A Looming Danger
Submitted by Anonymous on Mon, 07/17/2006 - 2:33pm.
When shit hits the fan, it will not be pretty
Submitted by joebu on Tue, 07/18/2006 - 2:39am.
Because of the overwhelming debt at the consumer and governmental levels, there is going to be no choice but to inflate the dollar. Bernanke can flinch all he wants with interest rates, but ultimately, he can't raise them much higher or else he will crash the economy. We are so far in a hole that we are past the point where inflation is the only "viable" option. Even if we were to raise taxes on the rich to the appropriate levels, the revenue would still not be enough to get out of the hole. Therefore, the only thing to do is print more money and dilute the value of dollar.
It's a shame because the biggest losers of inflation are the working class people. Their wages simply cannot keep up.
I would not be at all surprised if we are in an inflationary depression in the next decade, if not by the end of this decade. The economy will "grow" in nominal terms, but when discounted for inflation, it will actually be in recession.
All of the so-called "growth" or "rebound" since 2002 has been debt based. We haven't really made anything of value. We just borrowed more money and spent, thus in the short term, it made the economic growth figures look great. Many home owners maxed out on cashing out their equity and now they are finding themselves with very unhealthy debt/income ratios and rising interest rates on their adjustable rate mortgages. This trend cannot continue. The only way to avert a short term catastrophic disaster to print more money, which in itself is extremely dangerous. If more money is printed, consumers may be able to pay their mortgages and hold on to their homes for awhile, but their standard of living will steadily decline and ultimately, they may still have to sell their oversized homes for something smaller so they can free up money to meet other expenses. But if there is a glut on the housing market, then they may not be able to get much for their homes anyway. It's a lose-lose situation all the way around.
Living within your means is about as basic of a principle you can have. When you live within your means, life is so much simpler and easier to handle. When you live beyond your means, it invites a whole host of problems that eventually become overwhelming.
I just wonder what it is about the baby boomers who went so hog wild on wanting so many material goods and spending way beyond their means. These unhealthy financial habits all seemed to take off during the 80's. It seemed to correlate so directly with electing Ronald Reagan. Sadly, the boomers' kids (Gen X and Y) have followed suit.
I'm really sick of...
Submitted by AmberCat on Tue, 07/18/2006 - 9:31am.
baby boomers' "bad habits" being blamed for everything. The fact is that many of my generation are caught between paying for kids' college and parents' nursing homes and trying to save for their own retirements,and have not made lavish salaries,ever (Schoolteachers, anyone?) Most of the people I know live in modest, ramshackle homes. Sure, I know there are some people who take what money they have and buy an overpriced house they can't afford in Streetsboro or Medina to get away from...riff-raff. (A friend of mine in Medina says he's been in homes of the parents of kids on his son's soccer team and they've spent all their money on a house and have almost no furniture.) But that isn't most people.
Frankly, no one I know in the baby boomer generation are living extravagantly. And as salaries stagnate and inflation continues to skyrocket (forget "official" inflation figures- when your health care goes up double-digits every year, that's inflation), it's pious to talk about "living within your means" but it becomes less possible every year.
I think what you are talking about applies only to sliver of people who are in financial trouble. We already know that about 50% of those filing bankruptcy do so because of catastrophic medical expenses. Most of the others have lost their jobs. In the latter case, ok, it's possible some had unwise debt they expected to be able to pay but suddenly couldn't. In the former case, exactly how do you plan to "live within your means"?
Point well taken on the medical expenses
Submitted by joebu on Tue, 07/18/2006 - 2:05pm.
I have been aware that most backruptcy filers are in that situation because of circumstance that are no fault of their own.
When I wrote my post, I was thinking about all these McMansions that have propped up everywhere and the people who buy them, but really cannot afford it. They hardly put anything down and they string it out for 30 years or more. Worst yet, these people vote Republican because they want to think and act like they're rich. It seems like a repeat of the Gilded Age and Horatio Alger propaganda.
The bottom line is that in general, baby boomers, as a generation, were the first to exhibit this kind of behavior. I am not saying that all boomers are like this, but it sure seems like a significant portion that followed this trend - more so than any previous generation. Their desire for the good life all seemed to coincide with the conservative backlash we have seen since 1980, if not earlier.
Lastly, I think a lot of, if not most, blame should be on the creditors. They have been handing out way too much easy money. They used to have tight standards on who they gave a credit card to, the amount of credit, the length of the loan, etc. Somehow, they found that they make more money by preying on not-very-financially-astute people (and it's not necessarily their fault; some people are never taught) to have lots of easy credit and jacking up the interest rates on the high risk people (usually lower income people). Even though many of the debtors will default, the money the creditors make from the enormously high interest rates exceed the loss of principal. It's a shameful way to make money because it leaves so many people out on the streets.
Well, financial education
Submitted by AmberCat on Tue, 07/18/2006 - 9:22pm.
is something our next state treasurer Rich Cordray is pushing as one of his main campaign platforms. But how can he ever hope to compete with someone who has endorsments from a half-dozen right-to-life groups!!!
Sure are a lot in the Columbus area