The personal debt problem is alive and well
derryb
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The Subprime Final Solution - Jim Quinn
"These weasels have doubled down by accelerating the debt production and dropping it from helicopters to subprime borrowers across the land, like unemployed construction workers named Gus getting a degree in liberal arts from the University of Phoenix while sitting in their basement in boxer shorts."
"Can you really blame the borrowers? For the second time in the last decade the rich folk have generously offered to let them experience the good life, with debt that is never expected to be repaid. Now the MAN has knocked on their hovel door again and offered to put them in a brand spanking new Cadillac Escalade with no money down, requiring no proof of employment, and no prospects of repaying the loan. Hallelujah, there is a God!!!"
"These weasels have doubled down by accelerating the debt production and dropping it from helicopters to subprime borrowers across the land, like unemployed construction workers named Gus getting a degree in liberal arts from the University of Phoenix while sitting in their basement in boxer shorts."
"Can you really blame the borrowers? For the second time in the last decade the rich folk have generously offered to let them experience the good life, with debt that is never expected to be repaid. Now the MAN has knocked on their hovel door again and offered to put them in a brand spanking new Cadillac Escalade with no money down, requiring no proof of employment, and no prospects of repaying the loan. Hallelujah, there is a God!!!"
Natural forces of supply and demand are the best regulators on earth.
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Comments
On a side note, the article is pretty racist.
5% is still extremely cheap money.
Also, it is not that easy to obtain a car load if one has a credit score below 680.
Knowledge is the enemy of fear
A lower (-680) credit score will still get those pre-screened CC offers for balance transfers and 0% apr for 12 months, and you know what some folks do with all of those. I know someone with less than 680, and a bankruptcy in the past 2 years, that just got a mortgage.
<< <i>Interest rates at 5% will result in a boom to the US economy, not its destruction.
5% is still extremely cheap money.
Also, it is not that easy to obtain a car load if one has a credit score below 680. >>
5% may be cheap in relative historic terms but it'll feel expensive for those who have budgeted on nearly free money that are now tapped out each month.
And if you think it's not easy to obtain a car loan then you need to look around. I know someone personally with a negative net worth (6 figures of CC and student loan debt) who just bought a 40k sports car! they are doing the same thing that got this country buried last time. Round 2 is coming from what I'm seeing.
Knowledge is the enemy of fear
<< <i>harsh and over the top, but there's some real truth in there >>
<< <i>On a side note, the article is pretty racist. >>
Harsh yes, not sure about over the top - seems quite realistic to me.
Racist?? Now citing the truth is racist? Oh, yeah, I guess in today's PC world it might be - NO...only to those who CHOOSE to interpret it that way.
Cheers, RickO
<< <i>Your friend probably still has a decent credit score. >>
I don't see how he could. his wages are being garnished by the CC companies because he stopped paying them at one point. he is negotiating with them to pay off the debt. he basically stopped paying them for some time then the debt collectors starting hounding him so he started talking with the CC companies. buried in debt. drives a brand new sports car. i don't understand how he was ever approved but that's not up to me.
i don't know how common this is or isn't but it seems like they are loaning money to anyone again.
It was actually very amusingly written and entertaining, wow what a vocabulary and use of idiom and metaphor.
So, my usual question, "what should I DO about it??" Oh yes, number one: Be Outraged!!
Also pay off my debts, vote, and of course, buy some gold from one of their advertisers.
Liberty: Parent of Science & Industry
<< <i>Well, I sat down and read every word of that rant over my second coffee (Have you tried these Keurig brewers? Nice.)
It was actually very amusingly written and entertaining, wow what a vocabulary and use of idiom and metaphor.
So, my usual question, "what should I DO about it??" Oh yes, number one: Be Outraged!!
Also pay off my debts, vote, and of course, buy some gold from one of their advertisers. >>
Keurig is da bomb!
What should you do about it? Be informed and make investment decisions accordingly. Debt was the problem leading to 2008. Problem not only remains but is being pumped once again.
Natural forces of supply and demand are the best regulators on earth.
Relating to the debt topic, I got a new car recently so my debt to income is pretty high. However, I always pay my bills on time and usually over the amount. This is what a lot of people don't get. They'll rack up their cc bill but just pay the minimum. After a while, they're paying more in interest than the actual item was worth.
Also this is not a a new car(new to me). Its a 06 with 86K miles. Still the newest vehicle Ive ever owned.
<< <i>Locally its still fairly hard to get a car loan. I told them I would make a down payment of over 50% of the cars value and wanted to take out a loan to cover the rest. My credit score is above average my income to debt ratio is less then 20%(mortage), own farm land, and show 3 sources of income. They were not going to give me the load at first till I told them I could write a check for the car, I just wanted to build my credit. The bank will be making a whopping $600 off my car loan and Ill be adding credit to my name when I refi my house.
Also this is not a a new car(new to me). Its a 06 with 86K miles. Still the newest vehicle Ive ever owned. >>
Used car loans are not the same as new car loans. New car loans are NINJA loans (no income, no job/assets), Used car loans are basically personal loans. Explains the big difference in interest rates, required credit worthiness and required down payment. The groups financing each are two different entities with different lending standards. New car loans (to anyone that wants one), along with student loans are the private debt risk to the economy. We all know where the public debt risk lies.
Natural forces of supply and demand are the best regulators on earth.
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<< <i>harsh and over the top, but there's some real truth in there >>
<< <i>On a side note, the article is pretty racist. >>
Harsh yes, not sure about over the top - seems quite realistic to me.
Racist?? Now citing the truth is racist? Oh, yeah, I guess in today's PC world it might be - NO...only to those who CHOOSE to interpret it that way.
Cheers, RickO >>
Singling out black people and trying to blame them for all the subprime lending is not accurate and is racist. It's not the color of a person's skin that determines if they're more likely to take on subprime debt. It's their socio-economic status that determines it. And last time I checked, there were plenty of poor white people around too.
It is probable that as a percentage, more black people are poor. A lot of that has to do with the vicious cycle of discrimination they have to endure. But if you look at absolute numbers, more white people are poor because they're still the majority in this country. So, the motivation behind the author's decision to only use a black neighborhood as an example, is pretty clear.
<< <i>On a side note, the article is pretty racist. >>
Race was not mentioned in the linked opinion piece. Anyone that associates a particular race with what was described may want to reconsider their own level of racism. It may just be stereotyping but unfortunately when it involves race there are those that see it as racism. Same holds true for sexism.
Natural forces of supply and demand are the best regulators on earth.
<< <i>West Philly is over 75% black. "Hip hop nitwits" and cruising around in Jay Z and Kanye style can only be interpreted one way. $200 air jordans? Escalades? He's clearly stereotyping. >>
sounds like the white 19 year old "gansta" that lives next door to me.
Author is clearly calling it as he correctly sees it. Are you able to dispute what he said? When the truth hurts (and it usually hurts someone) it is still the truth.
Natural forces of supply and demand are the best regulators on earth.
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<< <i>West Philly is over 75% black. "Hip hop nitwits" and cruising around in Jay Z and Kanye style can only be interpreted one way. $200 air jordans? Escalades? He's clearly stereotyping. >>
sounds like the white 19 year old "gansta" that lives next door to me.
Author is clearly calling it as he correctly sees it. Are you able to dispute what he said? When the truth hurts (and it usually hurts someone) it is still the truth. >>
It's subtle, but the racism is there. It's fine if he included everyone, but here he's targeting a specific group. The author doesn't provide evidence for any of his statements. "Cash flow is required to service debt. Maybe the West Philly subprime Mercedes drivers can trade their SNAP cards for cash to make their car loan payments, since they don't have jobs." That's a pretty bold statement to make - that these subprime auto loan holders are all on food stamps and that they have no jobs. I'd love for someone to actually prove this.
It's not my job to prove that he's wrong. The one making these ridiculous claims has to prove that his claims are accurate. I don't see any citations. Do you?
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<< <i>West Philly is over 75% black. "Hip hop nitwits" and cruising around in Jay Z and Kanye style can only be interpreted one way. $200 air jordans? Escalades? He's clearly stereotyping. >>
sounds like the white 19 year old "gansta" that lives next door to me.
Author is clearly calling it as he correctly sees it. Are you able to dispute what he said? When the truth hurts (and it usually hurts someone) it is still the truth. >>
It's subtle, but the racism is there. It's fine if he included everyone, but here he's targeting a specific group. The author doesn't provide evidence for any of his statements. "Cash flow is required to service debt. Maybe the West Philly subprime Mercedes drivers can trade their SNAP cards for cash to make their car loan payments, since they don't have jobs." That's a pretty bold statement to make - that these subprime auto loan holders are all on food stamps and that they have no jobs. I'd love for someone to actually prove this.
It's not my job to prove that he's wrong. The one making these ridiculous claims has to prove that his claims are accurate. I don't see any citations. Do you? >>
next time you're at the grocery store behind someone of any race using SNAP, follow them out to the parking lot and see what they are driving. Do this the next 10 times you are in line behind a SNAP user and see what kind of percentage you come up with on high dollar automobiles. Consider your "market survey" to be the citation you seek. These are the kind of spenders the author is referring to - people with a low enough income (or no job) to qualify for SNAP but still given a loan for a $25K+ automobile. I see something wrong with that picture, do you? Subprime loans such as these are what almost destroyed our economy in 2008. Author is pointing out the only thing that has changed is what the loans are used for (new cars and college diplomas).
Natural forces of supply and demand are the best regulators on earth.
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<< <i>West Philly is over 75% black. "Hip hop nitwits" and cruising around in Jay Z and Kanye style can only be interpreted one way. $200 air jordans? Escalades? He's clearly stereotyping. >>
sounds like the white 19 year old "gansta" that lives next door to me.
Author is clearly calling it as he correctly sees it. Are you able to dispute what he said? When the truth hurts (and it usually hurts someone) it is still the truth. >>
It's subtle, but the racism is there. It's fine if he included everyone, but here he's targeting a specific group. The author doesn't provide evidence for any of his statements. "Cash flow is required to service debt. Maybe the West Philly subprime Mercedes drivers can trade their SNAP cards for cash to make their car loan payments, since they don't have jobs." That's a pretty bold statement to make - that these subprime auto loan holders are all on food stamps and that they have no jobs. I'd love for someone to actually prove this.
It's not my job to prove that he's wrong. The one making these ridiculous claims has to prove that his claims are accurate. I don't see any citations. Do you? >>
next time you're at the grocery store behind someone of any race using SNAP, follow them out to the parking lot and see what they are driving. Do this the next 10 times you are in line behind a SNAP user and see what kind of percentage you come up with on high dollar automobiles. These are the kind of spenders the author is referring to. Consider your "market survey" to be the citation you seek. >>
I've done this..... most often they are newer cars... and yo scratch your head and say to your self..... WTH.. [h = heck] am I missing here...... Anyway.. most inport thing I've discovered in this thread is I'm not the only one who thinks highly of their Kuerig.
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<< <i>West Philly is over 75% black. "Hip hop nitwits" and cruising around in Jay Z and Kanye style can only be interpreted one way. $200 air jordans? Escalades? He's clearly stereotyping. >>
sounds like the white 19 year old "gansta" that lives next door to me.
Author is clearly calling it as he correctly sees it. Are you able to dispute what he said? When the truth hurts (and it usually hurts someone) it is still the truth. >>
It's subtle, but the racism is there. It's fine if he included everyone, but here he's targeting a specific group. The author doesn't provide evidence for any of his statements. "Cash flow is required to service debt. Maybe the West Philly subprime Mercedes drivers can trade their SNAP cards for cash to make their car loan payments, since they don't have jobs." That's a pretty bold statement to make - that these subprime auto loan holders are all on food stamps and that they have no jobs. I'd love for someone to actually prove this.
It's not my job to prove that he's wrong. The one making these ridiculous claims has to prove that his claims are accurate. I don't see any citations. Do you? >>
next time you're at the grocery store behind someone of any race using SNAP, follow them out to the parking lot and see what they are driving. Do this the next 10 times you are in line behind a SNAP user and see what kind of percentage you come up with on high dollar automobiles. These are the kind of spenders the author is referring to. Consider your "market survey" to be the citation you seek. >>
That wouldn't be an indicative sample though. Maybe, the FDA should do the same? Instead of testing new drugs on a sample that is representative of the entire population, they should just let the drug companies pick people they come accoss?
SNAP helps a lot of people who really try their best to stay afloat. Single moms who were abandoned by their husbands, killed or jailed. How about all those people who are disabled and can't work and for one reason or another don't qualify for disability payments? My gf's grandma had Alzheimer's and didn't get any help from SSDI because she was a political refugee who left her home when it was being shelled in a civil war and didn't work enough years in the US to qualify for SSDI. She didn't take SNAP assistance because her kids took care of her, but not everyone is lucky like that.
I agree with a lot of people here that SNAP costs too much. We have to cut it down especially with all the debt we have now. But, claiming that SNAP only goes to deadbeats and lazy people is just not accurate.
<< <i>SNAP helps a lot of people who really try their best to stay afloat. Single moms who were abandoned by their husbands, killed or jailed. How about all those people who are disabled and can't work and for one reason or another don't qualify for disability payments? My gf's grandma had Alzheimer's and didn't get any help from SSDI because she was a political refugee who left her home when it was being shelled in a civil war and didn't work enough years in the US to qualify for SSDI. She didn't take SNAP assistance because her kids took care of her, but not everyone is lucky like that. >>
I'm not faulting SNAP or those that deserve its services. I'm faulting the desperation to loan money that allows low or no income individuals to take on debt they clearly cannot afford to pay back. We saw this happen with real estate and we saw the results in 2008. The author is pointing out, very clearly, that deja vu is upon us. It is warnings such as this that should have been heeded in 2007. And again, it will go unheeded. This is why your PMs will be worth having and this is why such information is relevent to PM discussion.
Natural forces of supply and demand are the best regulators on earth.
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<< <i>SNAP helps a lot of people who really try their best to stay afloat. Single moms who were abandoned by their husbands, killed or jailed. How about all those people who are disabled and can't work and for one reason or another don't qualify for disability payments? My gf's grandma had Alzheimer's and didn't get any help from SSDI because she was a political refugee who left her home when it was being shelled in a civil war and didn't work enough years in the US to qualify for SSDI. She didn't take SNAP assistance because her kids took care of her, but not everyone is lucky like that. >>
I'm not faulting SNAP or those that deserve its services. I'm faulting the desperation to loan money that allows low or no income individuals to take on debt they clearly cannot afford to pay back. We saw this happen with real estate and we saw the results in 2008. The author is pointing out, very clearly, that deja vu' is upon us. >>
That's pretty obvious. The people in power think the system can't work without ever increasing consumer debt. Student loan debt is also a huge problem. At least with subprime car loans, it's investors who take the hit. With student loans, it's the taxpayer!
<< <i> Student loan debt is also a huge problem. At least with subprime car loans, it's investors who take the hit. With student loans, it's the taxpayer! >>
Taxpayers (and dollar holders) took a huge hit with subprime (bad/unjustified) real estate loans. Don't think it won't be the same with any bad consumer debt that is large enough to cripple a major lender or bank. While debt continues to be the number one threat to our economy the lenders continue full steam ahead. Problem lies in their ability to take on bad debt knowing they can bundle it and pass it off to someone else (maybe your retirement fund?) who will eventually dump it on the taxpayer.
What we need is regulation requiring a lender to hold the loan for the life of the loan and all loans on the books to be transferred with a transfer of company ownership. This in itself would have prevented the 2008 meltdown. The threat of having to suffer the consequences of making bad loans would in itself prevent most bad loans. Unlimited bad loans were a major factor in driving up real estate prices. Quinn correctly points out the current threat to the economy is new auto loans and student debt.
Natural forces of supply and demand are the best regulators on earth.
Liberty: Parent of Science & Industry
Undisciplined borrowers have and will get in too deep with credit cards. Lenders will continue to inexplicably offer credit to poor risks.
Play their game and profit. Credit card companies never tire of offering bonus cash back just for accepting cards. I oblige and pocket the bonus cash. During 2013 I'll net about $3,000 and laugh all the way to the bank.
https://www.pcgs.com/setregistry/gold/liberty-head-2-1-gold-major-sets/liberty-head-2-1-gold-basic-set-circulation-strikes-1840-1907-cac/alltimeset/268163
Looks like Quinn (original post) is right on the money, again.
Natural forces of supply and demand are the best regulators on earth.
Interesting Article. Thanks for the link. Got a lot of chuckle on his descriptions. but it's hard to ignore what information he provides. Pretty sick stuff. Explains a few things I've been noticing that I just couldn't figure out by myself.
The Author doesn't provide much in the way of verifiable proof, but sure explains a lot.
<< <i>Car And Student Loans Account For 95% Of All Consumer Credit Issued In Past Year
Looks like Quinn (original post) is right on the money, again. >>
The average age of a vehicle is over 11 years, was about 9 a few years ago, so it is only natural that car loans would increase as vehicle simply die and need to be replaced. Student loans have increased as a stagnant economy has pushed more people to try to differentiate themselves to become better candidates for employment.
None of the stats in the article are particularly alarming or unexpected.
Knowledge is the enemy of fear
<< <i>
<< <i>Car And Student Loans Account For 95% Of All Consumer Credit Issued In Past Year
Looks like Quinn (original post) is right on the money, again. >>
The average age of a vehicle is over 11 years, was about 9 a few years ago, so it is only natural that car loans would increase as vehicle simply die and need to be replaced. Student loans have increased as a stagnant economy has pushed more people to try to differentiate themselves to become better candidates for employment.
None of the stats in the article are particularly alarming or unexpected. >>
95% of past year credit being issued in the two areas that will see the greatest percentage of default? Very alarming to those that have alarm systems.
Natural forces of supply and demand are the best regulators on earth.
Knowledge is the enemy of fear
<< <i>The problem is assuming there will be large defaults on those loans. >>
too late for student loans
and
Car loans just getting warmed up.
Natural forces of supply and demand are the best regulators on earth.
<< <i>SNAP helps a lot of people who really try their best to stay afloat. Single moms who were abandoned by their husbands, killed or jailed. How about all those people who are disabled and can't work and for one reason or another don't qualify for disability payments? >>
Food banks. Basics only. Milk, rice, oatmeal, eggs etc. They are much more efficient at providing food on the cheap than the local Kroger.
(corporate giants too big to fail… not civilian populace since it costs very little to feed the masses)
Call them bad loans, but it's more a product of not having leaders who know how to rebuild the infrastructure (skimming) , or venture capitalists (scamming) who cannot see long term benefits of eliminating "loans" and creating jobs. Real work for real people. That would stimulate growth and a robust economy (in my humble opinion). Because there's always something to do (labor wise)
"Rates are low, credit is easy, underwriting is shoddy, and sales are booming. There’s your thumbnail sketch of today’s “surging” auto market. It’s a carbon copy of the subprime mortgage fiasco that plunged the economy into recession 5 years ago. Now the same nightmare is unfolding in Cartopia, the emerging credit Shangri-la where anyone who can transport himself onto a carlot in an upright position can drive away in a shiny new vehicle no-strings-attached."
Natural forces of supply and demand are the best regulators on earth.
<< <i>Easy Lending to Risky Borrowers Makes a Comeback
"Rates are low, credit is easy, underwriting is shoddy, and sales are booming. There’s your thumbnail sketch of today’s “surging” auto market. It’s a carbon copy of the subprime mortgage fiasco that plunged the economy into recession 5 years ago. Now the same nightmare is unfolding in Cartopia, the emerging credit Shangri-la where anyone who can transport himself onto a carlot in an upright position can drive away in a shiny new vehicle no-strings-attached." >>
I have never seen (before this year) 0% interest rates offered on USED car loans. ZIRP is paying dividends.
Hint: It is someone else's very risky debt.
It is estimated that about half (nearly 3/4 $Trillion) of student loans are held directly by the Federal Government. Here's a good view of what happens to prices when easy (taxpayer) money is used to pay them. The rise in medical costs can be contributed to government medical payment programs. The solution to the education price problem and the student loan risk to taxpayers is simple - require colleges and universities to provide their own, direct financing to students. Once the food stamp program (SNAP) is feeding enough Americans, look for food prices to follow.
Natural forces of supply and demand are the best regulators on earth.
Knowledge is the enemy of fear
<< <i>Again, the best cure for high prices is high prices. People could not afford to go to college so the G gave them money. We are already seeing in California a push to freeze tuition. College tuition on a relative basis is probably about as high as it will be for at least a generation. There will be no more 10%+ annual rate increases. >>
High prices are only cured by high prices when rational consumers are the buyers. When Government is the buyer hammers and toilet seats only become more expensive. Lets use food stamps as an example: Who will shop the smartest and thriftiest - A buyer with his own money or a SNAP card holder using someone else's money?
Easy money is why prices are high and as long as money is easy prices will continue to climb. The more markets become adultered with the entry of taxpayer money, the more inflation will appear in those markets (QE and rising equities, MBS purchases and rising home prices?). But, let's focus on the debt it has created and the risk of that debt to those not participating in the student loan scam. This is where the crisis will be.
Natural forces of supply and demand are the best regulators on earth.
Box of 20
<< <i>If the high prices become unsustainable, perhaps that's when deflation will come into play. There will be no marketplace when no one can afford to buy anything including healthcare and tuition, especially when wages have stagnated for a few decades. Going into debt was the solution to keep up, but that has reached a saturation point now. >>
Easy money (taxpayer dollars) keep is sustainable. Government debt obviously has no saturation point. At least no yet.
Stackers see that saturation on the horizon.
Natural forces of supply and demand are the best regulators on earth.
Then why keep stacking? If you see that G handouts/spending will reach a saturation point and cease, then the basic argument for PMs becomes moot.
Knowledge is the enemy of fear