America's Debt

[4Runninfun]

Almost unbelievable statistics this article reports.

http://lewrockwell.com/rep3/debt-slavery.html

[mattzj98]

happy to not be contributing to statistics :P

[Fatboris]

Wow, didn't expect to find other readers of Lew on here or Austrian School believers. I like to troll zerohedge too, the comments sections are usually well worth the price of admission.

[4Runninfun]

This is actually the first I'm reading of his page. I saw the link on my cousin's FB page. It is pretty good reading. I'm not 100% on board with Libertarians, however, I do agree with a lot of what they have to say.

[Fatboris]

check out Ludwig Von Mises. When you put Keynes up against Mises it's a no-brainer....anyway, I was in the same space as you several years ago. Maybe someday we'll get together for that long cigar and tall drink :cheers:

[Chris]

It doesn't take a financial wizard to see the issue for what is is and what has become the American Way. Our culture became that of instant gratification and I have no sympathy for those who indulge in their wants above their needs.

Here's my tip for the thread, if you want it pay cash. If you don't have cash don't buy it. Simple enough.

[Heather]

Ludwig Von Mises
:thunb:

[Jackie]

If you don't have cash don't buy it. Simple enough.
And there you have it. Simple as that.

And that is the truth. Believe it.

Do you really need to eat out every week? Do you really need a new hair-doo, manicure, sweater, tires, a lift on the rig etc.? I don't think so. You could probably put all of that off for a while.

The joy of being debt-free is priceless.

[mattzj98]

Do you really need a new tires, a lift on the rig etc.?
Yes please!

[Rob]

Our culture became that of instant gratification and I have no sympathy for those who indulge in their wants above their needs.

And that was one of the many things that led to the financial crisis. I think it was about the time the economy cratered that the average savings rate in the U.S. was a negative number. I wonder how long it'll be before that becomes the norm again.

[Java]

I dunno. I get the point of it, but I don't agree with the idea of all debt being bad debt, just stupid people with too much access. Just like food, it's not evil, just overdone. He list this at the end:

"Do you need a car?

Just get an auto loan.

Do you need a house?

Just get a mortgage.

Do you need to fill up your house with stuff?

Just get a credit card.

Do you need an education?

Just get a student loan."

Aside from the credit card, I'd call all of that good debt if you've shopped out the loans. I know one retired person who was able to pay cash for her house, everyone else I know has a mortgage. I paid cash for my Jeep because at the time I could, but I have a 0.9% 3 year loan on our Subie that I'm OK with, and if it wasn't for student loans I wouldn't have been able to go to school. If you don't have a mortgage (or haven't finished one) you're either paying rent or living with your parents; borrowing for a car is fine if that car is taking you to work everyday; borrowing for school is the BEST investment you can make, bar none.

[Brody]

Do you really need to eat out every week? Do you really need a new hair-doo, manicure, sweater, tires, a lift on the rig etc.? I don't think so. You could probably put all of that off for a while.

I could do with a new hair doo and a manicure, but we are debt free with the exception of mortages on 4 houses...and one of them is almost paid off. We use our credit cards for the air miles and other "benefits", but these get paid off every month. Both of us have paid cash for every car we have ever owned. Our student loans were paid off years and years ago...

Neither of us has bought into the "buy now/pay later/pay on 90 days/interest free" bullshit that seems to get so many people into trouble...We don't have the money to buy something or pay for services, we wait until we do. Pretty ******* simple....and even combined, our income isn't what anyone would call 'great'.....or even marginally 'good'.

[Chris]

I agree in general Paul but there are an awful lot of people today wishing they didn't ever get the mortgage they have today. I just talked to a guy who just completed a short sale of his $250,000 condo in Maui. Same building as my son who just paid 140,000 for the same thing. Like me he's retired and just waved 100k goodbye which changes everything. As you said car loans aren't inherently bad but buying anything on a loan that devalues so fast is not smart spending.

We are fortunate to be debt free and retired, not because we're rich or inhertited anything but because we looked at this time in our lives as important and kept it in view all our lives. We worked hard and saved hard for 30+ years and we never had a fancy house, expensive cars or toys choosing to be conservative to enable us to do this. Many years and foresight eventually pays off.

Most of our long-time friends can't retire or worse live on Social Security because they lived the "good life" when the paychecks were regular and now have diddly. So I think I'm agreeing with you to a point. My caution is to have a long view on life, odds are good you'll make it and reap the benefits of long-held dreams.

[Rob]

So I think I'm agreeing with you to a point. My caution is to have a long view on life, odds are good you'll make it and reap the benefits of long-held dreams.

:thumb:

[SCRubicon]

I'll tell you what blows my mind. They threw the "J" word into the third fact. ;)

[4Runninfun]

I'll tell you what blows my mind. They threw the "J" word into the third fact. ;)

staggering amount for sure! This is part of some of the traps that we are in today, how many people can truly understand what a billion is? regardless of whether it's dollars, gallons of water or otherwise. So when some politician gets in front of the camera and says the budget for XX is $3.2 billion it doesn't really mean much to majority of people. And lets also not forget that pesky .2 billion tacked on. Don't fail realize that's still $200,000,000. ;)


Aside from the credit card, I'd call all of that good debt if you've shopped out the loans. I know one retired person who was able to pay cash for her house, everyone else I know has a mortgage. I paid cash for my Jeep because at the time I could, but I have a 0.9% 3 year loan on our Subie that I'm OK with, and if it wasn't for student loans I wouldn't have been able to go to school. If you don't have a mortgage (or haven't finished one) you're either paying rent or living with your parents; borrowing for a car is fine if that car is taking you to work everyday; borrowing for school is the BEST investment you can make, bar none.

You have to be very careful not to fall into some key pitfalls. Debt regardless of what it is for is bad. Now is a mortgage as bad as $25k in credit card debt? Probably not. But what if you're upside down on your house by $100k? Maybe that $25k in CC debt wouldn't seam to bad then. Debt has been sold to us in the past few decades as "necessary". But not so many years ago (when private citizens and the gov were more solvent) such debt was unheard of. Auto loans for instance were a fraction of what they are today. How many of our parents or grandparents have talked about SAVING up for a car, instead of just getting a loan? Remember you can never get ahead while you're trying to get even.

Another point on housing and mortgages. My uncle is a machinist, does great work but even owning his own company he's not going to be joining the country club any time soon. Yet he still owns his house outright. he is about 50 years old. How? When my Aunt and him first decided to get a house they bought the land with a loan, and then paid cash to build the house. This resulted in the minimal amount of financing needed, and the house got built as funds permitted. There is always more than one way to skin a cat.

Good criteria for whether or not student loans are a worthwhile risk, is based on the expected return on investment of your chosen degree. If one is going to school for a liberal arts degree I'd suggest that a loan to achieve that degree would not be worthwhile. The market is flooded right now with kids that have that or similar degree. So employers are going to be looking for more. Furthermore paying back that debt is going to be difficult, increasing the risk of default. Now if ones chosen degree is in the STEM field then given that it is projected that in the next 10-20 years 80% of all jobs will be within that field, then you're risk is much more worthwhile.

This is a huge topic and obviously this is just a few quick thoughts hopefully enough to encourage further thought. :thumb:


Ludwig Von Mises

My reading list just grew!

[Chris]

For those, like myself, who were stumped when Jon mentioned STEM.

"STEM fields is a US Government acronym for the fields of study in the categories of science, technology, engineering, and mathematics."

[Popsgarage]

Here's my tip for the thread, if you want it pay cash. If you don't have cash don't buy it. Simple enough.

X3!!!!

[Java]

You have to be very careful not to fall into some key pitfalls. Debt regardless of what it is for is bad. Now is a mortgage as bad as $25k in credit card debt? Probably not. But what if you're upside down on your house by $100k? Maybe that $25k in CC debt wouldn't seam to bad then. Debt has been sold to us in the past few decades as "necessary". But not so many years ago (when private citizens and the gov were more solvent) such debt was unheard of. Auto loans for instance were a fraction of what they are today. How many of our parents or grandparents have talked about SAVING up for a car, instead of just getting a loan? Remember you can never get ahead while you're trying to get even.

Another point on housing and mortgages. My uncle is a machinist, does great work but even owning his own company he's not going to be joining the country club any time soon. Yet he still owns his house outright. he is about 50 years old. How? When my Aunt and him first decided to get a house they bought the land with a loan, and then paid cash to build the house. This resulted in the minimal amount of financing needed, and the house got built as funds permitted. There is always more than one way to skin a cat.

Good criteria for whether or not student loans are a worthwhile risk, is based on the expected return on investment of your chosen degree. If one is going to school for a liberal arts degree I'd suggest that a loan to achieve that degree would not be worthwhile. The market is flooded right now with kids that have that or similar degree. So employers are going to be looking for more. Furthermore paying back that debt is going to be difficult, increasing the risk of default. Now if ones chosen degree is in the STEM field then given that it is projected that in the next 10-20 years 80% of all jobs will be within that field, then you're risk is much more worthwhile.

I agree with all of that, except I don't think debt is inherently bad or good, decisions are bad or good. without loans I would have no house, car, education or business, I've borrowed for all of them. The loans have enhanced my life. I'm not saying I like payments, but smart borrowing is a good tool. Your Uncle is smart. No two ways about that one, that is a good move if you can do it. On the other end, some folks are upside down in their houses, but that is just the way the market is and it's not their fault (in most cases). It's still better than renting, for me I'd rather own 50% of something than 100% of nothing in a rental. I guess it's how you look at it, and what your current situation is. It really is a case-by-case thing. If you decide to save the $200k + that a house costs these days in cash, you still have to live somewhere while you do that. If you have a $1000.00 a month rental and can save another $1000 a month, you can buy a $200k house for cash in 16.6 years, after paying $200k in rent. A mortgage on $200k is about $1700 a month, so if you got the loan to begin with you could use the same $$ to pay $2000 a month on the loan, and you'd pay an addtional $3600 a year towards the loan (assuming the $1700 / month loan). That difference alone would add up to $57,600 over 16 years, or 33 mortgage payments, ie: 2.75 "free" years. However, if you did manage to save for 16.6 years, and home values were constant, you'd be ahead for sure in year 17, you'd have the house paid off almost 10 years earlier than a loan from day one. But you'd have to live in a rental for 16.6 years... if home prices went up over those 16.6 years, you'd be better off in a fixed rate mortgage from day one. The trick is to accurately predict the market... hahahahahaha.

cars are sooo much more expensive these days, saving for a new car is very tough and with depriciation and what you can earn on savings, probably not worth it. Keep the $$ in the bank and make the payments until the principal owed and what you have in the bank are the same #, then pay it off. They take it off the back end anyway, so no sense letting them have it early. I don't prepay my loans, I buy dividend re-investing stocks instead (AT&T, Comcast, Ford...) and cash out when the $$s match. I use www.computershare.com, you can buy in for a few hundred and invest as little as $50.00 a pop. and you canlose money there too, ask me how I know. cars are always a bad investment, they always lose value. saving for a used car for a few thousand still makes a lot of sense, but I don't think there is any way to spin car loan into a good thing. The only plus is that you need it to go earn money.

I think all education is worth it, but for sure some degrees have higher dollar returns than others. The rewards of education are so far beyond dollars that I would always recommend it. However, if I had a kid majoring in Philosophy I probably wouldn't be co-signing the loan...

[Java]

For those, like myself, who were stumped when Jon mentioned STEM.

"STEM fields is a US Government acronym for the fields of study in the categories of science, technology, engineering, and mathematics."

I'm going to pretend I already knew that. :thumb:

[Java]

Remember you can never get ahead while you're trying to get even.

I like that!! In the future I will quote you. :thumb:

[Brody]

Here's my tip for the thread, if you want it pay cash. If you don't have cash don't buy it. Simple enough.

X4

[SCRubicon]

For those, like myself, who were stumped when Jon mentioned STEM.

"STEM fields is a US Government acronym for the fields of study in the categories of science, technology, engineering, and mathematics."

One category kinda leads inta the odder der. I know three out of the four categories public school children are failing at. Do I get a prize? :D