# US "economic Armageddon" - when and how bad? **URL:** \ **Category:** Great Debates\ **Created:** [November 24, 2004, 2:19pm UTC](https://boards.straightdope.com/t/us-economic-armageddon-when-and-how-bad/276465 "2004-11-24T14:19:33Z")\ **Posts on this page:** 20\ **Page:** 1
**Author:** ![ElvisL1ves](https://avatars.discourse-cdn.com/v4/letter/e/5daacb/32.png) [@ElvisL1ves](https://boards.straightdope.com/u/ElvisL1ves)\ **Post date:** [November 24, 2004, 2:19pm UTC](https://boards.straightdope.com/t/us-economic-armageddon-when-and-how-bad/276465/1 "2004-11-24T14:19:33Z")
[Morgan Stanley’s chief economist](http://business.bostonherald.com/businessNews/view.bg?articleid=55356) has predicted that > [@](#): > > America has no better than a 10 percent chance of avoiding economic ‘armageddon.’’ > [@](#): > > Roach sees a 30 percent chance of a slump soon and a 60 percent chance that ‘we’ll muddle through for a while and delay the eventual armageddon.’’ The chance we’ll get through OK: one in 10. Maybe. > > In a nutshell, Roach’s argument is that America’s record trade deficit means the dollar will keep falling. To keep foreigners buying T-bills and prevent a resulting rise in inflation, Federal Reserve Chairman Alan Greenspan will be forced to raise interest rates further and faster than he wants. > > The result: U.S. consumers, who are in debt up to their eyeballs, will get pounded. His basis for thinking so? > [@](#): > > To finance its current account deficit with the rest of the world, he said, America has to import $2.6 billion in cash. Every working day. That is an amazing 80 percent of the entire world’s net savings. Sustainable? Hardly. > > Meanwhile, he notes that household debt is at record levels. Twenty years ago the total debt of U.S. households was equal to half the size of the economy. Today the figure is 85 percent. > [@](#): > > The dollar is hitting fresh lows against currencies from the yen to the euro. Its parachute failed to open over the weekend, when a meeting of the world’s top finance ministers produced no promise of concerted intervention. It has farther to fall, especially against Asian currencies, analysts agree. The Fed chairman was drawn to warn on the dollar, and interest rates, on Friday. So what’s the better alternative? > [@](#): > > Greenspan might instead deliberately allow the dollar to slump and inflation to rise, whittling away at the value of today’s consumer debts in real terms. Inflation of 7 percent a year halves "real’’ values in a decade. That’s just Econ 101, of course. There is a limit to how much a government can borrow before it has to resort to essentially printing more money to pay it off. It’s something we fiscal conservatives have been saying ever since Reagan ran up the debt (and blamed the Democrats). But you can’t fool Mother Nature. So how is Roach’s prediction wrong? What basis is there to believe that this is not the inevitable eventual result of the Republican’s practice of running up the national credit card? When do the loaners of the money run out and cut us off? Wasn’t ending inflation the best way there was to “let people keep more of their own money”? Where is that spectacular economic growth from cutting taxes on the wealthy? What else is left to do that can prevent a crash, and is there any way to convince the party in sole power to do it? ---
**Author:** ![AmericanMaid](https://avatars.discourse-cdn.com/v4/letter/a/e480ec/32.png) [@AmericanMaid](https://boards.straightdope.com/u/AmericanMaid)\ **Post date:** [November 24, 2004, 2:34pm UTC](https://boards.straightdope.com/t/us-economic-armageddon-when-and-how-bad/276465/2 "2004-11-24T14:34:06Z")
For a good discussion why don’t you check out this: [http://boards.straightdope.com/sdmb/showthread.php?t=287264](http://boards.straightdope.com/sdmb/showthread.php?t=287264) ---
**Author:** ![ElvisL1ves](https://avatars.discourse-cdn.com/v4/letter/e/5daacb/32.png) [@ElvisL1ves](https://boards.straightdope.com/u/ElvisL1ves)\ **Post date:** [November 24, 2004, 2:44pm UTC](https://boards.straightdope.com/t/us-economic-armageddon-when-and-how-bad/276465/3 "2004-11-24T14:44:47Z")
Thanks, but that discussion was more about if the economy will tank in the next few months from more immediate causes, and if there are short-term tools available to prevent it. Roach’s broader point is that it almost certainly will tank, resoundingly, but with a less-definite time scale, and that long-term tools to prevent it (such as balancing the budget) have been discarded. ---
**Author:** ![pantom](https://avatars.discourse-cdn.com/v4/letter/p/34f0e0/32.png) [@pantom](https://boards.straightdope.com/u/pantom)\ **Post date:** [November 25, 2004, 5:36am UTC](https://boards.straightdope.com/t/us-economic-armageddon-when-and-how-bad/276465/4 "2004-11-25T05:36:31Z")
IMO, we’re going through a reasonable repeat of the late sixties to the late seventies. We’re in the setup phase now. Something analogous to the ending of Bretton Woods in 1971 - probably a definitive ending of the dollar’s reserve currency status - is going to happen. After that comes - something. Last time it was inflation coupled with unemployment. This time, who knows? All we can say for sure is, it won’t be pleasant. The time frame is up for grabs too. James Grant, an amazingly literate guy who’s the editor of his own little rag, _The Interest Rate Observer_, called the timing of the dollar crisis “inconvenient”, because really there’s no way of knowing when. The BBC’s article on the subject today [had this interesting quote:](http://news.bbc.co.uk/1/hi/business/4037903.stm) > [@](#): > > “You never know what beat from a butterfly’s wing will send this thing into oblivion,” said David Gilmore of Foreign Exchange Analytics. Which is true. Short-term, the thing to look for would be a spike in interest rates accompanied by a continuing fall in the dollar. That would be an indication of actual flight from the dollar beginning in earnest. Meantime, over at _The Financial Times_ today, Martin Wolf ended an op-ed on this subject with this (subscription only, no link): > [@](#): > > What, then, is the bottom line? It is, first, that the current account deficit’s trajectory cannot be explained away by positive features of the US economy. It is, second, that a big real depreciation of the dollar is inescapable if the trend is to be changed. The world must stop pretending that what is inevitable can be wished away. The challenge is, instead, to manage the adjustment to the needed changes in the exchange rate, while sustaining activity. Adjustment is coming. Let us co-operate to make it as smooth as possible. It was one of the more disheartening things I’ve read in a while. However, there is no such thing as a dollar bull anymore. That probably means there’ll be a strong dollar rally very soon, because markets love to put egg on the faces of as many people as possible. What happens after that will be key, since that rally will give everyone a little breathing room and a little more time to figure out what to do. ---
**Author:** ![Rashak\_Mani](https://avatars.discourse-cdn.com/v4/letter/r/ea666f/32.png) [@Rashak\_Mani](https://boards.straightdope.com/u/Rashak_Mani)\ **Post date:** [November 25, 2004, 1:56pm UTC](https://boards.straightdope.com/t/us-economic-armageddon-when-and-how-bad/276465/5 "2004-11-25T13:56:10Z")
Sure looks like a scary and viable scenario… Still won’t a weaker dollar allow for more exports and reverse the trade deficit somewhat ? Interest rates are extremely low in the US… if they do go up a bit it shouldn’t be that bad… but eventually that means less real investment and more financial speculation. Inflation has been heating up so little… sure sign that things aren’t that bad… considering the govt deficit. One thing is for sure… the dollar will lose it position as the main world currency if this goes on. Brazil is considering using other currencies in export contracts to avoid losses due to the dollars slump. Once the dollar becomes just another national currency the US economy will suffer… the US can’t simply run more dollars and compensate their consumer rythm. ``` yep... no good prospects... but "armageddon" ? Still a bit off... for some time. ``` ---
**Author:** ![clairobscur](https://avatars.discourse-cdn.com/v4/letter/c/839c29/32.png) [@clairobscur](https://boards.straightdope.com/u/clairobscur)\ **Post date:** [November 25, 2004, 2:12pm UTC](https://boards.straightdope.com/t/us-economic-armageddon-when-and-how-bad/276465/6 "2004-11-25T14:12:09Z")
I would be interested in some more infos about this statement : > [@](#): > > To finance its current account deficit with the rest of the world, he said, America has to import $2.6 billion in cash. Every working day. That is an amazing 80 percent of the entire world’s net savings Can we assume it’s accurate? ---
**Author:** ![hawthorne](https://avatars.discourse-cdn.com/v4/letter/h/c89c15/32.png) [@hawthorne](https://boards.straightdope.com/u/hawthorne)\ **Post date:** [November 25, 2004, 2:17pm UTC](https://boards.straightdope.com/t/us-economic-armageddon-when-and-how-bad/276465/7 "2004-11-25T14:17:24Z")
FWIW, there is a [thread in IMHO](http://boards.straightdope.com/sdmb/showthread.php?t=288380) running on this topic. ---
**Author:** ![Master\_Wang-Ka](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/master_wang-ka/32/3325_2.png) [@Master\_Wang-Ka](https://boards.straightdope.com/u/Master_Wang-Ka)\ **Post date:** [November 25, 2004, 2:28pm UTC](https://boards.straightdope.com/t/us-economic-armageddon-when-and-how-bad/276465/8 "2004-11-25T14:28:32Z")
> [@Rashak Mani](#): > > Sure looks like a scary and viable scenario… > > Still won’t a weaker dollar allow for more exports and reverse the trade deficit somewhat ? Depends on what we mean to export. A trend that has made me friggin’ mental is the shutting down of industrial infrastructure in the States and shipping it all to China and elsewhere, where labor costs are lower. When World War II broke out, one of the reasons we won was because of our massive production capacity. When World War III happens… will we still HAVE any production capacity to speak of? ---
**Author:** ![Jinx](https://avatars.discourse-cdn.com/v4/letter/j/c6cbf5/32.png) [@Jinx](https://boards.straightdope.com/u/Jinx)\ **Post date:** [November 25, 2004, 2:33pm UTC](https://boards.straightdope.com/t/us-economic-armageddon-when-and-how-bad/276465/9 "2004-11-25T14:33:47Z")
Greenspan says the same thing! We are on the brink of going the way of the Dodo. Maybe that can be the new Republican mascot? If Greenspan’s worried, I think we all should be quaking in our boots! The enemy no longer needs weapons…just the ability to buy and sell us 10 times over! If the US were sold on the NYSE, we’d be in a perfect position for a hostile takeover! Our economy’s on the brink of flat-lining, baby! But, don’t blame me…I didn’t elect this man who believes in borrow and spend economics. I think he’s gambling no one is going to force America to pay up! 😃 In all seriousness, we’re all gonna be paying the piper for this. I believe we are seeing the epitome of the expression “pick your battles”. - Jinx ---
**Author:** ![msmith537](https://avatars.discourse-cdn.com/v4/letter/m/d9b06d/32.png) [@msmith537](https://boards.straightdope.com/u/msmith537)\ **Post date:** [November 25, 2004, 4:25pm UTC](https://boards.straightdope.com/t/us-economic-armageddon-when-and-how-bad/276465/10 "2004-11-25T16:25:05Z")
> [@Master Wang-Ka](#): > > When World War II broke out, one of the reasons we won was because of our massive production capacity. > > When World War III happens… will we still HAVE any production capacity to speak of? That would seem more relevant if winning wars was still about numbers of tanks and airplanes. Even if it was, don’t worry. We still have plenty of production capacity here in the US. I don’t understand why some people feel that manufacturing is the only important sector of the economy. > [@Jinx](#): > > If the US were sold on the NYSE, we’d be in a perfect position for a hostile takeover! …and if the Queen had balls she’d be the King. > [@Jinx](#): > > Our economy’s on the brink of flat-lining, baby! And you base this on what measurement of economic health? > [@Rashak Manix](#): > > Still won’t a weaker dollar allow for more exports and reverse the trade deficit somewhat ? A weaker dollar makes it more desireable for American companies to manufacture products here and buy American exports. The downside (as for every upside in Econ there must be a downside) is that interest rates and inflation tend to rise. Europe also doesn’t really like a weak dollar because it hurts their exports and foreign companies will be less likely to invest here. A bigger concern for me is what will happen to Social Security and Medicare when all the baby boomers retire. Forget this ‘China buying us out’ crap. National economies don’t work like that. All this debt will eventually cause interest rates to rise which means all those folks living in debt so they can buy houses and cars they can’t afford are going to see some real financial hardships when they can no longer afford their payments. ---
**Author:** ![Rashak\_Mani](https://avatars.discourse-cdn.com/v4/letter/r/ea666f/32.png) [@Rashak\_Mani](https://boards.straightdope.com/u/Rashak_Mani)\ **Post date:** [November 25, 2004, 7:54pm UTC](https://boards.straightdope.com/t/us-economic-armageddon-when-and-how-bad/276465/11 "2004-11-25T19:54:18Z")
> [@Master Wang-Ka](#): > > When World War III happens… will we still HAVE any production capacity to speak of? The US produces few fighters a month… unless a war extended for more than a year would this be relevant. Multimillion dollar fighter jets just take too long. So if the US is fighting for their lives and their bloated defence budget doesn’t save them… it won’t be industrial production during a short period that will. Besides they would be broke if combat lasted 2-3 years. (see costs in Iraq with a fraction of the US army) Over here americans are portrayed as consuming way more than they can afford. Is it true how indebted you americans are ? How badly ? (I think those that due it in order to live above their means or status are silly… otherwise such low interest rates are simply to good to be true for wannabe house owners… hehe ) ---
**Author:** ![Master\_Wang-Ka](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/master_wang-ka/32/3325_2.png) [@Master\_Wang-Ka](https://boards.straightdope.com/u/Master_Wang-Ka)\ **Post date:** [November 25, 2004, 11:15pm UTC](https://boards.straightdope.com/t/us-economic-armageddon-when-and-how-bad/276465/12 "2004-11-25T23:15:28Z")
> [@Rashak Mani](#): > > Over here americans are portrayed as consuming way more than they can afford. Is it true how indebted you americans are ? How badly ? (I think those that due it in order to live above their means or status are silly… otherwise such low interest rates are simply to good to be true for wannabe house owners… hehe ) I don’t know about the numbers, but many Americans – perhaps most Americans – carry a floating debt of some kind. Currently, I owe a monthly payment on my car until it’s paid off (I own the other car outright), and I carry a floating debt on one of my credit cards (until I pay that off, too). I think I currently owe a total of about $5000 that I’m paying on monthly; if I had to come up with the money to make it all go away, I could. Easier not to do it all at once, though. Then again, I own my house and land outright, no liens, no mortgages, and I only have one credit card on which I owe money. I’m cautious. Many others are not. ---
**Author:** ![Kimstu](https://avatars.discourse-cdn.com/v4/letter/k/ecd19e/32.png) [@Kimstu](https://boards.straightdope.com/u/Kimstu)\ **Post date:** [November 25, 2004, 11:51pm UTC](https://boards.straightdope.com/t/us-economic-armageddon-when-and-how-bad/276465/13 "2004-11-25T23:51:01Z")
The numbers seem to say that yes, Americans do consume more than we can afford—but so far, not more than we can afford **to maintain**. That is, though our debt levels keep going up, the amount it costs us to service the debt has not yet changed very much. [These tables](http://tiger.berkeley.edu/sohrab/politics/householddebt.html) give an idea of the trend from the late '40s to the late '90s. Average household debt as a percentage of after-tax income has risen from 67% in 1967 to **103%** in 1999—so as of recent years, on average, we’ve literally got more debt than disposable income to cover it. That means that even if we lived at absolutely zero expense for an entire year and devoted every last penny of available income to our debt burden, we **still** couldn’t pay it off. Ouch. How can we go on like this? Because over the last 20 years or so, the percentage of after-tax income that it costs to **maintain** that rising level of debt has stayed pretty much the same—increasing from 12.8% in 1980 only to 13.4% in 1999. As another fiscally cautious person, I think that over one-eighth of your disposable income is still **way** too much to spend on debt servicing, but that’s just me. You can see how the lack of drastic change in that percentage could lead many people to feel that they’re still in control of their finances, even if they’ve been getting deeper into the red in terms of total debt burden. Can we keep going on like this? IANAE, but just on a common-sense level it doesn’t look too healthy. There are a couple of factors that have put some downward pressure on the debt-service percentage: in the first place, income taxes for most people have been significantly cut over the past twenty years, so you can spend more money on debt service without increasing the **percentage** of after-tax income it costs you. In the second place, interest rates in recent years have been quite low—in very recent years, extremely low—so you can maintain bigger amounts of debt with the same amount of money. If interest rates rise significantly, though, debt service is suddenly going to be a lot more painful. We seem to be feeling the pinch in increased bankruptcy rates—up [44% in the last four years](http://knowledge.wharton.upenn.edu/index.cfm?fa=viewArticle&id=1078) alone (and steadily rising for longer than that). But it’s certainly a very natural result of our consumption-driven economy and heavily consumerist society. We get a whole lot of messages urging us to buy more stuff, for all sorts of reasons, from increasing our sex appeal to bolstering our economy. Those messages are seldom accompanied by any caveats urging us not to buy stuff we don’t really need or not to spend more than we can honestly afford. ---
**Author:** ![pantom](https://avatars.discourse-cdn.com/v4/letter/p/34f0e0/32.png) [@pantom](https://boards.straightdope.com/u/pantom)\ **Post date:** [November 26, 2004, 12:59am UTC](https://boards.straightdope.com/t/us-economic-armageddon-when-and-how-bad/276465/14 "2004-11-26T00:59:01Z")
You have to look at the whole world to see what’s actually happening: 1 - Japan: nominally a democracy, in actuality a single-party state tightly managed centrally. They’ve always managed their foreign exchange policy for the benefit of their exporters, because their internal economy has no engine of growth because of the top-to-bottom corruption and ossification inherent in a one-party state. 2 - China and India: have massive numbers of people they need to employ. They need to run like mad just to stay in place. China can actually generate internal growth, because despite being madly bureaucratized like India, they have an actual infrastructure on which to grow, which India mostly lacks. Also, unlike Japan, they’re at the start of their development, so there’s plenty of headroom before the inherent limits of a single-party state take over as they have in Japan. So at some point China may begin to release its currency, but it will be slow going. 3 - The US: the Admin is determined to be Reagan reincarnated, so the recovery that’s just now starting will look like the eighties, with a falling dollar accompanying a rising stock market as the government spends way more than it takes in and encourages this continuing debt binge. The debt binge will continue to be financed by the three countries above for their separate reasons. At some point one of them will decide not to show up at an auction of US Treasuries, and stop buying the debt issued by Fannie Mae and Freddie Mac to finance mortgages. That will be when the real fun begins. But that probably won’t happen for a while, because none of these countries has any reason to stop, or will in the foreseeable future. Losses that they may take on the debt they buy would just be necessary social spending, far as they’re concerned. So yes, the dollar will eventually start falling uncontrollably off a cliff, and all that debt will suddenly look really awful, but as for exactly when, probably not yet. Best indication that the fun has started would be a rise in the 10-year bond yield accompanied by a continuing fall in the dollar. So far, this yield has actually fallen since the Fed started raising interest rates. It peaked at around 4.8% after they started to raise rates. As of now, the yield is at [4.195%](http://finance.yahoo.com/q/bc?s=%5ETNX&t=1y) according to Yahoo, while the euro is worth [1.316 dollars](http://www.x-rates.com/). (This will vary depending on when you click these links, of course.) So if the euro is worth even more than that and the 10 year yield rises above 4.8%, it’ll be time to really start worrying, as that would be a sign that somebody’s stopped financing our deficits. Personally, I think it’ll be a few years before this scenario plays out, but you never know, of course. ---
**Author:** ![msmith537](https://avatars.discourse-cdn.com/v4/letter/m/d9b06d/32.png) [@msmith537](https://boards.straightdope.com/u/msmith537)\ **Post date:** [November 26, 2004, 1:31am UTC](https://boards.straightdope.com/t/us-economic-armageddon-when-and-how-bad/276465/15 "2004-11-26T01:31:29Z")
> [@Rashak Mani](#): > > The US produces few fighters a month… unless a war extended for more than a year would this be relevant. Multimillion dollar fighter jets just take too long. So if the US is fighting for their lives and their bloated defence budget doesn’t save them… it won’t be industrial production during a short period that will. Besides they would be broke if combat lasted 2-3 years. (see costs in Iraq with a fraction of the US army) Look, if WWIII starts, debt is going to be the least of our concerns so maybe we can dispense with such an unrealistic scenario? There are legitimate concerns and consequences people should be more concerned with: -collapse of Social Security -having to retire much later in life (or never) -losing their savings to inflation -loss of government services -deterioration in the value of their homes (higher interest rates so home loans are not as appealing) The thing is that what many people consider “common sense” with regards to economics actually isn’t. Common sense says that we should save money and avoid debt, right? Well, while you should keep some savings in order to have liquid assets in case of emergencies, maintaining large amounts of cash under the pillow or in a savings account (which is about the same thing) is not smart. Inflation will eat away at it until there is nothing left. Probably the best investment you can make is your home. In fact, a long-term mortgage makes sense because as everyone who has taken finance knows, money now is worth more than money later. While over the long term you are paying more to service the loan, a smaller loan payment means that you will have more cash on hand each month to invest or pay off bad debt (like credit cards and car payments - debt that does not pay for an appreciating asset). Theoretically you will also be making more money as you get older so each year you are actually paying less as a % of your income. So Rashak Mani, you are correct when you say it is silly for people to live above their means. Except when it comes to their home. ---
**Author:** ![China\_Guy](https://avatars.discourse-cdn.com/v4/letter/c/779978/32.png) [@China\_Guy](https://boards.straightdope.com/u/China_Guy)\ **Post date:** [November 26, 2004, 5:13am UTC](https://boards.straightdope.com/t/us-economic-armageddon-when-and-how-bad/276465/16 "2004-11-26T05:13:43Z")
Roach managed to drag himself away from his yachts and cry wolf? He is famous for making predictions that get the general direction correct but are way out there on the end result. He was the chief economist for AsiaPac based in HK for years and years, and such hyperbole was his signature. I’ve met and heard him speak several times in the 1990’s. In a nutshell, he doesn’t even believe such an armageddon but he sure likes headlines. His analysis is pretty spot on though, and he calls direction extremely well. The US will have a rough time. One side point, US consumer debt effectively skyrocketed in the aftermath of the dot com bubble bursting. Greenspan engineered a soft landing with low interest rates that enabled mass America to refinance their homes (and take out cash that could pump prime the economy). This means individual debt levels went way up, and those individuals will take it in the shorts when interest rates rise. The real question is if there will be mass repossessions that leads to a collapse in property markets and imperils bank balance sheets. ---
**Author:** ![davenportavenger](https://avatars.discourse-cdn.com/v4/letter/d/5f8ce5/32.png) [@davenportavenger](https://boards.straightdope.com/u/davenportavenger)\ **Post date:** [November 26, 2004, 6:11am UTC](https://boards.straightdope.com/t/us-economic-armageddon-when-and-how-bad/276465/17 "2004-11-26T06:11:21Z")
> [@Jinx](#): > > If Greenspan’s worried, I think we all should be quaking in our boots! Obviously the time has come to replace Greenspan. Who will be the Condi Rice of the Federal Reserve? ---
**Author:** ![ralph124c](https://avatars.discourse-cdn.com/v4/letter/r/8797f3/32.png) [@ralph124c](https://boards.straightdope.com/u/ralph124c)\ **Post date:** [November 26, 2004, 11:59am UTC](https://boards.straightdope.com/t/us-economic-armageddon-when-and-how-bad/276465/18 "2004-11-26T11:59:18Z")
So would a cheaper dollar mean higher US stock prices? I can see germany, Japan etc. buying US stocks,with their cheap dollars…seems like a better course than T-bills. ---
**Author:** ![Rashak\_Mani](https://avatars.discourse-cdn.com/v4/letter/r/ea666f/32.png) [@Rashak\_Mani](https://boards.straightdope.com/u/Rashak_Mani)\ **Post date:** [November 26, 2004, 1:47pm UTC](https://boards.straightdope.com/t/us-economic-armageddon-when-and-how-bad/276465/19 "2004-11-26T13:47:58Z")
> [@Kimstu](#): > > How can we go on like this? Because over the last 20 years or so, the percentage of after-tax income that it costs to **maintain** that rising level of debt has stayed pretty much the same—increasing from 12.8% in 1980 only to 13.4% in 1999. As another fiscally cautious person, I think that over one-eighth of your disposable income is still **way** too much to spend on debt servicing, but that’s just me. I thought the final interest rates were actually lower for Americans ! So if I have 100 dollars debt… I pay 13.4 dollars at the end of the year as interest ? Its not big… but it can basically become bigger if you don’t manage it. If you owe the credit card here… you would probably pay 13% in a month… month and a half of interest ! ---
**Author:** ![Rashak\_Mani](https://avatars.discourse-cdn.com/v4/letter/r/ea666f/32.png) [@Rashak\_Mani](https://boards.straightdope.com/u/Rashak_Mani)\ **Post date:** [November 26, 2004, 1:50pm UTC](https://boards.straightdope.com/t/us-economic-armageddon-when-and-how-bad/276465/20 "2004-11-26T13:50:25Z")
> [@msmith537](#): > > So Rashak Mani, you are correct when you say it is silly for people to live above their means. Except when it comes to their home. A lot of the US economy is driven only on over consuming and debt… but for an individual its risky. 13% is what you would be pay here for 3 months interest in a good bank and having good credit ! 13% a year is still pretty good actually, but debt is debt… and having fancy cars to show off won’t make you earn more… well not most of the time. [Next page](https://boards.straightdope.com/t/us-economic-armageddon-when-and-how-bad/276465.md?page=2)