42450)
2004: 75.5% of total income - with 2 earner income ($55660/$73770)

Taxes have gone up: 24% to 30% primarily due to Social Security/Medicare (FICA)
Health care and child care are major parts of the expansion, but so are disproportionate increases in car and home expenses.

From a FIRE perspective this is quite sensible: higher asset prices due to credit yield higher payments (mortgage and car loan); higher asset prices also yield higher insurance costs.

Spartacus
08-02-09, 10:39 AM
The only thing I disagree with is categorizing all housing as a necessity.

No matter where you live, there is cheaper housing elsewhere. I'm not advocating infinite downward mobility here, eventually ending up in tents on public land.

edit (adding): it occurred to me that since most home buyers think it's partially an investment, some portion of housing costs should be allocated to the same bucket as investment related stocks & bonds - not necessities.

The counter-argument is that housing design has changed to accomodate cultural change such that the same amount of money buys housing designed for use by fewer people. Also city planning has been over-run by (I think this is Kunstler) "haters of steel wheels & lovers of 4 (but never 2) rubber wheels".


I was considering putting together an example of FIRE in action, but Elizabeth Warren already has a pretty good one:

http://privatizationofrisk.ssrc.org/Warren/

Taxes have gone up: 24% to 30% primarily due to Social Security/Medicare (FICA)
Health care and child care are major parts of the expansion, but so are disproportionate increases in car and home expenses.

From a FIRE perspective this is quite sensible: higher asset prices due to credit yield higher payments (mortgage and car loan); higher asset prices also yield higher insurance costs.

Personally interesting to me is that in the early 90s I read all the stuff she talks about on consumerism - (Juliet Schor et al.).