Under a mattress, in the freezer: Why so many are hiding cash

A story about some cold hard cash:

Where to stash your cash? Some Americans are sleeping on it—literally.

While banks are still the go-to solution for most consumers, 29 percent say they’re keeping at least some savings in cash bills and coins, according to a new survey of 1,820 adults from American Express. Of those holding cash savings, 53 percent are hiding it in a secret location.

Millennials are even more apt than other generations to go the mattress or freezer route, with 67 percent of those saving cash saying that they hide it outside a bank account.

“We’ve long asked people about how they’ve planned to keep their savings, and for the past few years, we’ve seen an uptick in people saving cash,” said Kimberly Litt, public affairs manager at American Express. This is the first year the company has specifically asked Americans about tucking away cash.

The survey also found that about 1 in 4 consumers anticipates a financial emergency this year, and hiding cash at home could be one way people are preparing. “I’ve also heard of people using it as a budget technique, keeping cash in envelopes set aside,” said Litt.

AmEx didn’t ask where, exactly, that cash is stashed, but a 2012 Marist College survey of 1,080 adults found that the most popular place—with 27 percent of the vote—is the freezer. A little less than 20 percent of Americans hide cash in a sock drawer, while 11 percent put it under the mattress and 10 percent secure it in a cookie jar. Another 9 percent keep their cash somewhere else in the house.

Hmm.  In the days before ATM’s, holding cash made more sense since banks were not open 24-7.  However, if people feel a need to store some we don’t recommend keeping too much money in the house as insurance will only pay $200 maximum in case of a claim…theft, fire etc.

Straight Talk on ‘Sweatshops’

Factory workers in China and other developing countries do difficult jobs that most Westerners wouldn’t want to do, and the workers are compensated at the rate of only about $1 or $2 per hour, plus a tiny living space in a crowded dormitory. Many Westerners view these ‘sweatshops’ as a moral outrage because they believe that the workers are ‘exploited’ by their employers.

One of our students reports that he has a housemate who is one of those people who use the issue of sweatshops as an opportunity to express moral outrage. Perhaps our student should encourage his housemate to chill out and watch the TED talk by Leslie T. Chang. She went to China and befriended young women who work in the sweatshops. Her insightful and heartfelt report sets the record straight.

Across China, there are 150 million workers, one third of them women, who have left their villages to work in the factories, the hotels, the restaurants and the construction sites of the big cities. Together, they make up the largest migration in history, and it is globalization, this chain that begins in a Chinese farming village and ends with iPhones in our pockets and Nikes on our feet and Coach handbags on our arms that has changed the way these millions of people work and marry and live and think. Very few of them would want to go back to the way things used to be.

Certainly, the factory conditions are really tough, and it’s nothing you or I would want to do, but from their perspective, where they’re coming from is much worse, and where they’re going is hopefully much better, and I just wanted to give that context of what’s going on in their minds, not what necessarily is going on in yours.

Why are Baseball Contracts Guaranteed?

Reader Craig Purpus brings to our attention a New York Times piece about the new $210 million contract signed by baseball pitcher Max Scherzer. Baseball contracts usually run five years or so, but Scherzer’s contract is unusual in that it promises to pay him for the next 14 years–probably well past the end of his pitching career. Indeed, the contract calls on Scherzer to pitch only for the next seven years.

Under the contract, Scherzer’s salary is fixed at $15 million per year. The contract provides no annual salary increases, not even to compensate for inflation. The author of the article takes this fact as evidence that people expect very little future inflation. While that inference is not unreasonable, the same inference can more reliably be deduced from the fact that inflation-adjusted bonds are not currently selling for much of a premium. The more interesting question is why the contract spreads the payments over such an unusually long period. Unfortunately, the article offers no answer.

One aspect of Scherzer’s contract that is not unusual is that the payments are guaranteed. That is, Scherzer will get payed the same whether he pitches well or poorly, or even if he suffers an injury and cannot pitch at all. Some of the New York Times’ readers questioned why the club would offer such a guarantee.


The answer probably has something to do with risk. A purely performance-based contract would impose the cost of injury risk on the player–if he got hurt and couldn’t pitch, he wouldn’t get paid. In contrast, a guaranteed contract relieves the player of this risk and transfers the risk to the club. This transfer of risk to the club is probably efficient because the club is in a better position to bear the risk. Compared to the player, the club is invested in a more diverse set of assets and also likely has a greater tolerance for risk. Essentially, the club is less risk averse than is the player, so it makes sense for the risk to be borne by the club.

Tax Time

I just spent 3 painful hours completing my federal and state income tax returns.  It really amazes me that it takes so long given the relatively simple nature of my return.  I have no employees, private business, foreign bank accounts, large inheritances or anything else out of the norm. The compliance burden of dealing with the complex tax code includes the total time and money wasted on filling out tax forms, keeping records, learning tax rules, and other tax-related (e.g. Turbotax) expenses. I was amused by some of the choices available for your refund money.  They include pre-paying next year’s taxes and, my favorite, making extra contributions to the treasury to pay down the federal government debt.  What I wanted the IRS to do instead was….

For parents, now begins the anxious waiting game for college financial aid

A Washington Post story on the cost of college:

For the many high-school seniors who already have submitted their college admissions applications, the season of waiting for an acceptance letter has begun. For their parents, there’s a different anxiety-ridden waiting game: For the financial-aid offers that will spell out just how much this is all going to cost.

Paying for college is now a lot like buying a plane ticket. You have no idea how much the person sitting next to you is paying because most schools discount their tuition to maximize their enrollment numbers and revenue. It’s no different than the airlines trying to fill as many of their seats at the highest prices.

The average discount for first-year students at private colleges is now a staggering 46 percent. But who gets a discount and how big of one a student gets is less straightforward than ever before. It used to be that colleges awarded their own aid dollars based mostly on a student’s finances: the more your family made, the more you usually paid, unless you were an exceptional student the school really wanted.

But with more and more colleges widely employing the practice of“enrollment management” during the past three decades, the distribution of financial aid has become a lot less predictable. Now everyone, regardless of income, believes they deserve some sort of financial help. Half of colleges “front-load” their aid, meaning they give more to students the first year of college than in the subsequent years, hoping an emotional attachment will keep students enrolled.

Seems like a key difference between paying for college and buying an airplane ticket is that Expedia or Priceline don’t require you to document the value of your bank accounts and provide several years of Federal tax returns before giving you the ticket price options.

QE Draghistyle

From the Wall Street Journal:

FRANKFURT—The European Central Bank said Thursday it will purchase eurozone countries’ government bonds, a landmark decision aimed at combating stagnation and ultralow inflation in a region that has emerged as a top risk to the global economic recovery.

ECB President Mario Draghi said the ECB will buy a total of €60 billion ($69 billion) a month in assets including government bonds, debt securities issued by European institutions and private-sector bonds. The purchases of government bonds and those issued by European institutions will start in March and run through September 2016, Mr. Draghi said. The risks associated with the bonds of EU institutions will be shared, but purchases of other government bonds won’t be subject to loss sharing, Mr. Draghi said.

The ECB also lowered the interest rate it charges on its four-year loans to banks by 0.10 percentage point.

The decision marks a new era for a central bank that was modeled on Germany’s conservative central bank in the late 20th century—at a time when fighting inflation was more of a priority than combatting stagnation, weak consumer prices and recurring financial crises.

The euro slumped and was recently at $1.1530, from over $1.16 just before the announcement.

The announcement to buy government bonds, a policy known as quantitative easing, or QE, was made Thursday by Mr. Draghi at a news conference following the ECB’s policy meeting. Officials kept its main lending rate unchanged at 0.05% and a separate rate on overnight bank deposits parked with the central bank at minus 0.2%, meaning banks must pay a fee to keep surplus funds at the ECB.

Wow. Although we think that more liquidity is not a long term solution to sovereign credit and European structural economic problems, the current policy is setting up some interesting incentives. For example, if the ECB buys bonds from a bank and pays it “cash” and the bank wants to hold the extra deposits at the central bank it will be taking a .2% haircut!  What happens if -.2% turns out to be the highest return on a risk adjusted basis?  Anyway, as we head towards dollar parity you might want to book a Euro land vacation.

Manager ‘truly sorry’ for blowing up hedge fund

Here is the story via CNBC:

A hedge fund manager told clients he is “truly sorry” for losing virtually all their money.

Owen Li, the founder of Canarsie Capital in New York, said Tuesday he had lost all but $200,000 of the firm’s capital—down from the roughly $100 million it ran as of late March.

“I take responsibility for this terrible outcome,” Li wrote in a letter to investors, which was obtained by CNBC.com.

“My only hope is that you understand that I acted in an attempt—however misguided—to generate higher returns for the fund and its investors. But even so, I acted overzealously, causing you devastating losses for which there is no excuse,” he added.

The existence of the hedge fund industry actually presents an interesting puzzle.  Why would very rich people be willing to pour money into a fund that steals their money and doesn’t tell them what they do? Is it the financial market equivalent to getting your fix by spending a week at the craps or blackjack tables in Vegas? If 70% of mutual funds with the managers paid 1% of assets per year and 0% of the profits can’t beat their appropriate index, there is no way a hedge fund charging 2% of assets per year and taking 20% of the profits will ever beat out index funds.

Reminder: MLK Was All About the 2nd Amendment

Today’s leftists disparage those who ‘cling to guns and religion.’ But on this MLK Day, let’s not forget that ‘guns and religion’ was exactly how MLK rolled.

Most people think King would be the last person to own a gun. Yet in the mid-1950s, as the civil rights movement heated up, King kept firearms for self-protection. In fact, he even applied for a permit to carry a concealed weapon.

A recipient of constant death threats, King had armed supporters take turns guarding his home and family. He had good reason to fear that the Klan in Alabama was targeting him for assassination.

William Worthy, a journalist who covered the Southern Christian Leadership Conference, reported that once, during a visit to King’s parsonage, he went to sit down on an armchair in the living room and, to his surprise, almost sat on a loaded gun. Glenn Smiley, an adviser to King, described King’s home as “an arsenal.”

In fact, gun control was one of the ways in which racists kept blacks from protecting themselves:

…in 1956, after King’s house was bombed, King applied for a concealed carry permit in Alabama. The local police had discretion to determine who was a suitable person to carry firearms. King, a clergyman whose life was threatened daily, surely met the requirements of the law, but he was rejected nevertheless. At the time, the police used any wiggle room in the law to discriminate against African Americans.

When MLK preached non-violence, he meant that his supporters should not initiate violence. Yet if someone were to initiate violence against him, he was prepared, quite rightly, to finish it. MLK’s experience reminds us that the right to self-defense is fundamental, and in fact undergirds all the other civil rights.

Reminder: Government Wiretapped MLK, Tried to Goad Him into Suicide

Today we observe MLK Day, a holiday created by the federal government. It is worth remembering, however, that back in the day, it was the federal government that wiretapped MLK and tried to get him to commit suicide.

FBI director J. Edgar Hoover feared Reverend Dr. Martin Luther King Jr. so much he sent the civil rights leader an anonymous letter urging him to commit suicide, it has emerged.


After delivering his ‘I Have A Dream Speech’ at the 1963 March on Washington, the government’s interest in the leader intensified and Hoover allocated significant resources to monitoring King’s movements and eavesdropping on his conversations, according to ‘The Burglary: the Discovery of J. Edgar Hoover’s Secret FBI.’

The FBI was apparently looking for a communist party connection – which is how they got permission from Attorney General Robert Kennedy – however the only information they garnered was about the reverend’s extramarital affairs.

When Hoover learned King would be the recipient of the 1964 Nobel Peace Prize, he stepped up his attack, instructing his agents to send King an anonymous note in which they threatened to divulge details about his affairs if he didn’t take his own life.

The FBI’s fake letter purported to be from an indignant African-American.

‘You are no clergyman and you know it. I repeat you are a colossal fraud and an evil, vicious one at that. You could not believe in God… Clearly you don’t believe in any personal moral principles.’

It then went on: ‘King, there is only one thing left for you to do. You know what it is…. You are done. There is but one way out for you. You better take it before your filthy, abnormal fraudulent self is bared to the nation.’

The agents told him he had just 34 days in which to ‘do it.’

We agree with Nick Gillespie that this incident offers some insight into the general character of government as an institution.

Though it was sent 50 long years ago, the FBI’s so-called suicide letter to Martin Luther King, Jr. is very much of a piece with today’s America, where fear of and anger toward the government casts a shadow over everything from web-surfing to starting a business….

Fifty years ago—again, right around the time that the FBI was about to become the subject of a hagiographic hit TV show and trying to goad Martin Luther King, Jr. into killing himself—Richard Hofstadter was denouncing the “paranoid style in American politics.” He lamented that, “American politics has often been an arena for angry minds.”

But today’s lack of trust and confidence in the government doesn’t seem all that angry. It’s more like we’re resigned to the fact that our rulers think little of us—that is, when they think of us at all. In gaining new knowledge about how people in power almost always behave, we are wiser and sadder and, one hopes, much less likely to put up with bullshit from the left, right, or center.

There’s a real opportunity to the politicians, the parties, and the causes that dare to embrace real transparency —about how legislation is being crafted, about our surveillance programs at home and abroad—as a core value and something other than a throwaway slogan. But as an unbroken thread of mendacity and mischief binds the present to the past, a future in which government can be trusted seems farther off than ever.

That same government that can’t be trusted is the institution in which ‘progressives’ put their faith, and which they want to enhance in power and in scope.

Modern Parenting is Impoverishing the Childhood Experience

In a fascinating article in The Atlantic, Hanna Rosin reveals how much parenting, and therefore also the childhood experience, have changed since we were kids.

It’s hard to absorb how much childhood norms have shifted in just one generation. Actions that would have been considered paranoid in the ’70s—walking third-graders to school, forbidding your kid to play ball in the street, going down the slide with your child in your lap—are now routine. In fact, they are the markers of good, responsible parenting. One very thorough study of “children’s independent mobility,” conducted in urban, suburban, and rural neighborhoods in the U.K., shows that in 1971, 80 percent of third-graders walked to school alone. By 1990, that measure had dropped to 9 percent, and now it’s even lower.

Walking to school by the third grade? We were walking ourselves to school by the first grade. To be sure that we remembered correctly, we checked with mom, who confirmed it.

Another change is that the parents we know seem to spend a lot more time with their kids than our parents spent with us. Rosin confirms that parental contact hours have in fact increased, even though parents work more than they used to. So parents both work more, and spend more time with their kids. That can only imply that the adults have less time to themselves. The life of a parent has gotten tougher, which perhaps explains in part why fewer people these days want to do it.

Rosin’s own experience is typical of modern practice.

My mother didn’t work all that much when I was younger, but she didn’t spend vast amounts of time with me, either. She didn’t arrange my playdates or drive me to swimming lessons or introduce me to cool music she liked. On weekdays after school she just expected me to show up for dinner; on weekends I barely saw her at all. I, on the other hand, might easily spend every waking Saturday hour with one if not all three of my children, taking one to a soccer game, the second to a theater program, the third to a friend’s house, or just hanging out with them at home. When my daughter was about 10, my husband suddenly realized that in her whole life, she had probably not spent more than 10 minutes unsupervised by an adult. Not 10 minutes in 10 years.

Not 10 minutes without adult supervision? That’s just sad.

When you ask today’s parents why they are so much more protective, they reply that today’s world is more dangerous, and in particular, that children today face an increased risk of being abducted. The problem with that view is that it simply does not square with the facts.

David Finkelhor is the director of the Crimes Against Children Research Center and the most reliable authority on sexual-abuse and abduction statistics for children. In his research, Finkelhor singles out a category of crime called the “stereotypical abduction,” by which he means the kind of abduction that’s likely to make the news, during which the victim disappears overnight, or is taken more than 50 miles away, or is killed. Finkelhor says these cases remain exceedingly rare and do not appear to have increased since at least the mid‑’80s, and he guesses the ’70s, although he was not keeping track then. Overall, crimes against children have been declining, in keeping with the general crime drop since the ’90s.

All of this extra time that parents spend with their children is supposedly for the benefit of the children. So children must be doing better than they used to, right? Well, not so much.

[Kyung-Hee] Kim has analyzed results from the Torrance Tests of Creative Thinking and found that American children’s scores have declined steadily across the past decade or more. The data show that children have become:

“less emotionally expressive, less energetic, less talkative and verbally expressive, less humorous, less imaginative, less unconventional, less lively and passionate, less perceptive, less apt to connect seemingly irrelevant things, less synthesizing, and less likely to see things from a different angle.”
The largest drop, Kim noted, has been in the measure of “elaboration,” or the ability to take an idea and expand on it in a novel way.

We wonder if this generation, when it reaches adulthood, will be able to match the achievements of previous generations.

Finally, Rosin writes about a research study from the 1970s that filmed children playing unsupervised in ways that today seem unthinkable.

Andrew and Jenny, a brother and sister who are 6 and 4, respectively, explore a patch of woods to find the best ferns to make a bed with. Jenny walks around in her knee-high white socks, her braids swinging, looking for the biggest fronds. Her big brother tries to arrange them just so. The sun is shining through the dense trees and the camera stays on the children for a long time. When they are satisfied with their bed, they lie down next to each other. “Don’t take any of my ferns,” Jenny scolds, and Andrew sticks his tongue out. At this point, I could hear in my head the parent intervening: “Come on, kids, share. There’s plenty to go around.” But no parents are there; the kids have been out of their sight for several hours now. I teared up while watching the film, and it was only a few days later that I understood why. In all my years as a parent, I have never come upon children who are so inwardly focused, so in tune with each other, so utterly absorbed by the world they’ve created, and I think that’s because in all my years as a parent, I’ve mostly met children who take it for granted that they are always being watched. (Emphasis in original.)

Exit question, and a chilling one: Will people who grow up accustomed to constantly being watched feel comfortable with, or complacent about, being watched by a Big Brother surveillance state? Can human freedom survive overprotective modern parenting?