We Can't Save for Losing

Sorry This Post is So Long But I Know You Will Not Read It

Like me, a typical sensible person on a decreasing income, you have probably checked all your monthly bills and decided to cut back some services that you don't really need. For example, who needs that home phone when every family member has a cell phone? And why keep paying so much for those premium movie channels on cable - because they have more series than movies these days? Bet you also turned down the thermostat this winter, started leaving fewer lights on, maxed out the dishwasher every time, and YELLED "TOILET" whenever someone did not jiggle the handle correctly to save on the water bill. Ahh, yes, you are happy and proud of yourself for the work you put into lowering that energy bill (oops - I meant proud of yourself to have contributed to the glorious fight against global warming).

I am too - proud that is - of minimizing my usage of anything and everything (not the global warming part which is scientifically incompleat in my non-humble scientific mind).

But I'm not really saving much money! What happened here? Cable bill keeps getting higher. Phone bill too. They passed another increase in electricity rates. Upped the garbage/sewar fees. Water usage costs have gone up. And there's more - higher home insurance premiums, higher car and house property taxes, higher interest rates on those college loans for parents (how can they friggin' do that when US interest rates are almost zero?) Am I going nuts or are you going nuts too?

It's actually very scientific - the more we save, the more we lose. Just ask the Japanese about their economy for the last decade or so. Because individual Japanese citizens save huge amounts of money, there practically is no economy in Japan. (Here, 'economy' means buying and selling lots of unnecessary stuff to each other within your own country). Okay, the problems with the Japanese economy might not be a familiar subject in the USA so, although the analogy is accurate, it can be simplified.

Science is still science. The more we save, the more we lose. And when *everyone* saves more, we really really lose. Example: Power plants were built and designed to supply a specific, usually large, amount of electricity in a geographical area. But now residents like you and me aren't using as much electricity, those who lost their house are using no electricity, *and* every business - manufacturing, stores, gas stations, you-name-it - in the geographic area has cut back their energy use even more! Yet it costs the power plant companies just as much money and, in their opinion, more money than ever before to keep running *because* everyone decided to take their business away. Don't ask why - it's all rather economistic involving governing boards agreeing to rate hikes for the power company to pay off increasing debt at increasing interest rates because their income (our payments) have quit coming and they'd like to keep ahead of global warming.

Think of it this way. If you owned a good business but suddenly your business was bringing in 25% less money than before and your business has to pay its bills, you would increase your prices, right? Makes sense to the power companies and the public governing boards which always allow rate hikes (it's in their contract - to be on a 'public' governing board of a utility, you must misunderstand economically all the massive paper provided by the power company in its efforts to help the world's forests - er, I meant its efforts to "stay in business" because "it's too big to fail").

Of course, your attempt to increase prices in your own business would fail miserably as people would buy even less from you until you spiral down into bankruptcy because your company is too small to save. As a typical, fairly normal businessperson, you would indeed say that raising prices is the wrong approach when sales are declining rapidly. Maybe you would advertise more, mix up your product line, look at different consumer segments to add to the business, lower costs (yeah - try lowering that electric bill and see what happens!) etc. Your goal right now is to stay in business, not drive off your customers further. But you're not a 'public' utility/service or even a monopoly. You are sensible and base decisions on proven basic economic principles to keep your company going.

Public utilities and services, plus local monopolies, get to operate in their own economic stratosphere (do we still have one? I forget, maybe cause I'm freezing cold right now. Hey - what happened to global warming?) When the income for these businesses or operations go down, they raise prices to keep making money. Sometimes it is admittedly reasonable such as increasing the price I pay for garbage collection because there are 25% fewer homeowners paying for garbage service. And heck, it's hard to pay someone less for such an odorous job or find other cost-saving measures, especially as my home state keeps garbage cheaply, in landfills. And, unless you want to become Californian, those property taxes need to go up - again, since there are fewer homeowners and car owners here and our governor hates DC but loves Argentina, thereby already whacking off lots of public services along with other unmentionables.)

Power companies and water-supplying-whatever companies usually need to get the rates they charge customers approved by a public governing board. You would think these governing boards would be filled with atypical, mathematical-scientifical people who could weigh the pros and cons of, lets say, shutting down one power plant instead of increasing rates or maybe they'd ask the utilities for options on cost-cutting. But both the utilities and governing boards understand the game of rubber-stamping. Because, you know what? Those on the governing boards are actually typical and proly don't want to read that 500-page report. So your electric bill *will* go up along with your water bill and every other bill from a 'public' utility. (Though it's strange that some of these public utilities, especially power, are companies with stock for sale, etc., and don't seem very 'public' though my understanding of the word may be off).

Monopolies, on the other hand, live in heaven. I am absolutely enthralled by this one: the government broke up AT&T into little parts because AT&T had a monopoly on phone bills and charged customers whatever it wanted. The government thought that competition would lower phone bills. In my area, here comes Cingular - our premier cell phone company. And I am so happy to finally get rid of AT&T & just go cellular with Cingular. Next thing I know, Cingular has disappeared & my bills again leap higher because AT&T has taken over Cingular! Whatever happened to the original non-monopolistic plan? Watch out Sprint - you must be next cause I'm transitioning my cell phones over to you. And AT&T was born to be a monopoly.

Cable companies, including internet service connectors (I can't call them providers cause I really don't see them providing anything on the internet except the connection) also live in economic heaven. They will do anything to maintain their geographic dominance and increase prices to save money. Here's an actual Time Warner advertisement: Free HD upgrade for only $9.95 per month. How the heck can it be "free" if it costs $10 more a month? How can anyone allow this blatantly false ad to continue for months on end? Must be the television companies are sorely in need of money. Here's another Time Warner ploy: the promotional period for your plan has ended so the new price is $$$. Can someone explain to me how a plan I've had for 15 years suddenly became promotional?

So we can't save for losing, especially since we are all saving, thereby losing. When will this change? Maybe when "made in the USA" is the cheapest label globally (i.e., never). Hopefully, China will continue to buy our debt (misnomered "treasuries") so we can keep saving and losing at a rate that's somewhat bearable. We can also hope that global warming increases enough this winter to continue decreasing our electric/natgas/heating oil bills in advance of the public governing board meetings. Our only true solution is to become proud Americans again - spend as much as possible, buy houses!!!, save a tiny bit - to get not just our economy, but the world's economy, bustling again. Nothing else makes sense when you've made sense of it already.

-k (actually written 12/27)