Debt Free In a Collapse, Why?

[turbo6bar]

Originally Posted by Z-man

The only flaw in that logic is this: the banks don't want your possessions - they want your cash. They would rather you keep your car and get a job in order to pay them the cash back which they loaned you.

Those in power will try to stay in power.

As mentioned before, the Great Depression was closest we've been. Those who were liquid, solvent, and had capital, we're hurt the least. However, in today's segmented economy (less focused on subsistence), having capital isn't enough. One must think about being well-rounded. Being solvent and capable is sound no matter what the economy is doing. Why stray from what works?

[Mr_Wizard]

Quote de Mr_Wizard

Wow doom and gloom. Merry F'n Christmas

Doom and gloom? Yes, if you are not ready for it. Otherwise you just deal with it!

Hate to tell ya no matter how much anyone thinks they "prepare" youre still gonna be f'ked. No one is prepared for this no matter how ready they think they are.

[jyl]

Currently the economy (US and world) has a substantial output gap (factories producing well under capacity) and demand gap (demand for goods well below potential supply). That includes commodities e.g. energy. And, while governments (US and world) are pursuing stimulative monetary policy, the private sector (banks) are more than offsetting that with tight lending policies. This is not a recipe for inflation. So I think that setting your personal finances up for hyperinflation is a bad idea. It's fun for the Gloomy Gus types to talk about, I suppose.

[Shaun @ Tru6]

I continue to be amazed at the level of crazy on this board.

[M.D. Holloway]

Originally Posted by Crowbob

...Why bother being debt free? ...

Because at the end of the day, a true measure of a man is to pay his way and earn his keep - debt is a nessecary evil in our society but should be kept at a very bare minimum. The reason the country is in the shape it is in is because too many people think that they are entitled to all sorts of 'stuff' they didn't work for and will leave for the future to figuer out.

There is no better feeling than working for something and earning it - credit and debt allows us to have without the effort to earn it.

[turbo6bar]

Originally Posted by Mr_Wizard

Hate to tell ya no matter how much anyone thinks they "prepare" youre still gonna be f'ked. No one is prepared for this no matter how ready they think they are.

We need folks like you. You'll make excellent slaves for those with a plan.

I don't believe this will ever happen, though. If I accept meltdown as a likely event, I would have no motivation to work now. On the other hand, can't say I'm in a bad position, so I am not worried either way. Roll with the punches I will.

[onewhippedpuppy]

I continue to be amazed at the level of crazy on this board.

Easier to justify your gun purchases that way.

[Z-man]

Originally Posted by Shaun 84 Targa

I continue to be amazed at the level of crazy on this board.

That's it? That's all that's going to happen? Geez - if that's the case, I'm not worried - I thought it would be worse!

[Shaun @ Tru6]

Originally Posted by onewhippedpuppy

Easier to justify your gun purchases that way.

Nailed it Matt. What disturbs me most is some folks here want an apocalypse to occur just so they can shoot roving bands of "survivors that didn't plan." What are they called again?

Gotta say, love the hoped for sci-fi-fantasy, soap opera these guys dream up. Hollywood could use this untapped talent.

[rattlsnak]

If you're not in debt, you either make WAY too much money, or you live in a cardboard box.....

[Mr_Wizard]

Quote de Mr_Wizard

Hate to tell ya no matter how much anyone thinks they "prepare" youre still gonna be f'ked. No one is prepared for this no matter how ready they think they are.

We need folks like you. You'll make excellent slaves for those with a plan.

Bet you run outta ammo before me. I never stated that I had no plan. Just was pointing out that it is Christmas, then the paranoid patrol had to start up.

[Z-man]

Originally Posted by rattlsnak

If you're not in debt, you either make WAY too much money, or you live in a cardboard box.....

Actually, there's another option -- you live below your means.

I recently read an article on how to live like the wealthy do - and that theme - living below your means is very prevalent in most wealthy people's lifestyles. The article went on to state that the average value of a home of a millionaire in the US is $300,000. Not quite what one would expect. And the typical car such a millionaire drives is a Toyota - NOT a Mercedes or Lexus, or Bentley.

Wealthy people, IMHO, know how to live below their means, minimize debt, and maximize their money on proper investments. And that forumula works no matter what the financial level is.

-Z-man.

[herr_oberst]

Originally Posted by rattlsnak

If you're not in debt, you either make WAY too much money, or you live in a cardboard box.....

. . . or you live below your means and work hard to pay off big ticket items that you bought with credit.

I make a modest amount of money, live in a decent, well maintained home in a nice neighborhood, that I paid for in 9 years on a 30 year loan, my DD is an 18 year old Toyota that I maintain myself, I stash a few bucks away each month and still have enough discretionary to have a lot of fun.

And I still worry about an economic crash wrecking my lifestyle, but I am trying to mitigate the damage.

(beat me to it, zman, and no, I am not a millionaire, not even close)

[turbo6bar]

Originally Posted by Shaun 84 Targa

What are they called again?

This thread of more of a social experiment than a declaration of intent.

Originally Posted by Mr_Wizard

Bet you run outta ammo before me. I never stated that I had no plan.

If you have a bullet and a gun handy, you have more than I. However, what's to say your plan with a gun is any better than my non-plan. Mercenaries are cheap. Feed them. Give them shelter and women, and they will be committed. I'm not saying that is my plan, but how do you plan for the time when there are no rules?

ratsnake, read Millionaire Next Door.

[rattlsnak]

Originally Posted by Z-man

Wealthy people, IMHO, know how to live below their means, minimize debt, and maximize their money on proper investments. And that forumula works no matter what the financial level is.

-Z-man.

Yeah, that works well for millionaires, because 'living below their means' equals putting food on the table and their kids through college, etc... So what does it mean when you don't have it to start with and have to pay the electric bill with a credit card every month so your power doesn't get turned off? Sooner or later you get into a serious hole but not by spending frivilously.

Point is, you guys always think everyone who is in debt got there because of careless spending or 'wanting it now sydrome', but truth is, most people get there trying to maintain essential living things.. (not talking about the house flippers who got stung when the market collapsed, etc..)

Also, alot of you guys are older.. Simply put, my parents dont have any CC debt either, sorry, but life was just not as expensive then as it is now.

but this hits close.. I have a good friend who lost his wife, has three kids and is basically a slow sinking ship financially. He is getting alot of support, but he just filed chapter 7 finally. Hopefully, he can be alright and start over once all those debts are erased. What did he do that was so wrong?

[mca]

Originally Posted by rattlsnak

most people get there trying to maintain essential living things

Sorry, but I don't believe that for a second. Most people get into debt by living beyond their means or by being ignorant (not understanding how to manage finances - not the same as being "stupid" by the way).

I absolutely have sympathy for those that can't put food on the table and keep the lights on. In such situations it is my belief that the Church and community should provide assistance. Sad situation.

[The Gaijin]

Originally Posted by rattlsnak

....

Also, alot of you guys are older.. Simply put, my parents dont have any CC debt either, sorry, but life was just not as expensive then as it is now.

but this hits close.. I have a good friend who lost his wife, has three kids and is basically a slow sinking ship financially. He is getting alot of support, but he just filed chapter 7 finally. Hopefully, he can be alright and start over once all those debts are erased. What did he do that was so wrong?

That is the quote of the year! Expenses have always been out there..



As for your friend, I am sorry. He may have run up many bills caring for his wife, or maybe their lifestyle was based on their combined income. We don't know the details, but odds are he did nothing wrong. Insurance is important when you have kids. Otherwise, chapter 7 exists and they should be OK in the long run.

[tabs]

The USA is now climbing above the 80% of GDP in debt levels and within a few short years will be above the 100% of GDP in Debt. Japan is currently in the 100% + territory.

World population will sooner or late asorb that extra industrial capacity and commodities...however that doe not mean a reduced unemployment rate as there are more people with the same number of jobs.

There will be rumblings and crisis before the big meltdown...

At some point those lending money to the USA will cease to do so, or they will gradually reduce their exposure..which is already happening...

This means the USD will slowly be devalued, gold will climb higher and US interest rates will go higher as the US govt will have to pay a higher interest rate to keep investors buying our debt. Commodity prices in general reflect industrial utilization, and should remain relativily stable so long as industrial capacity utilization remains weak.

The devaluation of the USD is negative in the sense that ANYTHING imported is going to become very expensive as to be unaffordable including enrgy prices. However much of what Americans consume daily is produced right here...so those costs will not skyrocket except for the energy/commodity component of the product that is imported.

Interest on Debt is going to continue to increase as a % of GDP. If interest rate should spike either taxes or services/entitilment s will have to be cut.

The US is finding itself in a condrum in that anyway it moves it is finding a negative unintended consequence at the end of the Rainbow. What we are seeing is inertia in the economy. If one raises taxes or goes into debt one slows economic growth which then decreases tax revenues further.

[jyl]

I don't agree that a declining USD is overall negative. It is more complicated than that.

A declining USD has both positives and negatives.

The negatives are oft-discussed - higher import prices for Americans, lower local currency returns for foreigners investing in USD-denominated assets.

The positives are usually overlooked - American-made goods and services are more competitive internationally, which is good for American export businesses and thus for the balance of trade.

It is pretty obvious that the US government wants the USD to decline, in order to boost the competitiveness of American exports. When the US government gives lip service to "a strong dollar" but conspicuously does nothing about it, thus implicitly permitting FX traders to continue betting against the USD, you are seeing a competitive devaluation. Driving interest rates down and competitively devaluing the currency are, combined, a strong stimulus. This isn't new, it has been done by past governments.

In theory, foreign investors might desire higher US interest rates to compensate for the negative FX return from the declining USD, as tabs says. So far, they don't appear to be acting on the desire, not with US interest rates as low as they are. Investors are still risk-averse, certain US-denominated assets are seen as safe havens, and the motivation to seek higher safety still trumps the motivation to seek higher return. Dubai World's default is helpful here.

Note that this FX return factor will motivates foreign investors to demand higher US interest rates only so long as the USD is declining. If the USD is stable, whether at a low or a high level, then the return from FX is neutral and no longer a factor in interest rates.

The decline in the USD is toughest on the Europeans and Japanese. Not only are their companies' at a disadvantage since their costs are in increasingly expensive EUR and JPY, they are also faced with even more competitive Chinese prices since the RMB is still being managed to the USD.

[mca]

Originally Posted by tabs

The US is finding itself in a condrum in that anyway it moves it is finding a negative unintended consequence at the end of the Rainbow.

Try this move .... reduce taxes, increase domestic production and alleviate some of the corporate regulations so that they are encouraged to keep business here.

What would be a negative unintended consequence here? (this isn't a rhetorical question)