Debt Free In a Collapse, Why?

[Shaun @ Tru6]

Originally Posted by jyl

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.

I am now exporting to Japan, South Korea and Kuala Lumpur with a significant increase in sales. I'll be focusing on Europe and Russia for fall 2010.

[pwd72s]

Originally Posted by rattlsnak

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

Wrong on both counts. Sit yourself down some day...figure out exactly how much you fork out in interest alone. Then ask yourself just how badly you "need" the things you are paying interest on.

I learned long ago that financial happiness is NOT paying interest while being in a position for others to pay interest to you.

[tabs]

Originally Posted by 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.

And exactly who is buying that US debt....ahh did you say the FED...thus keeping the interest rates low.

Watch the bid to cover ratio on T Bill sales...

AND why yes a devalued USD does help exports...however it also is a hidden pay cut for US workers as their USD dominated pay has less buying power.

[jyl]

It would be interesting to figure out how much of the average consumer's spending goes to things that are imported from countries whose currency is NOT pegged to the USD. China doesn't count, their currency is managed to the USD.

[Scuba Steve]

Originally Posted by pwd72s

Wrong on both counts. Sit yourself down some day...figure out exactly how much you fork out in interest alone. Then ask yourself just how badly you "need" the things you are paying interest on.

I learned long ago that financial happiness is NOT paying interest while being in a position for others to pay interest to you.

Pretty much. I see it like a thermo problem - you've got this much coming in so there can only be that much going out (output + savings anyway). And savings each month had better be greater than $0 in order to fully fund the IRA contribution each year. If that means eating in a lot or forgoing something, so be it.

If needs vs. wants are still difficult to handle, just annualize what things cost. That car payment just grew into something large, and all of a sudden it's a lot easier to grasp just what certain things cost over time. Same goes for interest payments.

[rattlsnak]

you guys are still missing the point.. what if there is not enough coming in to cover BASIC living expenses?

two parents working, 3 kids, making average pay, living well in their means, then ones loses their job and the other loses their life.

Gee, i wonder how you're going to pay the utilities bill? You put it on a CC thats how. Yeah, that REAL irresponsible..

Point is, once again, not ALL people in this situation have made poor or bad choices.. life happens to the good people also...

[onewhippedpuppy]

Originally Posted by rattlsnak

you guys are still missing the point.. what if there is not enough coming in to cover BASIC living expenses?

two parents working, 3 kids, making average pay, living well in their means, then ones loses their job and the other loses their life.

Gee, i wonder how you're going to pay the utilities bill? You put it on a CC thats how. Yeah, that REAL irresponsible..

Point is, once again, not ALL people in this situation have made poor or bad choices.. life happens to the good people also...

Of people that get into trouble with debt, you just described maybe 0.01% of them. Basically your statement is irrelevant. By its very definition, using debt is living beyond your means. If you could afford the purchase, you wouldn't borrow money for it, would you? Sadly, most Americans think they NEED two new cars, a nice house, LCD TVs, nice vacations, etc. Therefore they are using debt to cover their NEEDS. That's BS.

I grew up poor and spent most of my younger years working construction for low wages. I didn't have much, but I got by just fine. At the time I didn't even have a credit card, but I never failed to pay my bills. My wife and I got married and struggled for a few years, but we never carried a credit card balance. We were married in 2002, not exactly ancient history. But we have also never taken a fancy vacation, don't have fancy clothes or things, don't have new cars or a fancy house, etc.

As someone else said, read "The Millionaire Next Door". It will seriously change your perceptions about wealth and how it is attained.

[Westy]

Originally Posted by pwd72s

Wrong on both counts. Sit yourself down some day...figure out exactly how much you fork out in interest alone. Then ask yourself just how badly you "need" the things you are paying interest on.

I learned long ago that financial happiness is NOT paying interest while being in a position for others to pay interest to you.

This is the quote of the forum. Couldn't be more correct. We haven't paid interest in over 20 years (sans the home loan) and that's almost paid for. With the exception of 2, all of our married friends are in debt up to their a$$es with credit cards. It has been too easy to obtain, too easy to use, and now it's too easy to make deals for 30 cents on the dollar owed. This whole credit card abuse/scam gets me so riled I want a Jack. We pay our bills, we pay what we owe. .......eff it, I'm gonna go pour a Jack.

[rattlsnak]

Don't get me wrong, I get what everybody is saying and I agree but I have gone with this guy to the lawyers and the meeting with the US Justice Trustee and saw first hand what kind of people are in court for bankruptcy and I'm telling you it's 80 % people with bad situations like losing jobs, medical bills etc, only a few who were turned over to chapter 13 because of carelessness. I'm not talking about people like your friends who are in debt I'm talking about people in bankruptcy.
Sorry for the rant and going a little off topic. But I've seen it first hand recently and apparantly it's much higher percentage of people than you think.