It's back with a vengeance: Private debt

ksammut

You think everyone would learn that build up debt is not a good thing. Either that or just another confirmation people do not have any savings and are forced to take on more debt during an economic time that is a lot worse than many want to believe.

It's back with a vengeance: Private debt

DoubleEagle59

Is it any wonder really??...when the gov't pounds the table saying ' we need more credit so people can borrow and spend to get the economy going'.

renman95

"We have not solved (anything) when it comes to the deleveraging myth," said Michael Pento, president of Pento Portfolio Strategies. "We have learned nothing."

VanHalen

With the low interest rates and student loans ballooning, it's no surprise. Many auto/truck loans these days are 72 or 84 months at 1% or 2% with sales back at 2006/2007 levels.

cohodk

I have more debt than I've ever had. Cheap money is hard to turn away. Now if I was just wrong about no inflation i'd be set.

derryb

Money is about to get a lot more expensive. Those that need to buy it are better off buying it now.

However, the frugal will continue to foot the bill for the careless. As as happened on many occasions since 2008, the careless will often be the ultimate winners.

ksammut

<< <i>I have more debt than I've ever had. Cheap money is hard to turn away. Now if I was just wrong about no inflation i'd be set. >>



After I posted the original post, I mentioned to my wife. We both agree that the government's only way out is very high inflation. If that is the case, they will eventually make it happen.

derryb

Debt levels are unmanageable, so they have to be lowered. And there are only three ways to do it.

ksammut

<< <i>Debt levels are unmanageable, so they have to be lowered. And there are only three ways to do it. >>



Thank God for the 2nd Amendment as it might slow down the possibility of number 3 happening.

Baley

<< <i>

<< <i>I have more debt than I've ever had. Cheap money is hard to turn away. Now if I was just wrong about no inflation i'd be set. >>



After I posted the original post, I mentioned to my wife. We both agree that the government's only way out is very high inflation. If that is the case, they will eventually make it happen. >>



If I believed there'd be very high inflation, I'd take on a lot of debt, locked in at current interest rates, too. Invest the money (gold, land, stocks, doesn't matter as long as it's not "consumed") and then, later, when the assets have hyperinflated values and once the assets are sold for the new high values. I'd pay off the loans at the old number of dollars. Sounds so simple! So brilliant! The "secret" everybody knows! Surely it won't be that easy though. No high inflation, rather continued battle against DEflation. If there were a whiff of real inflation, they'd raise interest rates and crush it.

derryb

Do not confuse a slowed inflation rate with deflation. Money supply is not deflating and consumer prices are not falling. Get a couple of investment asset classes/commodities to drop in price and all the economists are ready to declare "deflation." Stagflation is a word that seems to have disappeared from their vocablulary.

If there were a whiff of real deflation, my grocery bill would be going down. The drastic slowdown in money velocity is being incorrectly viewed as a sign of deflation. Consumers not spending is not the same thing as prices are dropping.

RGJohn

<< <i>

After I posted the original post, I mentioned to my wife. We both agree that the government's only way out is very high inflation. If that is the case, they will eventually make it happen. >>



I largely agree.
But not 'high' inflation, that would scare people too much. What they want (and have) is consistent, steady, bit-at-a-time inflation. Relentless inflation. Like the frog/hot water thing. If they allow high inflation (increase heat too rapidly), frog jumps out of pot/people hoard their few assets, trade ceases and markets collapse.
At 3% to5% inflation per year (which IMHO we easily have been experiencing these last several years) they will reduce the value of our savings by 25 to 50% in 10 or so years.
------
This seems to me to be a mere repetition of the 'Savings and Loan' crisis of the 80's. Perhaps bigger but otherwise the exact same deal.

chumley

I can tell you that I personally have started deleveraging and it is Painful

Musky1011

Dave Ramsey----DEBT FREE and LOVING IT

mhammerman

Seems to me that there are two ways to look at debt, at least for us regular guys.

You can take debt now knowing that certain things are going to be more expensive in the future. Cheapest thing I see now is RE interest rates; maybe something like a small retreat away from the city for 4% interest...hummmmmmmmmm.

Getting rid of all debt except for cheap RE results in more cash on hand or in some other very liquid asset. Good strategy for those looking to keep their options open, to remain flexible regardless or outside conditions. Having a lot of consumer debt or keeping credit limit type balances on the visa precludes this option (clue: don't consume too much at one time).

I'm reminded of a paraphrased quote from one of my design professors in grad school: "Time is your friend. Time is the one limiting factor that prevents all events from occurring at the very same moment. Your success or failure will be a result of how you manage time."

So, go into debt now, get rid of debt now...time will tell.

derryb

the problem with debt (and the bankers know this) is that the people who need it the most are the ones who can least afford it.