More Middle Class are becoming Upper-Middle Class

[bjl584]

Did the 'Lost' Middle Class Become Upper Class? - U.S. Business News - CNBC

[Wino]

How do they define "upper middle class?" My goal is to be there. I'd like to know where "there" is.

[bjl584]

How do they define "upper middle class?" My goal is to be there. I'd like to know where "there" is.

Here is what Wikipedia has to say on the matter:

Upper middle class - Wikipedia, the free encyclopedia

I can't speak for how reliable the data is, but it's a place to start.

[JoeP]

From the article in the OP:

Upper income families, by contrast, have seen their median net worth grow over the same period by 87 percent, to $574,788 from $307,134.

I've always focused on net worth rather than income. I know a couple families who are firmly in the 6-figure income range, with expenses to match. I'd much rather be debt free with good financial discipline to carry me into retirement, as opposed to working all those years to be saddled with debt and chronic financial leakage and then be forced to make major sacrifices.

[dontgopoor]

Here's another article on the middle class, that I saw yesterday: What Happened to the Middle Class? - DailyFinance

[Wino]

Here's another article on the middle class, that I saw yesterday: (link)

Interesting article. They left out the "borrow more than the house is worth, because you're just going to sell it for even more in 6 months and use the equity to buy a new BMW." The housing crunch was caused by stupid government rule changes that allowed and/or forced banks to sell loans to people who could not afford them, and finally, the greedy people themselves who took these bad loans and perpetuated the cycle with more borrowing.

And then they all spent the money on luxuries. The money from the housing boom is not "gone." It is in 60 inch flat screen TV's, 6 year old BMW's, idled ATV's, and a million other short term purchases that were paid for with money pulled from speculative equity. The housing bubble didn't burst. It was first over-inflated by everyone (and if you're underwater on your house loan, most likely you're part of "everyone"), then it was shown to be the house of cards that it was, built on nothing but speculation and greed.

[JoeP]

Interesting article. They left out the "borrow more than the house is worth, because you're just going to sell it for even more in 6 months and use the equity to buy a new BMW." The housing crunch was caused by stupid government rule changes that allowed and/or forced banks to sell loans to people who could not afford them, and finally, the greedy people themselves who took these bad loans and perpetuated the cycle with more borrowing.

Can you please explain the part I bolded above? I have issue with the word "forced" used in this context. From my limited knowledge in finance, I do not recall any bill or regulation set into law that forced banks to sell any loan product to anyone. If the banks offered and approved loans to people who would normally not qualify, I'd like to know if the government had anything to do with it (along with the regulation they put upon banks).

Aside from that, you really have to take a close look at those who signed the loans that were extended to them. Just like those credit card offers that come in the mail, it is really up to the potential borrower to do their home work and make a sound decision based upon their financial situation and tolerance for risk.

If consumer financial education is missing from this equation, then let's identify THAT as the thing to work on as a society.

[dontgopoor]

Wino - please clarify which regulations you refer to that encourages or forces lending.

If consumer financial education is missing from this equation, then let's identify THAT as the thing to work on as a society.

I completely agree with JoeP, so much so that I spent several years, a few minutes every day, writing a book to do exactly what he refers to. And I don't mean personal finance as in the budgeting, spending within your limits, managing credit cards, and all the other very good habits that have been widely covered for decades.

Rather, I took on the the marketing techniques that manipulate emotions that bring people to want that luxury car, to have it all, to believe that they deserve to treat themselves to very nice things.

I am a huge proponent of business and capitalism. Yet, I also believe that consumers need to educate themselves about how marketing preys on emotional weaknesses. Without consumer understanding of these techniques, the playing field is tilted in favor of marketers.

Yes, financial education includes things like budgeting needs versus wants. But without an understanding of how marketing-manipulated emotions twist the perception of what is a "need" and what is a "want", a consumer will be hard pressed to handle the nuts-and-bolts of budgeting. History shows this.

So much of what's on these boards deals with the prioritization of EFs, retirement savings, income versus expenses - this makes sense. And these points tend to be second nature for the kinds of logical minded folks that generously donate their time to give advice. But very few people posses the Spock like logic that makes logical spending habits easy.

Most of the population thinks emotionally first. Recent brain research shows this for all types of decision making. For consumers, this is what has conventionally known as Buyer's Remorse.

A good understanding of the marketing techniques used to sell and the emotions appealed to, a simple understanding of how the brain makes decisions, and a good and simple buying process goes a long way.

[Wino]

Wino - please clarify which regulations you refer to that encourages or forces lending.

Here's a whole article for you, from 2008: Clinton Pressure to Promote Affordable Housing Led to Mortgage Meltdown

Do you deny that forcing banks to balance out skin color lending regardless of creditworthiness was one of the main factors in the boom-cum-crash?

Here's a chart to help you see how the above article can justify its points: http://www.marketobservation.com/blo...sUSMay2011.jpg

Clinton said that everyone should own a house, and forced the banks to loan money or be sued. So, they lost a ton of money that the rest of us had to repay.

[dontgopoor]

Here's a whole article for you, from 2008: Clinton Pressure to Promote Affordable Housing Led to Mortgage Meltdown

I read most of the article and then its links to source article and frankly I don't see any reference to regulations or legislation. The article makes a lot of claims similar to what I've seen other more mainstream media outlets make.

Do you deny that forcing banks to balance out skin color lending regardless of creditworthiness was one of the main factors in the boom-cum-crash?

I neither assert or deny - you're the one making the claim. I'd sure like to see other's research on this. It's probably out there, I've just not seen exactly what you're claiming.

Here's a chart to help you see how the above article can justify its points: http://www.marketobservation.com/blo...sUSMay2011.jpg

Schiller's chart is purely a history of home values and has no direct correlation to the Openmarket online article that you posted.

I'm happy to have the discussion with you but your assertion is a bit thin on facts as you present it.


I have researched and and summarized the Sub-prime Mortgage and Foreclosure Crisis, but I've published that work on a for-profit basis. There's a lot of blame to go around, but at the end of the day my conclusion was that while sub-prime loans were important factor, they were not the most important.

[Wino]

I said, "The housing crunch was caused by stupid government rule changes that allowed and/or forced banks to sell loans to people who could not afford them"

You changed it to "regulations," and expect me to defend your rewording. Clinton threatened banks with the power of the federal government (you know, the ones who make money available to banks) if they didn't comply. That changes the rules. The article showed exactly this.

That would be extortion if done outside the government.

Bill Clinton's drive to increase homeownership went way too far - BusinessWeek

Yet another article. Let me quote it for you: "It’s clear now that the erosion of lending standards pushed prices up by increasing demand, and later led to waves of defaults by people who never should have bought a home in the first place."

And later: "The National Homeownership Strategy began in 1994 when Clinton directed HUD Secretary Henry Cisneros to come up with a plan, and Cisneros convened what HUD called a "historic meeting" of private and public housing-industry organizations in August 1994. The group eventually produced a plan..."

So, when those who enforce the rules come up with a "plan" for the "private and public housing industry" you don't think those are rule changes?

[dontgopoor]

I went back to recheck and you're right - you did not use the word regulation, another poster used that term to refer to your use of "rules", sorry.

I don't see any reason to doubt the reports that the Clinton administration pushed for the relaxation of lending standards. To what extent were they "extorted", who knows. Clearly sub-prime mortgages were a piece of the housing bubble, foreclosure crisis, and subsequent economic mess. But they were just a piece, not the main driver, based on what I've seen/read.

Then again, sub-prime loans were not loans for the middle-class.