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Why people stay poor

 
 
 
How does that explain how the poor in developing countries stay poor? Or the poor who don't have cell phones?
 
In poorer countries, they often have no bargaining right and are paid less or sometimes not at all. This means less spending is generated, so less circulates in the economy to create more jobs. This could be in the way of greater sales for additional foods, cars, house purchases, clothing, travel and holidays etc. Also less money is banked. Thus less staff being employed.
 
No, Loren, I am pretty sure that the reason the poor stay poor is because it takes money to make money, and the poor gots no money.
 
laughing dog said:
How does that explain how the poor in developing countries stay poor? Or the poor who don't have cell phones?
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or the poor who have reasonably low priced cell phones?

oh wait, right, every single solitary individual human living on this planet who makes under 25k a year gets involved in stupidly overpriced cell phone payment schemes and that is the sole cause of poverty.

that doesn't just make sense... that's makes loren sense!
 
So rich corporations take advantage of poor people by over charging them, and then surrogates for those rich corporations come into message boards and blame poor people.

Sounds about right.
 
Wasn't Obama giving poor people free cellphones at one point in order to undermine freedom and democracy? Whatever happened with that? Were those crappy old iPhone 3s or something?
 
Tom Sawyer said:
Wasn't Obama giving poor people free cellphones at one point in order to undermine freedom and democracy? Whatever happened with that? Were those crappy old iPhone 3s or something?
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A cell phone company was out on a street corner giving out the Obama phones last weekend. I should have checked it out.
 
Obviously the price of cell phones isn't why poor people are poor. The general idea of poor getting swindled out of their money by taking advantage of their poverty might be.

However, I'm a bit confused about the ad. What does "90 days same as cash price" mean? And why would they mention the total price after the "worry-free" 6.5 years of payments, as it's almost 3 times the cash price? Who the heck would take that deal except a person who doesn't know math (or has no problem paying for 3 times the normal price for a luxury product, while needing a payment plan to afford it)?
 
Jayjay said:
Obviously the price of cell phones isn't why poor people are poor. The general idea of poor getting swindled out of their money by taking advantage of their poverty might be.

However, I'm a bit confused about the ad. What does "90 days same as cash price" mean? And why would they mention the total price after the "worry-free" 6.5 years of payments, as it's almost 3 times the cash price? Who the heck would take that deal except a person who doesn't know math (or has no problem paying for 3 times the normal price for a luxury product, while needing a payment plan to afford it)?
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The cash price for the phone is $829. If you make three payments of $277, in 90 days, the phone is yours. A person on the $29.99/week plan has only paid $360, at at that point.

What this is really all about is access to financial services. It takes about the same amount of labor and overhead to create a $50 loan, as a $5000 loan. It's only a little less than a $50,000 loan. A $50,000 dollar loan will return about $6000 dollars a year, give or take. That's not a bad return for a few hours work.

In the really small loan market, they want the same return as expected on the $50k loans. It's possible, through judicious use of punitive "late fees" and refinancing. This weeks loan payment(principle, interest and late fee) is late, but it can be covered by another loan, complete with the loan generation fee. It takes about 60 days and a person could owe the next two years income for a $400 loan.

Many years ago, I lived the life of a suburban squire. I had a lovely house in a suburb, complete with a tree shaded lawn and a big lawn mower. I worked on commission for production, so my paycheck could vary a couple hundred dollars from week to week, but I made a good living. Every Friday, right after lunch, my wife would call me and ask the amount of this weeks check. This allowed her to budget for things such as the house note, car payment, etc.

One Friday evening, I came home and handed her the check. She opened her purse to write the deposit slip and discovered last weeks check still tucked in the check book. She had forgotten to go to the bank on Saturday morning, which was her usual routine.

In the meantime, the house note check had been written and sent. This was not a problem, because like any other respectable suburbanite with a blonde wife, I had overdraft protection, through my credit card. The deal was quite simple. Anytime a check bounced, Visa would put $100 in my account and charge me $127. They kept doing this until the check cleared. It took four tries to cover the house note check, so it cost me $508 to cover a $400 overdraft for two days.

I would have been better off if I had taken a payday loan. It's easy to talk about poor people and their poor financial practices, but it's really a matter of how close you live to the edge. It's always very expensive on the edge.
 
Bronzeage said:
I would have been better off if I had taken a payday loan.
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You're wrong about that. Showing me numbers won't do any good to dissuade my view. The reason doesn't lie in the numbers.

It's easy to talk about poor people and their poor financial practices, but it's really a matter of how close you live to the edge. It's always very expensive on the edge.
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There is certainly some truth in that. The sad thing is people sometimes delude themselves into thinking the culprit behind a financial downfall stems from the last one, two, or few unfortunates in their lives. We should seldom blame the last straw placed upon a camels back as the true reason for things turning south. People are often a lot closer to the edge than they realize. When things are running smooth and something happens, they might not realize just how close they are to the edge until things start hitting from different angles.
 
Jayjay said:
However, I'm a bit confused about the ad. What does "90 days same as cash price" mean? And why would they mention the total price after the "worry-free" 6.5 years of payments, as it's almost 3 times the cash price? Who the heck would take that deal except a person who doesn't know math (or has no problem paying for 3 times the normal price for a luxury product, while needing a payment plan to afford it)?
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I think they mention the total cost due to consumer protection laws. There was a thread on poverty last year where I posted a WaPo article about a family that was paying a total of $4,500 for a $1,500 sofa/love seat combo. The kicker was that often when they went to pay their bill they came out with another purchase financed with the same "rent-to-own" scheme. The usual suspects were defending this family's poor financial decision-making but it shows that Loren has a good point - these purchases are definitely keeping them in dire financial straits!
 
Jayjay said:
Obviously the price of cell phones isn't why poor people are poor. The general idea of poor getting swindled out of their money by taking advantage of their poverty might be.

However, I'm a bit confused about the ad. What does "90 days same as cash price" mean? And why would they mention the total price after the "worry-free" 6.5 years of payments, as it's almost 3 times the cash price?
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That is weekly payments, not monthly.
Who the heck would take that deal except a person who doesn't know math...
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The person that doesn't understand math.
(or has no problem paying for 3 times the normal price for a luxury product, while needing a payment plan to afford it)?
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Well, there used to be this thing called Layaway, where you'd pay in installments, and once fully paid, you'd get the product.

But now days, it is legal to rip people the fuck off. Why are poor people sometimes poor? Because while middle class people are paying 0.9% interest on that $30k car loan, the targeted poor are paying 100% interest for a quasi-1.5 year $900 loan. And people like Loren don't support laws to prohibit usury. I call that fucking hypocrisy.

Wanna hear the kicker, that 60 month $30k car loan will cost the owner less in interest than the poor person getting the phone.
 
Derec said:
Jayjay said:
However, I'm a bit confused about the ad. What does "90 days same as cash price" mean? And why would they mention the total price after the "worry-free" 6.5 years of payments, as it's almost 3 times the cash price? Who the heck would take that deal except a person who doesn't know math (or has no problem paying for 3 times the normal price for a luxury product, while needing a payment plan to afford it)?
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I think they mention the total cost due to consumer protection laws. There was a thread on poverty last year where I posted a WaPo article about a family that was paying a total of $4,500 for a $1,500 sofa/love seat combo. The kicker was that often when they went to pay their bill they came out with another purchase financed with the same "rent-to-own" scheme. The usual suspects were defending this family's poor financial decision-making but it shows that Loren has a good point - these purchases are definitely keeping them in dire financial straits!
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These purchases shouldn't even be remotely legal.
 
fast said:
There is certainly some truth in that. The sad thing is people sometimes delude themselves into thinking the culprit behind a financial downfall stems from the last one, two, or few unfortunates in their lives. We should seldom blame the last straw placed upon a camels back as the true reason for things turning south. People are often a lot closer to the edge than they realize. When things are running smooth and something happens, they might not realize just how close they are to the edge until things start hitting from different angles.
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Definitely. Living too close to the edge is at the heart of most financial trouble. It makes people do things like make the payments in the ad.
 
Loren Pechtel said:
fast said:
There is certainly some truth in that. The sad thing is people sometimes delude themselves into thinking the culprit behind a financial downfall stems from the last one, two, or few unfortunates in their lives. We should seldom blame the last straw placed upon a camels back as the true reason for things turning south. People are often a lot closer to the edge than they realize. When things are running smooth and something happens, they might not realize just how close they are to the edge until things start hitting from different angles.
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Definitely. Living too close to the edge is at the heart of most financial trouble. It makes people do things like make the payments in the ad.
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That's ticket. If you're poor, move away from the edge.
 
Bronzeage said:
What this is really all about is access to financial services.
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It's more about priorities. If you can't afford it easily you do not need the newest model cell phone (the ad is for Galaxy 5 but seems to be from when the phone was new judging by the cash price), especially not when the only option to get it is an unfavorable loan.
 
Derec said:
Bronzeage said:
What this is really all about is access to financial services.
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It's more about priorities. If you can't afford it easily you do not need the newest model cell phone (the ad is for Galaxy 5 but seems to be from when the phone was new judging by the cash price), especially not when the only option to get it is an unfavorable loan.
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No, it is about access to financial services. A person with credit doesn't pay $900 for that phone. In fact, they don't pay for the phone upfront at all. They sign a two yr contract and get to use the phone. Poor guy, if he wants the phone, he is getting suckered into a 100% interest, 18 month long loan. They both will pay the same to actually use the phone.

As I noted previously, a person with $30k car loan at 0.9% is paying less outright interest than the person getting the phone in the OP "deal".
 
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