JoeTaxpayer

From Innumeracy.com:
Innumeracy: A term meant to convey a person’s inability to make sense of the numbers that run their lives. Innumeracy was coined by cognitive scientist Douglas R Hofstadter in one of his Metamagical Thema columns for Scientific American in the early nineteen eighties. Later that decade mathematician John Allen Paulos published the book Innumeracy. In it he includes the notion of chance as well to that of numbers.

From “Money Merge Advantage“, an MMA agent’s blog:
“In FACT… The software alone could still beat the 2nd scenario (putting the $300 discretionary to the mortgage each month)… WITHOUT using that discretionary income AT ALL. Yes, SERIOUSLY!”

If you have no idea what Money Merge Accounts are, or what I am talking about, please see my Money Merge Links page for references and then read on. In the blog I reference, the example starts with $250K, 30 yr, 6.5% mortgage. Then we are told a bi-weekly will provide some $75,800 worth of interest savings. No problem there, a bi-weekly is like paying 8% higher than the required monthly payment, usually in the form of a 13th payment snuck in once a year. The examples then offer that $300 more each month will cut the mortgage down to 19 yrs 8 months, which I still follow. But then the blog writer claims that with no extra money, beyond the $300, MMA will cut the mortgage to 14 yrs 4 months! This is beyond the wildest claims I’ve seen so far, and completely beyond reason.

Lastly, came the quote above, suggesting that with no extra funds available, the HELOC shuffle alone can produce savings greater than a $300 monthly principal payment would achieve. This raises new and troubling questions. The couple in the example have a net income of $3800/mo. If their HELOC were 0%, and they borrowed this $3800 at the beginning of each month, and paid it back at month’s end, it would gain them just under $21 per month, nowhere near $300. And no HELOC offers a 0% interest rate. At best, the HELOC is a percent or two under the fixed rate mortgage. This is simple math, folks, and no “sophisticated algorithms” are going to change the fact that 1+1=2 or that the best one might squeeze out of their HELOC shuffle efforts is $20-$30 per month, certainly not $300.

Joe

written by JOE \\ tags: HELOC, income, innumeracy, interest, jferheart, mma, money merge account, Mortgage, saving, sophisticated algorithms, UFF

I received enough email asking why I picked on Obama for what may have been a slip of the tongue regarding distribution of income gains. I think that our elected officials, whoever they are, need to speak with precision and when it comes to numbers, be close enough to exhibit an understanding of what they are discussing.

So, this past Tuesday, I hear Sen John Barrasso (WI) being interviewed by CNBC on the current gas price concerns. He offered that the average American uses 1500 gallons of gasoline each year. I’ll not split hairs to suggest that he meant the average driver, that was understood. But let’s think for a minute. 1500 gallons, even at 20 MPG (which is low, earlier, CNBC said the MPG was up to 30 MPG this year, which seemed high) that’s 30,000 miles per year. That just seemed wrong to me, so a few seconds with The Google and I found the Energy Kid’s Page, a site hosted by the department of energy. There, I found the number to be 500 gallons average with 12,000 miles driven by the average driver. This made a bit more sense to me, and this data was confirmed by the California Energy Commission, which states a US average of 464 gallons used per year. These numbers differ by less than 10%, but are far from the 1500 gallons the honorable Senator from Wisconsin stated.

The price of gas is high, painfully so. In any dialog about economics, it’s important to have your numbers right. Now, at work on Monday, I know that every dollar rise in gasoline impacts the average driver by $500 per year. I don’t aspire to the Cliff Clavin award, but I do want to know my facts before I quote them.

(I just found another beautiful New York Times graphic titled, “The Varying Impact of Gas Prices” illustrating the percent of one’s income going to gasoline purchases, across the country. Take a peek.)
Enjoy the weekend!

Joe

written by JOE \\ tags: barack obama, distribution of income, economics, energy, Finance, gasoline, innumeracy, john barrasso, mpg, president

From an interview with Barack Obama aired on CNBC tonight;

“We know that over the last decade or so that more than half the economic growth has been captured by the top 1% of US citizens. That means the other 99% have seen their effective incomes go down. That is not a recipe for long term economic growth.”

I’m sorry - if half the gain went to just the top 1%, the remaining gain went to the rest of the people. Let me be clear, I am not suggesting this is ‘fair’ or that I’d advocate policy that would perpetuate it. I offer the following chart, which supports Obama’s intentions;

My issue, and reason for this post is that I believe precision is important. If all (100%) of the gains had gone to the top 1% of earners, then the rest of us would have remained level. It would take for the top X% to increase more than 100% of whatever gains occurred in a given period to impact the statistics so the rest of us would have lost ground. Please, Mr. Obama, the facts are bad enough, use them to your advantage. Learn to speak about the numbers and the numbers will speak for themselves.
(Note - click on the image above to read the entire article from the CPBB)

Joe

written by JOE \\ tags: barack obama, economic growth, Finance, income, innumeracy, statistics