US consumers climbing back into debt hole, but quality is higher.

[TheGhostAgent]

Liaze, I work in the client side of the financial field... I know... I went into the career with full good intentions of helping people get to retirement safely, protecting their assets, their family, etc. Little did I know, people don't give a flying fuck, think the govt will and should take care of them, and give two shits about their own future or have lack of any motivation to improve their situation. And worse yet, think it won't happen to them. Suffice to say, this career has opened my eyes into coming upon a single conclusion. Many of people's financial woes are of their own doing. Nothing makes me die inside more and quicker than the response I get, "I don't care about retirement, they're just going to take our money and I want to get as much as I can from them instead through social security."

Unless we change the whole cultural mindset of personal finance, we'll continue to perpetuate economic bubbles and dig ourselves into a hole we cannot get out of. Maybe I'm crazy to think we can be better. Maybe I'm simply too optimistic to think we can learn and I'm the lone sailor trying to right the ship. I do know this though. It sure as hell beats following everyone else off the cliff.

[Kivimetsan]

Liaze, I work in the client side of the financial field... I know... I went into the career with full good intentions of helping people get to retirement safely, protecting their assets, their family, etc. Little did I know, people don't give a flying fuck, think the govt will and should take care of them, and give two shits about their own future or have lack of any motivation to improve their situation. And worse yet, think it won't happen to them. Suffice to say, this career has opened my eyes into coming upon a single conclusion. Many of people's financial woes are of their own doing. Nothing makes me die inside more and quicker than the response I get, "I don't care about retirement, they're just going to take our money and I want to get as much as I can from them instead through social security."

Unless we change the whole cultural mindset of personal finance, we'll continue to perpetuate economic bubbles and dig ourselves into a hole we cannot get out of. Maybe I'm crazy to think we can be better. Maybe I'm simply too optimistic to think we can learn and I'm the lone sailor trying to right the ship. I do know this though. It sure as hell beats following everyone else off the cliff.

Perfect solution - End the bailouts and quit the subsidies.

End the Fed.

It may look nasty, but its much better to end it now, than to drag it on and risk ultra nationalism rising in Europe again.

[TheGhostAgent]

Perfect solution - End the bailouts and quit the subsidies.

End the Fed.

It may look nasty, but its much better to end it now, than to drag it on and risk ultra nationalism rising in Europe again.

Ripping the band-aid right off... unfortunately it can't go that way even though it may seem the most "efficient and quick", but it is simply not practical. It would have to be done in stages to insure a calm transfer.

[Zecora]

The business cycle is NOT a bad thing.

By your standards. You should perhaps ask some of those directly touched by it if they agree...unless you feel that as long as the almighty market is free, it doesn't matter that people suffer? Or am I misreading you?

[Gheld]

By your standards. You should perhaps ask some of those directly touched by it if they agree...unless you feel that as long as the almighty market is free, it doesn't matter that people suffer? Or am I misreading you?

Anybody who lost due to making stupid, greedy, uninformed investments in the 2008 crash deserved what they got. <---- period.

[paralleluniverse]

So are wages going to match hyperinflation?

1. The US will never have hyperinflation. The Fed has successfully controlled inflation for over 30 years.

2. Despite this, higher inflation (say 4-5% instead of the current 2%) is GOOD, because it erodes the real value of debt, thus stimulating the economy.

3. To see this, take the extreme example of hyperinflation. You owe $200,000 on a house, hyperinflation happens tomorrow, all prices and wages increase by 1000000%, then you can just collect your paycheck and walk into the bank with a wheelbarrow of cash to pay off your debt, so you are no longer debt-constrained.

4. Of course wages will increase in line with inflation, if they didn't then consumers can't afford to buy products, so product makers would lose sales and lower prices.

---------- Post added 2012-07-12 at 04:12 PM ----------

Every time the government takes out another loan from the Federal Reserve, the purchasing power of your dollar goes down.

US public sector debt is BAD. Very, very bad.

The purchasing power of your dollar goes down when inflation goes up. But printing money and more than doubling the monetary base does not cause inflation while in a liquidity trap.

Your bullshit Austrian theory continues to be proved wrong by QE1, QE2 and 2% inflation.

---------- Post added 2012-07-12 at 04:17 PM ----------

bahaahhahaha you really falling for FED lies? Ok leaving now...

Also people borrowing money isn't always a positive thing, look at the housing bubble?

You seriously take FED policy seriously? Man no wonder the global economy is in the shitter when people believe that garbage.

Artificially low interest rates will just spread Mal-investment like cancer again, as it did in 08.

---------- Post added 2012-07-13 at 01:39 AM ----------



ROFL this ^_^

Yeah goodluck finding a job in a dead market, especially with a libtard arts degree. HAHAHA

Funny coming from an Australian, as the RBA has successfully done monetary policy for decades, in line with their duel mandate of low employment and 2-3% inflation.

As a result, the unemployment rate is 5.2%, one of the lowest in the world, there was no recession from the GFC, and inflation is within the target range.

[Daelak]

Oh please Laize, Show me how pre-ww2 Germany and zimbabwe compare to 2012 US.

I'm sorry I didn't see the "not" in your not vulnerable to hyperinflation, my apologies.

[Zecora]

Anybody who lost due to making stupid, greedy, uninformed investments in the 2008 crash deserved what they got. <---- period.

On that I agree, however, I was hardly talking about the inverstors. Small-time savers, employees, people who lost their homes, everyone who go without a job due to the economic downturn...these are the people who suffer from what Laize deem "NOT a bad thing", and they are far more in numbers than those few people who shuffle in wealth.

[Deleted]

On that I agree, however, I was hardly talking about the inverstors. Small-time savers, employees, people who lost their homes, everyone who go without a job due to the economic downturn...these are the people who suffer from what Laize deem "NOT a bad thing", and they are far more in numbers than those few people who shuffle in wealth.

The people who lost their homes should never have had them to begin with. They got to live like Kings and Queens for a while, while politicians and Wall street pushed the scales in their favor.

And investing always has some risk.

[Zecora]

The people who lost their homes should never have had them to begin with. They got to live like Kings and Queens for a while, while politicians and Wall street pushed the scales in their favor.

And investing always has some risk.

And the people who have had their homes for decades, and are faced with rising costs and unemployment from those "Not bad" market crashes? The people, who suffer through no fault of their own?

[BLCalliente]

1. The US will never have hyperinflation. The Fed has successfully controlled inflation for over 30 years.

2. Despite this, higher inflation (say 4-5% instead of the current 2%) is GOOD, because it erodes the real value of debt, thus stimulating the economy.

3. To see this, take the extreme example of hyperinflation. You owe $200,000 on a house, hyperinflation happens tomorrow, all prices and wages increase by 1000000%, then you can just collect your paycheck and walk into the bank with a wheelbarrow of cash to pay off your debt, so you are no longer debt-constrained.

4. Of course wages will increase in line with inflation, if they didn't then consumers can't afford to buy products, so product makers would lose sales and lower prices.

I lol'd.

Yeah, of course wages will increase with inflation.

Of course.

Except that all historical data for the last 50+ years shows they haven't.

[TheGhostAgent]

And the people who have had their homes for decades, and are faced with rising costs and unemployment from those "Not bad" market crashes? The people, who suffer through no fault of their own?

Like I said before, out in the field, I'd say more than 90% of the problems are the people themselves. I see more self-inflicted financial disasters due to poor planning, lack of planning, refusal of planning, than an actual unforseen event that happened due to unfortunate circumstances that pushed them over the edge. People who do plan, would be well equipped to mitigate the damage brought on by unforseen events. There are 2 spectrums and reasons for these mass foreclosures.

1 - Not just sub-prime mortgages themselves, but the biggest financial contributing factor is due to negative equity. Fall of the housing prices vs the mortgage they hold. Compounded on adjustable rates where the interest rate hike pushed them over the edge in affordability. People buying these outlandish houses without a down payment. The only acceptable unforseen event that they cannot properly fully mitigage, is unemployment. Even then, cash flow issues could have been cushioned if they had savings and saved up to 3-6 months of their annual income. Some would say to go as far as a year. And what is the U.S.'s savings rate? Oh yeah, negative.

Article backing this up: http://online.wsj.com/article/SB124657539489189043.html

2 - Medical reasons. Be it from an accident and or illness that puts them out of work. Costs of medical care that completely saps their resources and ability to pay for the mortgage or taking a home-equity loan only to default. Believe it or not, 49% of people who say the reason they foreclosed, was because of medical reasons. Here is an article and research backing it up.

http://law.cwru.edu/studentLife/orga...0Article~1.pdf

Now how does this circle back around to being the consumer's fault?

1 - Their spending and savings habits. People are simply spending more than they earn, digging themselves into a cycle of debt. They severely lack any savings discipline and refuse to save for themselves in the future, be it retirement, buying something they want, etc. The whole culture is all about consumption, living in the now, getting the next new best gadget and gizmo. This obscene financial illteracy is perpetuated by popular media (Im looking at you CNBC/MSNBC/FOX/etc), enabled by piss poor parenting, and poor teaching (out of my ENTIRE academic career of the past, there has only been 2 teachers, 1 professor, 1 adjunct professor/big time attorney that taught anything real and did their best to prepare these young minnows to be financially independent and literate).

2 - Their lack of foresight and distaste for "insurance". You'd be shocked at how ridiculous it is for me to have to CONVINCE people as to why insurance is an important part of everyone's financial foundation. If 49% of the people that foreclosed due to medical expenses actually insured against it, be it disability insurance + health insurance, or death of a bread winner via life insurance, all of those foreclosures would not have had to happen ever. Of course, people are short sighted and only see it as an expense and carrying through life with the mind set of "oh it will never happen to me".

In the past, prior to taking this career path, I genuinely thought people's financial woes were due to events out of their control. The more I talk to people nowadays, the more firmly I believe people are f'ing retarded, irrational and think nothing bad will EVER happen in their life time or better put, denial. So are these events the fault of the people themselves? I am pressured to almost say, abso-fucking-lutely YES.

[BLCalliente]

The people who lost their homes should never have had them to begin with. They got to live like Kings and Queens for a while, while politicians and Wall street pushed the scales in their favor.

And investing always has some risk.

Owning your home = living like kings and queens.

Right.

[Daelak]

Like I said before, out in the field, I'd say more than 90% of the problems are the people themselves. I see more self-inflicted financial disasters due to poor planning, lack of planning, refusal of planning, than an actual unforseen event that happened due to unfortunate circumstances that pushed them over the edge. People who do plan, would be well equipped to mitigate the damage brought on by unforseen events. There are 2 spectrums and reasons for these mass foreclosures.

1 - Not just sub-prime mortgages themselves, but the biggest financial contributing factor is due to negative equity. Fall of the housing prices vs the mortgage they hold. Compounded on adjustable rates where the interest rate hike pushed them over the edge in affordability. People buying these outlandish houses without a down payment. The only acceptable unforseen event that they cannot properly fully mitigage, is unemployment. Even then, cash flow issues could have been cushioned if they had savings and saved up to 3-6 months of their annual income. Some would say to go as far as a year. And what is the U.S.'s savings rate? Oh yeah, negative.

Article backing this up: http://online.wsj.com/article/SB124657539489189043.html

2 - Medical reasons. Be it from an accident and or illness that puts them out of work. Costs of medical care that completely saps their resources and ability to pay for the mortgage or taking a home-equity loan only to default. Believe it or not, 49% of people who say the reason they foreclosed, was because of medical reasons. Here is an article and research backing it up.

http://law.cwru.edu/studentLife/orga...0Article~1.pdf

Now how does this circle back around to being the consumer's fault?

1 - Their spending and savings habits. People are simply spending more than they earn, digging themselves into a cycle of debt. They severely lack any savings discipline and refuse to save for themselves in the future, be it retirement, buying something they want, etc. The whole culture is all about consumption, living in the now, getting the next new best gadget and gizmo. This obscene financial illteracy is perpetuated by popular media (Im looking at you CNBC/MSNBC/FOX/etc), enabled by piss poor parenting, and poor teaching (out of my ENTIRE academic career of the past, there has only been 2 teachers, 1 professor, 1 adjunct professor/big time attorney that taught anything real and did their best to prepare these young minnows to be financially independent and literate).

2 - Their lack of foresight and distaste for "insurance". You'd be shocked at how ridiculous it is for me to have to CONVINCE people as to why insurance is an important part of everyone's financial foundation. If 49% of the people that foreclosed due to medical expenses actually insured against it, be it disability insurance + health insurance, or death of a bread winner via life insurance, all of those foreclosures would not have had to happen ever. Of course, people are short sighted and only see it as an expense and carrying through life with the mind set of "oh it will never happen to me".

In the past, prior to taking this career path, I genuinely thought people's financial woes were due to events out of their control. The more I talk to people nowadays, the more firmly I believe people are f'ing retarded, irrational and think nothing bad will EVER happen in their life time or better put, denial. So are these events the fault of the people themselves? I am pressured to almost say, abso-fucking-lutely YES.

Because all humans are irrational and horrible long term planners. So much for the rational agent theory of the markets.

[BLCalliente]

In the past, prior to taking this career path, I genuinely thought people's financial woes were due to events out of their control. The more I talk to people nowadays, the more firmly I believe people are f'ing retarded, irrational and think nothing bad will EVER happen in their life time or better put, denial. So are these events the fault of the people themselves? I am pressured to almost say, abso-fucking-lutely YES.

Yes, this had nothing to do with predatory lending practices. It's the consumers' fault exclusively.

[TheGhostAgent]

Yes, this had nothing to do with predatory lending practices. It's the consumers' fault exclusively.

Or require an IQ higher than that of a rock. Do you SERIOUSLY think you can purchase a $500,000 home with a $30,000 a year income? 0 down payment? Really? Do you need someone to tell you that you should only purchase things within your own income means? Do you seriously need someone to tell you that with an adjustable rate mortgage, that the rates may adjust to be higher in the future? Fuck, the term ADJUSTABLE is in the god damn contract! Does this absolve the bankers and mortgage writers their own responsibility of their predatory loaning and lax standards? Absolutely not, but they did not pull the trigger of the gun.

That would be equivalent of saying it is the gun smith/gun shop owner's fault for the person who shot themself with the gun they purchased. Seriously? People need to learn to take responsibility of their own decisions and actions rather than shelving it off to everyone else, portraying themselves as the victim.

[Tinykong]

Wages will rise with inflation...LOL.

I think a lot of people in this thread don't really understand how the Fed functions, or why fractional reserve banking doesn't work.

[Daelak]

Or require an IQ higher than that of a rock. Do you SERIOUSLY think you can purchase a $500,000 home with a $30,000 a year income? 0 down payment? Really? Do you need someone to tell you that you should only purchase things within your own income means? Do you seriously need someone to tell you that with an adjustable rate mortgage, that the rates may adjust to be higher in the future? Fuck, the term ADJUSTABLE is in the god damn contract! Does this absolve the bankers and mortgage writers their own responsibility of their predatory loaning and lax standards? Absolutely not, but they did not pull the trigger of the gun.

That would be equivalent of saying it is the gun smith/gun shop owner's fault for the person who shot themself with the gun they purchased. Seriously? People need to learn to take responsibility of their own decisions and actions rather than shelving it off to everyone else, portraying themselves as the victim.

Both parties are irrational because they are both humans. Irrational consumers irrationally thinking they can pay it, and irrational loan pushers who think they could sell these loans without repercussion.

[BLCalliente]

Or require an IQ higher than that of a rock. Do you SERIOUSLY think you can purchase a $500,000 home with a $30,000 a year income? 0 down payment? Really? Do you need someone to tell you that you should only purchase things within your own income means? Do you seriously need someone to tell you that with an adjustable rate mortgage, that the rates may adjust to be higher in the future? Fuck, the term ADJUSTABLE is in the god damn contract! Does this absolve the bankers and mortgage writers their own responsibility of their predatory loaning and lax standards? Absolutely not, but they did not pull the trigger of the gun.

That would be equivalent of saying it is the gun smith/gun shop owner's fault for the person who shot themself with the gun they purchased. Seriously? People need to learn to take responsibility of their own decisions and actions rather than shelving it off to everyone else, portraying themselves as the victim.

Good thing everybody in this country is as smart as you and I.

Oh wait, what's that? They aren't? Shit.


The mortgage companies gave out these predatory loans because there was absolutely no risk to them. They knew they were going to get paid by either completion of the mortgage, bundling the mortgage off and selling it to somebody else, or credit default swaps (thanks AIG!). They pushed as hard as they possibly could because they were making too much money and there was absolutely no downside. Should consumers have been smarter? Yes, except for the ones who aren't smarter. You know, almost all of them. The ones targeted by the predatory lending. If you don't know this, THIS IS WHY WE HAVE GOVERNMENT OVERSIGHT.

[Daelak]

Wages will rise with inflation...LOL.

I think a lot of people in this thread don't really understand how the Fed functions, or why fractional reserve banking doesn't work.

Uh, fractional reserve banking does work, its working right now, it's not some Austrian school crack-pot theory that has never been tried.