Interesting article on credit crunch vs debt crunch

Discussion in 'Politics & World News' started by dante, Jan 7, 2008.

  1. dante

    dante Unabomber

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    and why the current government stimulus/rate cuts are doing, well, nothing.

    basic upshot is that we're in debt up to (and past) our eyeballs, and having access to credit isn't going to do anything about that debt that we have... makes you wonder how we (as a people) are ever going to pay all that off, and keep the economy chugging along in the meantime.
     
    #1 -   Jan 7, 2008

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  2. LordOpie

    LordOpie MOTHER HEN

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    I agree that the issue is one of debt. After all, the US as a whole has more debt than assets for the first time ever. It's a serious problem that begins and ends with the cost of the Iraq invasion.

    That said, the extra liquidity might not be as effective with regards to math, but it's huge with regards to consumer confidence. The recovery will be slow and painful... anything else might collapse the system.
     
    #2 -   Jan 7, 2008
  3. X3pilot

    X3pilot Texans fan - LOL

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    Yep, and for folks like me and my wife who have no car payments, house paid off, no credit card debt and no loans outstanding, it doesn't pay to be fiscally responsible when the federal government comes along and bails everyone that was fiscally irresponsible out. My opionion, the economy needs to bust right now. It will be painful, but lowering interest rates to promote more debt is prolonging the suffering.


    Easy for me to say, huh?
     
    #3 -   Jan 7, 2008
  4. Silver

    Silver find me a tampon

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    To this point in time, there hasn't been a bailout, unless you consider cutting the fed rate a bailout of the banks.

    There will be no bailout to the poor saps on the bottom of the pyramid. There never is.
     
    #4 -   Jan 7, 2008
  5. LordOpie

    LordOpie MOTHER HEN

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    Are you willing to pay the personal price for such action?
     
    #5 -   Jan 7, 2008
  6. dante

    dante Unabomber

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    Dunno. My feeling after reading that (and similar) article is that easier credit as fine as long as it's used to fuel growth... The housing boom pulled the country out of recession in the early '00s, because easier credit allowed people to build/buy homes, which in turn raised the value of the homes, creating (artificial?) wealth. People used that wealth to improve their homes (spending money and hiring people) or to p!ss it away on depreciating assets like cars, tvs, etc, the majority of which were built overseas. Now that house prices are declining (and depreciating assets keep depreciating), people's extra wealth is just... gone. All I heard the last 5 years was that the reason for the continued growth was "The American Consumer". If The American Consumer is tapped out, are lower interest rates really going to help? It might allow them to squeeze a *little* more of their equity out of their homes, but if they're already making high monthly payments I'm wondering where the extra wealth is going to come from.

    Then again, I've been feeling pretty negative about the economy lately... Might be the weather out here. :)
     
    #6 -   Jan 7, 2008
  7. BurlyShirley

    BurlyShirley Rex Grossman Will Rise Again

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    ...could you explain what you mean by this? The "bust" part? What are the everyday implications of something like that? Are you talking "bust" like Great Depression?
     
    #7 -   Jan 7, 2008
  8. Stray_cat

    Stray_cat Monkey

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    Hmm agreed. Accessing more credit when your deep in it, just puts you closer bankruptcy. It is true the real-estate industry fueled the economy using low interest loans in the past, but it crashed even harder because of those loans. I've heard some really terrible stories from people with allot of money tied up in those loans. My opinion is that the greater portion of America has been living above its’ means for far too long. We need to find other ways to fuel the economy other than borrowing money.
     
    #8 -   Jan 7, 2008
  9. LordOpie

    LordOpie MOTHER HEN

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    Anything short of a slow recovery using tools like the Fed rate, bailouts, continued domestic spending would be another Great Depression.

    People like to pretend that they're insulated, but they're not.
     
    #9 -   Jan 7, 2008
  10. X3pilot

    X3pilot Texans fan - LOL

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    Let me rephrase bust..poor choice of words. I think maybe reset may be a better word for what I'm thinking. In essence, we cannot continue to prop up a recession headed economy by continuing to lower interest rates to promote spending. Lowering interest rates devalues the dollar on the global market, artifically inflating prices for consumer goods and commodities traded globally. (ex. $100 oil not really $100 oil but compensated for devalued dollar)

    Also factor in that core inflation reporting does not include energy and food prices and that over extends the general economic outlook. How could the 2 most expensive and closely tied purchases by Americans NOT be reported in the inflation numbers.

    From my very limited knowledge of finace, you can't just print money, it has to be backed by bonds, T bills, etc. (in the old days, gold) So how can flooding the economy with what amounts to fake money help, other than to prolong the inevitable.

    As for living with the consequences, I rememember the Carter days of W.I.N. Whip inflation now, high gas prices, and what looked like today's economy. There has to be a balance and yes, I'm willing to live with the economic fallout when the stock market goes down and the floor falls out from all the investment/speculative markets. My 401 K will die along with it.

    is reset a better word?
     
  11. X3pilot

    X3pilot Texans fan - LOL

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    I can't support the mortage freeze and what amounts to a bailout of poor finacing choices. I bought in 2005 and took a 3/1 arm, but paid it off in 2 years (albeit with funds from previous house sale) but I live in a development in PA full of NY/NJ people that could not have afforded the houses they're in, much less qualified for traditional finacing, with out interest only, 3/1, sub prime loans. But they took the savings from paying less tax in PA and what they made on home sales in a booming market and used the cash to buy crap to fill up their new McMansions. (Yes, so is mine) and now that the loans are resetting, they should get a bailout? Sure, a lot of it was predatory lending but the buyer still has to assume some liability. Caveat emporer or something like that?

    Yes, by not bailing them out, some people will lose their homes, but there has to be a lesson learned in all this...

    harsh, I know, again, easy for me to say from my position..
     
  12. Silver

    Silver find me a tampon

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    Yeah, but it's not a bailout. It's a basically a voluntary freeze on rates, which is helping out the banks just as much as it is helping out the borrowers right now.

    I agree that horrible decisions were made, but you can bet your ass if a bailout comes, the ones who made the loans are going to be walking away with the majority of taxpayer money.
     
  13. X3pilot

    X3pilot Texans fan - LOL

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    Oh, no doubt! I know the Guvmint would have never thought about this if it didn't serve big money F.O.S's accounts...I think I'm just frustrated over the lack of accountability and some of the bitter old man that thinks about how I worked my ass to do the right thing and how it doesn't pay to work hard...pity party over...

    F.O.S.*

    Freinds of Shrub's
     
  14. LordOpie

    LordOpie MOTHER HEN

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    Your description of reset is still too dangerously close to "bust".

    If Bill Clinton and his Admin could have another 8 years, I'd say they could "fix" the immediately problem by 2016... but for those who advocate a 'reset' of America's mindset, yes, we do need to lower our standard of living voluntarily or the global economy will do it for us.
     
  15. SPINTECK

    SPINTECK Turbo Monkey

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    Call me cynical, but the world players don't care about us and unless you have millions or even hudreds of millions, the stimulus package is not to insulate you. In fact this is the first time since the 19th century that americans have a lower standard of living than the british. The middle class is working harder for money that is worth less. This is for the Dividend holders of global companies.

    I'm actually very impressed that the recent changes were to help actual homeowners with locking rates, rather than the past 60-80 billion to help the banks and devalue our dollar.
     
  16. dante

    dante Unabomber

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    actually, the rate freeze is poised to help you the most... if your neighbor can't pay the mortgage on his $500,000 house and is forced into foreclosure (along with 20 other houses on your block), your house value just went from $500k to $300k. why would people ever buy your house (the only thing that determines what a house is worth is what people are willing to pay for it) when they can pick up one of the foreclosed ones from the bank for $250k (or $200k, or $175, etc)?

    studies have shown that for ever foreclosure on the block, your house just went down a certain percent (10%?).

    the thing I can't get away from is that housing prices have DRASTICALLY outstripped people's ability to pay for them... as long as people can't afford houses (whether the ones they're in or the one's they're looking to buy) the housing market isn't going to improve (or worse, it'll fall to the point where people are able to afford them again). until wages outpace cost of living increases, I don't see people as having the ability to keep this economy going...
     
  17. Toshi

    Toshi Harbinger of Doom

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    i agree with the above. supporting this is this line from the article that the OP posted:

     
  18. X3pilot

    X3pilot Texans fan - LOL

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    Great point, I had let that point slip to the back of my mind. My house has indeed slipped some in value, but as 2008 rolls on, I expect to see more foreclosures in my area, so we're just going to sit tight. A little equity is beeter than none, I suppose.
     
  19. fluff

    fluff Monkey Turbo

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    Who do you think should be accountable, the lender or the borrower? If you asked me for a $100k loan and I either lent it without security or secured it on a property worth $150 at current rates then you are unable to pay and your property is worth only $50k, who should take the hit?

    And don't be bitter, get all the unsecured lending you can get your hands on and get to be part of the great insolvency bailout instead*.

    *On no account should this be confused with advice, especially advice of the good variety.
     
  20. X3pilot

    X3pilot Texans fan - LOL

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    If there was a plausible way, they both should be held accountable. But how can you determine the greater fault? I can understand the people wanting to buy a home and lower interest rates helped a lot of those folks get homes. My issue is with the ones who went over the top and knowingly went for more house than they knew they could afford. On the other hand, greedy assed banks and lenders are offering up the drug of choice (easy money) and there are no laws against rampant consumerism or stupidity as far as I know.

    I'm still utterly schocked to hear Bush say our ecomony is still "basically stable" and that free enterprise (spending money) will make it all better.

    In the end, why should we expect the average consumer to pay their bills on time and in full when our leaders have failed to do that the last 7 years, driving up massive debt and charging it off to the future generations?
     
  21. BurlyShirley

    BurlyShirley Rex Grossman Will Rise Again

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    ...one thing I do know about this is that, with all these foreclosures, alot of friends of mine (mid-20's young professionals) are buying homes with ease...my family included. Im not sure if this is a national phenomenon or not, but with the banks unloading these properties, investors (for rentals and flips) and lower-income (but still with good credit + jobs) buyers are finding great deals. This probably doesnt help the economy alot now, but having a low mortgage is going to make the future alot more managable....especially as the baby boomers start to retire and people of my generation begin to quickly climb the financial ladder as more prime, professional jobs come available.
    ...of course, if it all goes to hell right now, who knows, but I dont think the news is all bad.
     
  22. X3pilot

    X3pilot Texans fan - LOL

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    That is a good uptick in a bad situation, as long as the buyers are sticking with more traditional finacing, or else it's going to be an endless cycle...
     
  23. BurlyShirley

    BurlyShirley Rex Grossman Will Rise Again

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    Well, I dont think anyone is dumb enough to take out an "adjustable rate" mortgage right about now, and I doubt the banks are giving them out either, given the current situation....although I could be wrong. I certainly didnt, and would hope none of my friends were stupid enough to.
     
  24. fluff

    fluff Monkey Turbo

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    Personally I think it is beholden to the lender to be more responsible with their money and who they lend it to. If they were to carry the risk then they would be more responsible about their lending, rather than relying upon someone else to be so. I would love to see the banks held to account, especially regarding secured lending.
    Spending of money is fairly essential to growth so there is a grain of truth in there, the issue is whether an economy built on large amounts of debt is ever stable. Were the US to apply the same rules to itself as it has to others (via the IMF) then they'd have applied the brakes long ago.
    It does make you wonder does it not. Then again what idiots would re-elect a man who presided over such the slide into massive debt?
     
  25. Westy

    Westy the teste

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    I've been commenting and ranting about such loans for a good year now. It turns out the dip**** I share an office with not only listened to my rants but went out and got one too. He is now having to sell his house because he can not make payments. Now he has some ridiculous idea of doing some seller assisted financing where he actually takes the loan for some dirt bag who can't get their own. He always claims to have bad luck, when I mentioned it might have more to do with poor decisions he wouldn't talk to me for a week, awesome.
     
  26. BurlyShirley

    BurlyShirley Rex Grossman Will Rise Again

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    ...well that's retarded. He is basically co-signing for someone he doesnt know?

    Anyway, "adjustable rate" mortgages seem like a dumb idea to begin with...or at least the lender should make sure the borrower is financially capable of meeting payments at however high the rate might go....they both end up losing if the bank has to foreclose.
     
  27. Westy

    Westy the teste

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    The guy basically is retarded. He has been laid off 5 times in the past 8 years. It would seem like he just has bad luck but it turns out he never show up for work. He will always be the first guy that gets canned when times get tough. If our business gets bad he will be the first person to go.
     
  28. fluff

    fluff Monkey Turbo

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    It's always nice to know that someone is in the queue ahead of you, although he will get the better pick of jobs if you end up getting canned in a later round of redundancies also. Not that I want to depress you.
     
  29. Westy

    Westy the teste

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    At this point I wouldn't be all that upset if I got canned. I've got a nice fixed rate mortgage with monthly payments less than a one bedroom apartment goes for around here. I can live off of my savings for quite a while.
     
  30. fluff

    fluff Monkey Turbo

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    It's been a while since I've been a grammar nazi but I hold you to high standards as you've got more smarts than most around here. Therefore I have to tell you that the sentence above caused me to endure mental anguish for several nanoseconds. Off of?
     
  31. Westy

    Westy the teste

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    Sorry, still got a good buzz going from last night.
     
  32. LordOpie

    LordOpie MOTHER HEN

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    "off of" is accepted usage in the US.

    Just sayin'.
     
  33. BurlyShirley

    BurlyShirley Rex Grossman Will Rise Again

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    i thank yer missin' sum commaz in der!
     
  34. fluff

    fluff Monkey Turbo

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    Not at all, all required commas are present and correct.
     
  35. fluff

    fluff Monkey Turbo

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    The English language is a thing of beauty, why must you mangle it so?
     
  36. BurlyShirley

    BurlyShirley Rex Grossman Will Rise Again

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  37. LordOpie

    LordOpie MOTHER HEN

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    We say the same thing about teeth.

    :D <--
     
  38. fluff

    fluff Monkey Turbo

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    A comma is not required after "Nazi" and before "but" as it does not join what would normally be two separate sentences;

    "Use a comma + a little conjunction (and, but, for, nor, yet, or, so) to connect two independent clauses, as in "He hit the ball well, but he ran toward third base."

    Contending that the coordinating conjunction is adequate separation, some writers will leave out the comma in a sentence with short, balanced independent clauses (such as we see in the example just given). If there is ever any doubt, however, use the comma, as it is always correct in this situation.

    "Use Commas With Caution

    As you can see, there are many reasons for using commas, and we haven't listed them all. Yet the biggest problem that most students have with commas is their overuse. Some essays look as though the student loaded a shotgun with commas and blasted away. Remember, too, that a pause in reading is not always a reliable reason to use a comma. Try not to use a comma unless you can apply a specific rule from this page to do so.

    Concentrating on the proper use of commas is not mere form for form's sake. Indeed, it causes writers to review their understanding of structure and to consider carefully how their sentences are crafted."
    http://grammar.ccc.commnet.edu/grammar/commas.htm

    Nor must you use one after "therefore" in the second example: http://www.northland.cc.mn.us/owl/comma_rules.htm

    Sorry, you gotta go back to school.
     
  39. BurlyShirley

    BurlyShirley Rex Grossman Will Rise Again

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    You are wrong on the first one. They would normally be two seperate sentences if you hadn't joined them with "but". Sorry.
    And "therefore" is written in such fashion that it is indeed emphasized. You are wrong fluffo.
     
  40. X3pilot

    X3pilot Texans fan - LOL

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