First, I think it's funny that you appended the word "crazy" to my word "alarmist." You put that adjective there in this thread.
Second, this is the Geeknights forum and we're probably going to focus on geeky things here. So if you're offended by the Muppets (here's why he brought that up), WoW, or Pogeys, tough shit.
Third, you and my wife share a common affliction, JoeBurr. You assume that because a bad outcome is possible, it is equally probable. You both panic and assume the worst. I'm not worried about depression because history -- you remember that thing you were banging on about a while back? -- shows that there are periodic fluxes in American economic stability. Recessions follow a waveform. Remember 2001, or 1991, 1982, 1980 or 1975? Those were some pretty harrowing recessions, but we managed to escape a 1929 situation.
After 911, we withstood a stock market collapse that sent the DOW tumbling to 5,000. By July 2007, it had recovered and reached an all-time high 14,000 marker. The U.S. economy has learned how to rebound. There are controls in place now to help avoid another depression. They're not infallible, but they certainly are effective.
Right now, lots of people like you, HungryAaron, are screaming doom and gloom prophetics about recession. But recession is two consecutive quarters of negative GDP growth, and we haven't seen that. We've seen a slowdown, sure, and there are negative indicators in the housing market and banking industries. That does not equal certain destruction of the American way of life, says the Economic Cycle Research Institute.
I've recently been working on a series of economics articles at work, and have had the pleasure of speaking with some experts. One is Ken Mayland, who runs Clearview Economics in Ohio, and is considered one of the nation's foremost economic forecasters. He believes there is still hope of avoiding recession.
“We’re getting pretty close to the wire,†he told me a couple of weeks ago. “But things change month to month. You need several months of widespread economic problems before it can be called a recession.â€
Mayland pointed to national employment growth in the fourth quarter of 2007 as a positive sign and said U.S. exporting of goods is at an all-time high.
What scares me, Joe, is how angry you are and how your fear seems to obfuscate any sense of hope. I worry about you, buddy.
You assume that because a bad outcome is possible, it is equally probable.
That is my expectation brought on by harsh experience. It's true. If something bad may happen, then it will happen. Oh, I've seen some good things happen, like when Leif Garrett was busted for heroin posession, but mostly things tend to get worse, not better. We might not have a depression. I'm not saying that we will. However, there are a lot of different things going on at once that make me believe that a rosy future is not in store.
Remember 2001, or 1991, 1982, 1980 or 1975? Those were some pretty harrowing recessions, but we managed to escape a 1929 situation.
Actually, I do remember each of those. I lived through them all. As you say, they weren't 1929, but they were not very pleasant. That's why I'm worried. The things we see right now are very similar to the things we saw back then.
Let's say you buy a $500,000 house. You get a mortgage at the current interest rate, and you know you can afford to pay that mortgage for the next X years until you own the house. Let's say the very next day they announce a new highway and a nearby school burns down. That is a pretty crazy circumstance right there. However, even in that crazy circumstance, if you can afford that $500,000 mortgage you got, then you are ok. What does the value of the house matter if you plan to live in it until you die?
Look at cars, since they are so much worse than houses. You buy a car and the value immediately plummets. The value of the car drops precipitously year after year. However, as long as you didn't buy a Ferrari that you couldn't afford in the first place, you aren't going to go bankrupt.
The monetary value of the car or house only matter if you are going to sell the car or house. The value of the house or car for purposes of providing shelter and transportation do not change. When I buy my first house, I'm primarily seeking shelter. Investment is a side benefit. When I buy a car, I'm looking for transportation. Being able to sell it if need be is a side benefit. The current shitty housing market fucks you only if you are buying and selling houses for purposes of investment. It's wonderful if you are buying a house for the purpose of shelter, which I am.
Look at cars, since they are so much worse than houses. You buy a car and the value immediately plummets. The value of the car drops precipitously year after year. However, as long as you didn't buy a Ferrari that you couldn't afford in the first place, you aren't going to go bankrupt.
We expect cars to depreciate. We don't expect houses to depreciate. Also, cars cost much less than houses. My car cost less than $10K. If it depreciates, it doesn't hurt too much.
You don't have equity in a car. You do have equity in a house. That equity (or negative equity if the house is worth less than its mortgage) affects your credit rating whether you want to move or not. If I take a loan of $10K over five years for a car, and my car depreciates to the point where it's worth $5k in the second year, that's not so bad, because it'll be paid off in three more years. If I take a loan for $500K over thirty years to buy a house and it loses $50K of its value in the second year, I'd be in much worse shape, whether I'm planning to sell or not.
These people thought they were going to be in the same house for many years. Then they were divorced. Neither one could afford the mortgage alone. They took a huge loss. Are you going to say, "Well, you should just plan on not getting divorced."?
I'd be in much worse shape, whether I'm planning to sell or not.
Only if you need to use that equity to take out another loan for something. After I pay off my car and student loans, the only other loans I will ever have in my entire life are a mortgage for a house, future cars, and maybe a small business loan. Other than that I will never take out a loan for anything ever. I will be otherwise completely debt free, and have no need to add more debt. Since this is the case, why would I care if a loss of value on my house hurt my credit rating if I am not going to open any new lines of credit?
Since this is the case, why would I care if a loss of value on my house hurt my credit rating if I am not going to open any new lines of credit?
When you went for that car loan or that small business loan and found that no one would loan you anything or would require a very high interest rate because your credit rating was adversely affected by that house, you'd probably care. Were you planning on carrying insurance on those cars? Insurance companies check your credit rating before selling you insurance. Do you ever want a new job? Many employers check your credit rating. Do you want a professional license? Many professional licensing boards check your credit rating. Do you think you'll ever need a new cell phone? Try getting a cell phone without decent credit.
When you went for that car loan or that small business loan and found that no one would loan you anything or would require a very high interest rate because your credit rating was adversely affected by that house, you'd probably care. Were you planning on carrying insurance on those cars? Insurance companies check your credit rating before selling you insurance. Do you ever want a new job? Many employers check your credit rating. Do you want a professional license? Many professional licensing boards check your credit rating.
If I can't afford a car because of no loan or high interest rate, I'll just go get a crappy car that I can afford with cash. If a small business loan isn't looking too good, I'll keep being an employee instead of starting a business. I only get insurance on the car because it is required by law. Since I'll be getting a crappy car, and also getting the minimum insurance required by law, it won't cost much despite my credit rating. If I need a new job, and they won't hire me because I have a bad credit rating despite my skills, that is not a place I want to work. The same goes for anything that requires a professional license.
Also, even with all these things considered, the effect of a house decreasing in value wouldn't have that much of an effect on my credit rating. Considering I have few debts, always pay them off, and always pay off my credit card, owning a house that lost some value won't make my credit rating look like that of a hobo.
How many people like that do you think there are in America?
That's their problem. I've never said this is great for everybody, I've only said it's great for me. All of those other people obviously broke rule #1 and bought things they could not afford. They deserve what they get. The only situation it could be bad for me is if there is a nationwide, or worldwide, complete economic collapse. Like we've said before, in that sort of situation it's Mad Max anyway, so why worry?
That's their problem. The only The only situation it could be bad for me is if there is a nationwide, or worldwide, complete economic collapse.
Like it or not, you still participate in society and you still participate in the economy. If many people have problems, then the economy will have a downturn. If the economy has a downturn, you will be affected. There doesn't have to be an economic collapse for you to feel an affect if the price of utilities or gasoline increase as a result of the downturn.
There doesn't have to be an economic collapse for you to feel an affect if the price of utilities or gasoline increase as a result of the downturn.
If prices go up, and my income does not also go up, all that will mean is that I will have fewer nice things. My life will continue, I will just buy less. It would be nice if it didn't happen, but there's nothing I can do about it.
It's only worth worrying about the problem if it is within my power to do something about it. If it is within my power to do something, I should just do that something and stop worrying. In other words, never worry. Just accept and adapt to the things you have no control over, and control the rest.
As Scott is probably never going to Marry or have kids. I doubt he will have other expenses that might in someway impact his financial situation greatly, unless all the jobs disappear.
However for people who might have kids in the future, Kids are a large reason why people go into debt. Especially helping their kids through College.
Of course it's useless to simply worry, but once you're convinced that a downturn is imminent, there are things that you can do. There are investments that are hedges against inflation. You can pay down your credit cards and loans so that, if you have to pay more for gas and utilities, you'll have some free money. If you're in school, there are occupational fields you can consider that are relatively safe from recession. As an individual, you can put off buying luxury items or getting into the housing market.
There are lots more positive things that can be done. However, to do most of them, you have to be willing to admit to yourself that the economy is not always going to be a bed of roses.
However for people who might have kids in the future, Kids are a large reason why people go into debt. Especially helping their kids through College.
Yes. Kids are a drain on your assets. They also cause much heartache and misery when they end up in juvenile court or when you divorce and you have to fight about who pays for them and who keeps them. Plus, they'll only slow you down when the apocalypse comes. I advise against having them.
However for people who might have kids in the future, Kids are a large reason why people go into debt. Especially helping their kids through College.
A quick Google search finds this interesting tidbit of information.
For 2004, the newest data available, the U.S. Department of Agriculture estimates that families making $70,200 a year or more will spend a whopping $269,520 to raise a child from birth through age 17. Higher-income families in urban areas in the West spend the most, $284,460.
The answer is simple. Unless you have a spare $269,520 over 17 years, don't have a kid. If you have a kid, and you don't have the money, that's just as stupid as buying a $269,520 Ferrari with a loan you expect to pay off in 17 years. People who buy, or make, things they can't afford deserve what they get. Live within your means.
There are lots more positive things that can be done. However, to do most of them, you have to be willing to admit to yourself that the economy is not always going to be a bed of roses.
And what I'm telling you is that I do not need to do any of these things, even if economic downturn is indeed on its way. Nobody who lives within their means and has marketable skills needs to do anything.
As long as you have the ability to separate your needs from your wants you will do fine. As for those foolish people who are stuck in the role of a consumerist... too bad! Perhaps a nice dose of hard reality will knock some sense into them.
An expensive car or house is not a need, it is a want. A new TV is a want not a need.
Food and shelter are needs. A lobster dinner and a townhouse in New York City are wants.
I'm in Scott's camp on this one. I converted my mortgage into a line of credit a few years ago to pay for some home improvements. My credit is awesome and I could easily go out tomorrow and get a $500K loan for a new house but why should/would I? I don't need a mansion, I don't need a new TV, I don't need a new car. I will be buying a new TV soon because I just got my bonus check from work and my website business is profitable enough for me to afford to buy one. My current TV is over 5 years old and will be moved to a different room in the house (I currently have two TVs in the house).
Remember that commercial not too long ago of the guy mowing his grass on his riding lawnmower talking about all the things he has (including debt up to his eyeballs)? That's not me and will never be me. If you allow yourself to become that person you have only yourself to blame.
My credit is awesome and I could easily go out tomorrow and get a $500K loan for a new house . . .
Remember that commercial not too long ago of the guy mowing his grass on his riding lawnmower talking about all the things he has (including debt up to his eyeballs)? That's not me and will never be me. If you allow yourself to become that person you have only yourself to blame.
That must be nice. I guess you're very much in control of your own finances.
. . . when we then merged our accounts I had nothing and she had about $2K left in her accounts. We used $1K of that to pay off the last of my debts and then she acted as if she bailed me out!
. . . We then went to a system of $20 per week "allowance" . . . My main thought has always been, "just give me $20 per week, no questions asked, and I don't care what you buy!"
This is the same woman, who after paying bills on payday, will transfer $500 from checking to savings and then tell me to stay away from the ATM because the checking account is nearly empty...
Can you seriously believe that the Iraq War is the central cause of the sub-prime banking crisis? I think Iraq might have serious repercussions on our government's overall economy, but you can hardly blame the shady dealings of mortgage brokers and real estate prospectors on the Iraq conflict.
I'm more likely to accept the dot-com bubble as the cause of the real estate crisis. People moved out of the stock market and into real estate because it was the historically safer investment. Of course the government slashing interest rates to stimulate spending probably helped, also.
You can't really blame the banks so much, either. Our current government loves corporate welfare. We grant subsidies for fuel companies (despite record profits), airlines (even though their own lack of security allowed 9-11 to happen), farming (the government pays certain farmers not to grow as much as they can to keep prices up), defense contracts (we probably don't need to spend $10 to supply our troops with a single can of soda), and banks (the government bailed them out previously after the saving and loan crisis). There was actually very little risk to the banks giving these loans.
Hmmm. While we are talking about worst case scenarios, I always say that everyone should have a variety of skill sets and every person with "white collar" aspirations should also possess some sort of experience with manual labor. My little sister, for example, is going to school for Pre-med but also has a lot of hands on expertise of auto mechanics, so she is covered in case of an emergency. (But man, if civil order broke down she'd be double-covered. People always need doctoring no matter how bad things are!) I am an animator which means my skills are completely non-essential, and in the case of an emergency, if there was great strife in America, my job would be one of the first to go. The thing is, I figure I'd go bake bread, or work on a farm for food and shelter, or learn carpentry skills. I've lived out of a suitcase before and my belongings fit in my car. It would not be the end of the world.
Not to beat a dead horse or anything, but homeowner equity has hit its lowest point since 1945. The Fed only started tracking this data since 1945, so this is the lowest homeowner equity figure ever reported. It would be fair to say that this is historically bad. I'm only being honest.
6% of mortgages in the US are currently delinquent.
It's really sad, but at the same time houses are getting really, really affordable down here in New York as a result. Teh buying is looking more and more plausible every day.
6% of mortgages in the US are currently delinquent.
It's really sad, but at the same time houses are getting really, really affordable down here in New York as a result. Teh buying is looking more and more plausible every day.
Bear Stearns, a major investment bank saw its stock drop 47% Friday. The Fed is bailing them out due to "liquidity issues," after what basically amounted to a bank run happened Thursday and Friday. The last time the Federal Reserve lent money to this type of institution was in the 1930s.
Bear Stearns, a major investment bank saw its stock drop 47% Friday. The Fed is bailing them out due to "liquidity issues," after what basically amounted to a bank run happened Thursday and Friday. The last time the Federal Reserve lent money to this type of institution was inthe 1930s.
Yeah, this is a big deal. The Fed doesn't like to lend to non-banks. J.P. Morgan is acting as intermediary, but the Fed would bear the loss. It buys them 28 days, probably long enough for them to be sold.
There are a number of large banks facing merger or sale right now too. This economic turmoil is far from over.
With a retard at the helm, W is taking us to hard times. I have a feeling that it will last for only a year or so, The next president will help bring us out of this rut. And with the measures put in place by FDR in the 30's, it won't be as bad as the Great Depression of the 20's.
I'm just glad my investments are pretty safe, even from a catastrophic market crash, and that Canada is real close. If we ever lost everything because of greedy bankers and governmental fuck-ups, I'd rather be poor in a country that'll give me health care.
Comments
First, I think it's funny that you appended the word "crazy" to my word "alarmist." You put that adjective there in this thread.
Second, this is the Geeknights forum and we're probably going to focus on geeky things here. So if you're offended by the Muppets (here's why he brought that up), WoW, or Pogeys, tough shit.
Third, you and my wife share a common affliction, JoeBurr. You assume that because a bad outcome is possible, it is equally probable. You both panic and assume the worst. I'm not worried about depression because history -- you remember that thing you were banging on about a while back? -- shows that there are periodic fluxes in American economic stability. Recessions follow a waveform. Remember 2001, or 1991, 1982, 1980 or 1975? Those were some pretty harrowing recessions, but we managed to escape a 1929 situation.
After 911, we withstood a stock market collapse that sent the DOW tumbling to 5,000. By July 2007, it had recovered and reached an all-time high 14,000 marker. The U.S. economy has learned how to rebound. There are controls in place now to help avoid another depression. They're not infallible, but they certainly are effective.
Right now, lots of people like you, HungryAaron, are screaming doom and gloom prophetics about recession. But recession is two consecutive quarters of negative GDP growth, and we haven't seen that. We've seen a slowdown, sure, and there are negative indicators in the housing market and banking industries. That does not equal certain destruction of the American way of life, says the Economic Cycle Research Institute.
I've recently been working on a series of economics articles at work, and have had the pleasure of speaking with some experts. One is Ken Mayland, who runs Clearview Economics in Ohio, and is considered one of the nation's foremost economic forecasters. He believes there is still hope of avoiding recession.
“We’re getting pretty close to the wire,†he told me a couple of weeks ago. “But things change month to month. You need several months of widespread economic problems before it can be called a recession.â€
Mayland pointed to national employment growth in the fourth quarter of 2007 as a positive sign and said U.S. exporting of goods is at an all-time high.
What scares me, Joe, is how angry you are and how your fear seems to obfuscate any sense of hope. I worry about you, buddy.
Look at cars, since they are so much worse than houses. You buy a car and the value immediately plummets. The value of the car drops precipitously year after year. However, as long as you didn't buy a Ferrari that you couldn't afford in the first place, you aren't going to go bankrupt.
The monetary value of the car or house only matter if you are going to sell the car or house. The value of the house or car for purposes of providing shelter and transportation do not change. When I buy my first house, I'm primarily seeking shelter. Investment is a side benefit. When I buy a car, I'm looking for transportation. Being able to sell it if need be is a side benefit. The current shitty housing market fucks you only if you are buying and selling houses for purposes of investment. It's wonderful if you are buying a house for the purpose of shelter, which I am.
You don't have equity in a car. You do have equity in a house. That equity (or negative equity if the house is worth less than its mortgage) affects your credit rating whether you want to move or not. If I take a loan of $10K over five years for a car, and my car depreciates to the point where it's worth $5k in the second year, that's not so bad, because it'll be paid off in three more years. If I take a loan for $500K over thirty years to buy a house and it loses $50K of its value in the second year, I'd be in much worse shape, whether I'm planning to sell or not.
These people thought they were going to be in the same house for many years. Then they were divorced. Neither one could afford the mortgage alone. They took a huge loss. Are you going to say, "Well, you should just plan on not getting divorced."?
Also, even with all these things considered, the effect of a house decreasing in value wouldn't have that much of an effect on my credit rating. Considering I have few debts, always pay them off, and always pay off my credit card, owning a house that lost some value won't make my credit rating look like that of a hobo.
It's only worth worrying about the problem if it is within my power to do something about it. If it is within my power to do something, I should just do that something and stop worrying. In other words, never worry. Just accept and adapt to the things you have no control over, and control the rest.
However for people who might have kids in the future, Kids are a large reason why people go into debt. Especially helping their kids through College.
There are lots more positive things that can be done. However, to do most of them, you have to be willing to admit to yourself that the economy is not always going to be a bed of roses. Yes. Kids are a drain on your assets. They also cause much heartache and misery when they end up in juvenile court or when you divorce and you have to fight about who pays for them and who keeps them. Plus, they'll only slow you down when the apocalypse comes. I advise against having them.
An expensive car or house is not a need, it is a want. A new TV is a want not a need.
Food and shelter are needs. A lobster dinner and a townhouse in New York City are wants.
I'm in Scott's camp on this one. I converted my mortgage into a line of credit a few years ago to pay for some home improvements. My credit is awesome and I could easily go out tomorrow and get a $500K loan for a new house but why should/would I? I don't need a mansion, I don't need a new TV, I don't need a new car. I will be buying a new TV soon because I just got my bonus check from work and my website business is profitable enough for me to afford to buy one. My current TV is over 5 years old and will be moved to a different room in the house (I currently have two TVs in the house).
Remember that commercial not too long ago of the guy mowing his grass on his riding lawnmower talking about all the things he has (including debt up to his eyeballs)? That's not me and will never be me. If you allow yourself to become that person you have only yourself to blame.
Ummmmmm . . . maybe not so much.
I'm more likely to accept the dot-com bubble as the cause of the real estate crisis. People moved out of the stock market and into real estate because it was the historically safer investment. Of course the government slashing interest rates to stimulate spending probably helped, also.
You can't really blame the banks so much, either. Our current government loves corporate welfare. We grant subsidies for fuel companies (despite record profits), airlines (even though their own lack of security allowed 9-11 to happen), farming (the government pays certain farmers not to grow as much as they can to keep prices up), defense contracts (we probably don't need to spend $10 to supply our troops with a single can of soda), and banks (the government bailed them out previously after the saving and loan crisis). There was actually very little risk to the banks giving these loans.
Yet another record for oil and . . . what's this? Oh me, oh my.
It's really sad, but at the same time houses are getting really, really affordable down here in New York as a result. Teh buying is looking more and more plausible every day.
There are a number of large banks facing merger or sale right now too. This economic turmoil is far from over.
I have a feeling that it will last for only a year or so, The next president will help bring us out of this rut.
And with the measures put in place by FDR in the 30's, it won't be as bad as the Great Depression of the 20's.
If we ever lost everything because of greedy bankers and governmental fuck-ups, I'd rather be poor in a country that'll give me health care.