Want to save the economy, make being in debt easier!

The BBQ Pit
1

Or so says some fucknut named Bill Gross who just happens to be the head of the world’s largest bond fund (story here).

Look at this quote:

That’s right, consumers don’t have the cash because,

wait for it,

wait for it,

they consumed it! That’s right, it’s gone. The “consumers” then borrowed a shit ton of money in home equity loans, credit cards, car leases, and pay-day loans to consume MORE. Way more than they could ever possibly afford. A trend that started in 1982 and bottomed out in 2005 when it actually went negative.

Interest rates have been blow 5.25% for over a year now, “the consumer” has yet to be bothered to scrape together some cash.

So fuck you Bill Gross and all the morons that think more debt is the answer to a credit crisis.

But there could be a silver lining. Current numbers have shown an increase in the savings rate since 2005 (although it’s hard to imagine it going lower). So let’s hope no one in Washington heard this guy so that the American consumer can become the American saver for a couple years. You know, show a little restraint and responsibility, then we’ll get you that shiny new house you’ve wanted, while the rest of us try to stave off the next recession.

2

If everybody saves all of their money for a couple of years, who the fuck is going to be buying all the shit from all of the employers that employ the people saving the money? Why would these employers continue to give their employees money to save if they’re not selling anything?

3

My god, you’re absolutely right! Clearly there are no other options but to save ALL of their money, or to spend ALL of their money.

You go to the back of the class with Bill and think about what is an appropriate percentage to save.

4

Appropriate level or not, it doesn’t change the fact the more saving means less purchasing means fewer jobs. Which, in the end, may mean less saving.

What may be rational (and prudent) on an individual scale can sometimes be painful on the macro level.

Now if you’ll excuse me, I need to apply for a boat loan.

5

Being in debt is at the discretion of the consumer(s) themselves, not the seller(s), nor those giving the loans or credit. Neither you nor I can control their spending or their indebtedness and neither can the creditors nor Bill Gross, no matter what viewpoints they have on the frozen credit snafu.

Bill is only guilty for pointing out the obvious.

Maybe mandatory education on fiscal responsibility should be required before anyone can be granted credit (or a loan) would be a better approach in the future. Kind of like a DMV setup where you have to get your license in order to be in responsible indebtedness.
The OP has misguided anger issues. BTW, thanks for reminding me that I need to shop around to reduce my mortgage rate.

6

People aren’t avoiding debt because the rates are too high - they are avoiding it mostly because they are either fearful for their employment situation, or are already in a bad one (ie, under- or unemployed).

Surely they’re not waiting for rates to drop even further before pulling the trigger on big purchases, recent inflation in medical and education have really leveled out recently, and oil prices are behaving.

I agree with Yeticus, the noob is only pointing out the obvious.

7

I thought the reason people are avoiding more debt right now is because tighter lending standards mean that they can’t get loans!

8

Nope, lot’s of money to be lent. But no one has any money to put down. Hence, the push to get government to loosen it’s last vestige of sanity and allow government back mortgages to be issued with 0% down instead of 5%.

Sad thing is, they’ll do it, and it will the the Democrats on the hook in 3-5 when another house of cards fall.

“why did it happen?”
“Dems wanted people to be able to buy houses.”

9

I’ve yet to meet a person who went into debt because they chose to. It’s always that living expenses increase–and that is not the person’s fault. Its the fault of an economical system that is both poorly regulated and can shoot up based on something so intangible that it can disappear. An economy with modest increases is sustainable. One that produces bubbles is not–it allows greedy people to put themselves first.

10

You must live in a tight little debt free baptist bubble.

Let me introduce you to ME. I’m like 99% of all the people I know. In college I wanted to go to Daytona for spring break, put it on a card. Wanted a new motor for my car, put it on a card. Wanted a new computer put it on my card.

12 years out of college. I want to go to Vegas, put it on the card. Night at the titty bar, put it on the card. New RC plane, put it on the card. Vacation in Asia, put it on the card.

Funny thing is I don’t even own the latest and greatest of anything. I don’t have a fancy dancy HD TV. I don’t have the latest and greatest computer(s). I drive a 13 year old vehicle. I’m still in debt by MY CHOICE.

OK, so you know somebody that can’t pay their electric bill, could it be because they CHOSE to blow their money on their cable bill or buying a $1500 TV or maybe because they have a $2000 a month mortgage because they CHOSE to buy a REALLY expensive house?

School loans, if I pay the minimum, I’ll have them until I’m 46. It was still a choice, I could have gone to community college for a few years and then transferred.

Every time you go into debt, you have to sign on a line, IT IS A CHOICE. You DO NOT have to do it.

If somebody is making good money and they are living on the razors edge of their income and their income drops. Its their fault. They should not have put themselves in that position.

Basic living expenses are dirt cheap, you can live in a reasonable shithole for $600 a month. Electric and other stuff, maybe another $200 a month on average. Skip the TV and internet and fancy ass cell phones, add in some food, and then split it with a room mate. You can LIVE on a $150 a week. Add in some school loans to better yourself, and maybe $250 a week. That’s $5.50 take home an hour on a 40 hour week, so $8.50 an hour pretax or so.

Anything above and beyond that was a CHOICE, if you couldn’t afford to pay for it all up front it was a CHOICE and it was a RISK.

Feel bad about them all you want, but they are in a bind due to their own CHOICES.

11

/raise hand

I did it to myself. I wanted to travel and buy what I wanted to buy. There was no reason for me to ever have been in debt, and not much of a reason for me to still be. I’m climbing out, but the rate of improvement is certainly reduced by my unwillingness to make drastic changes to my lifestyle.

I did however recognize my own failings and put considerable effort into teaching my kids much better financial skills than I have myself.

I agree with Yeticus Rex, education is the only way to stop the cycle.

12

0%? Really? I’m thinking 3.5% is the minimum you need to put down now for an FHA backed loan. I’m starting to house shop now and would love to know about all these wonderful government backed options.

13

Is this a joke?

14

I have; back in graduate school, there was an enormous gap between those of us who were living from our stipends and those who had signed up for student loans. We weren’t eating bologna-on-white-bread every day, but there were weeks when we alternated bologna-on-white-bread with bologna-on-rye; we were in shared housing (except for a married couple with a child, who lived in a 1B apartment); we did not have cars (except for a guy who was a studio musician and another one who had a car older than we were; the musician’s car was a relative’s hand-me-down). They had brand-new cars; some of them were living alone in 2Bs, none of them shared a bedroom. “You don’t need to pay anything until you graduate!” “but as soon as you graduate, you need to start paying, even if you do not have a job yet - and stipends are lower for postdocs than for graduate students :smack:”

That was about 1/4 of the graduate students for the department.

15

Does he say that somewhere else because in the story he says:

Something less than 20% is a far cry from 0% down. While I agree that we should not be encouraging people to go willy-nilly into debt and that home prices probably need to come down a little bit, dropping them too much is going to cause debt problems of its own. Even people who got sensible loans with reasonable 10-20% down payments could find themselves upside-down on their loan and get into a bad situation if they get laid off or have to move for a job.

16

The thing is, I put 20% down on my house once. I can’t afford to do it again. And I have dutifully made payments for 8 years and will continue to do so…but it would be really awesome to drop my rate by a point without having to make my upside-down loan whole again. I mean, by lowering my payment, the bank actualy LOWERS the risk that I will default, because I will have more flexibility. But I just looked up a refi option for me, with 0 points.

Before we even get to the downpayment, the bank wants nearly 4K in closing costs (not including escrows). Fucking ridiculous.

17

Well, I’m convinced. The government needs to step in and help people that got in debt, to be more in debt.

All those poor, innocent, hard working Americans. That took out a 30 year mortgage at 7%, paying more for the house than it was worth, and now think their rate should be lower.

I really liked that idea about requiring a license to get loans, or at least be required to read the terms.

How about this for a rule: before a loan can be issued, a person must sit in a quiet room for 30min with the terms of their loan, and access to investopedia. Maybe some graphs of historical housing prices and mortgages rates. No one is requiring them to figure out what an APR is, but at least they can’t see they weren’t given an opportunity.

Isn’t this what they want to do with people that plan to get an abortion? What did they call it in that case? Mandatory counseling?

“Now, hun, I know you’re scared. But have you really thought this through. You know, in the long term?”

I like this idea more and more. Show so graphic images of houses with hidden problems… changes in the economy…

18

Hiring is a response to increased demand. It is not a reflection of more money in the pockets of the wealthy. It is not even higher profits. If we need to decrease unemployment , making money easier for purchasers to obtain would help. Keeping people in their homes would also be beneficial. I would recommend make it easier to buy American cars for one thing.

19

Buy American cars or lease American cars?

What does making it easier even mean? Ford/GM/Chevy are more than welcome to slash their prices.

20

And they can raise them. So what is the point.
Demand is the engine of the economy. The problem is we make less and less all the time. So increased demand is an incomplete answer. The only sure way to increase employment is to build structures in America. We could retro-fit buildings to make them greener. we could fix roads and bridges. We could fix the levees around New Orleans.
Making it easier ,confuses you? It means lower the banking requirements on lending. Not to make it so those who can not pay it back get loans, but for small business men can get them. They actually hire people . But banks are locked into free money. They get money for free from the government, buy bonds and are guaranteed profit. Zero risk. They don’t want to give that up. They also are back in the credit default business. It provides huge salaries and bonuses. They are only thinking of themselves.