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America's Debt = "We're Screwed!" (pg. 9)
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| zookeeper |
They do seem to "hold all the cards"....so to speak.
I just remember back in the early 80s when having a gold card really meant something, now anyone can get one. To get one, you had to have a really good credit rating AND the actual assets as well, it was a symbol of being sucessful at the time.
Easy access to large amounts of money is too great of a temptation for most people.....and into big debt we go.
..and the American media sure doesn't make it easy to be frugal:rolleyes: ie: Lifestyles, MTV Cribs, Home Makeover, Growing Up Gotti...Etc. |
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| Fir3start3r |
| quote: | Originally posted by zookeeper
Hence the whole part about "preying" on unsuspecting minorities. AND advertising on a gospel station, which I'm sure these people trust,...that's LOW:mad:
Even if you DO read all the documentation, these lenders (or others) have people whom their full time job is to figure out ways to "bury" much of the loans terms in "legal-eze", you can't really understand what you are signing for. |
True, but if the loan is any great amount that's going to take years to pay off, I think a lawyer or at least some fiscal / financial advise from a source they trust would probably be prudent, wouldn't you think?
I feel for the people, but this just proves how much the public really knows nothing of financial responsibility.
The ones where the loans were fraudulent to begin with though, definitely have a case... |
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| Fir3start3r |
| quote: | Originally posted by Lilith
Credit industry is fairly resilient to defaulters, mostly because you get the people who are really into credit cards who shuffle debt from one card to another, back again and manage to amass a fairly big debt they think is 'manageable'
100 here, 1000 there, 100 over there... etc
Which isn't the same as having a big consolidated loan of 6+ figures at least mentally, it's nowhere near as intimidating but the interest rates and default charges are far more savage and you can get away with a minimum of paying off just enough to break even on the interest.
In short, they're an easy way to amass debt which is only able to be gotten rid of by filing for bankruptcy and people don't want to file for bankruptcy for an amount under $100,000 unless they're truly screwed with a lot of other debts at the same time. On the other hand, they have two things which mean credit card debt isn't seen as a big killer debt-
Pride, people don't want to be denied by the finance industry for a few years after filing for bankruptcy. (Plus debt recovery will get some of their assets)
They can pay enough to cover the interest, but not actually make a dent in the amount owing, so it lingers around forever until the perennially optimistic think that times will get better and they can pay it off.
The other thing to consider about credit cards is they're a way of increasing your credit rating without a lot of effort, you pay them on time and it soon amasses to a reasonable amount which will make you eligible for other types of larger loans. As for the deadbeat debtors, the damage they do to a financial institution is very minimal, finance industries are resilient creatures who are very good at sinking claws into people for a long time. You miss a $100 payment once a month, you're not going to kill them :)
Even if say, 3 in 10 or even 5 in 10 people with a monthly credit debt where missing payments, they're still making money out of the others and that outgoing debt which the bank absorbs and bides its time knowing you'll pay it back (the total they loaned) in interest, one way or another. |
The credit industry is another bag altogether that is going under a microscope as well.
It does share the same mysterious, nebulous financial understanding as it's subprime brethern in the publics mind though...
(again pointing to the fiscal ineptitude of the public at large). |
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| zookeeper |
| quote: | Originally posted by Fir3start3r
the public really knows nothing of financial responsibility.
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Certainly the American public...
I've talked to some people who have said that they didn't use ANY lawyers on a house closing, refinance or a home equity loan. They thought a lawyer would be too expensive.....but not a 250,000 loan?!!:rolleyes:
...they are also in deep financial doo doo right now as well. |
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| Lilith |
Ah good, at least I'm not the only one who thinks there is a distinct lack of financial responsibility amongst the public to curb their excessive spending impulses.
It's not always so much big things like homes, shares and investments that are the problem, but the smaller loans of 'plastic' money and sub primes that are a real killer it seems... and accordingly the ones with the highest interest rates.
I don't know if there's any single reason why people are running out and deciding they need a 50' TV screen, 10 sub woofers in their Honda Civic and spend 15k on designer clothes... when they only earn 30k a year! More than likely a number of factors, high employment, social pressure from peers, influence from the media and especially, easy availability of credit from financial institutions. = all combined
Like all businesses and there's no business like the finance business, forget show business :p, which sees the market trend and adjusts it's practice to make money out of the trend.
People are generally (though there will always be exceptions) a bit more careful when it comes to the bigger loans as they're in there for the long run and the line of credit is more difficult to get.
There is a real, disturbing trend though even in the normal loans industry to be offering people very long terms credit for housing at a very young age, prime loans that run for 40, even 50 years! Sure the payments are easier but oh dear, they amass an enormous amount of interest, sometimes 2-3x more than the loan was for!!! :eek:
If you get offered one of those, say NO.
They even offered someone I know who's a part time law student one for an apartment that was going to run for 40 years, on top of the loans she's already got for university it could left her in debt until she's in her mid 60's. That's a terribly long time.
Another real shock to me is people taking out loans to buy shares, stocks and play around on the share markets, if you do not know what you're doing here you could end up with nothing but debt.
If you're thinking of doing this and you're not 100% sure you know what you're doing, say NO.
Share markets are a bit like a 10 horse race really.
Only 1 horse will win and it's been groomed to do that, there's also the horses that come in 2nd and 3rd, they get a little pocket money to keep them in hay and they're happy.
Then there's the other 7 horses... well, they're lucky if they break even, which is about 3 of the 7 will do that and then there's the other 5 rolling on in like a stroll in the park. Sniffing the grass and there for bragging rights, like most casual punters, they came to try their luck... and what they win won't even pay for the haulage to and from.
Stock markets work when people behave in a certain way, they're bolstered by the tons of faceless punters who turn up for a go and they know what they'll do, how they'll do it and they'll cash in because casual punters are like sheep... sheep in a horse race :)
They'll bolt and run in certain directions if you entice or frighten them, it's a rough game and like most forms of punting, you're not meant to win.
Yes I know you hear stories about someone who made big on shares, I've made big on shares but that was only because I basically buried myself in a portfolio for years and I tell you what, it's real easy to listen to the trends floating around and dip in. If it's anything to go by and I don't expect anyone to take me seriously (because I'm just some neurotic confused approval seeking mess of a woman /unquote), but I punched out of that early this year before the asian market went splat.
I will not be going near it for at least 18-24 months.
This is turning into a bit longer than I intended, I just feel it's important for people to read and learn about this, because it's a lot more personally relevant to them and will affect their lives much more than some dead people in a foreign country they don't even know and never seen, ever will.
Yes I know it's boring but you will become a fundamental part of your life and how much you enjoy life.
Time to go to bed...
Short version-
Have one credit card, have it with a limit of half what they will give you.
Don't take out sub prime loans
Don't take out loans for the purposes of gambling
Educate yourself on financial responsible activities
Get advice from professional non-associated financial people before dipping your toe into debt. |
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| Sunsnail |
| quote: | Originally posted by Lilith
Don't take out loans for the purposes of gambling
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ohh ok. |
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| Lilith |
| quote: | Originally posted by Sunsnail
ohh ok. |
You'd be surprised by how many people will do this.
Be it for 'sure fire' investments, shares or even just so their bookie doesn't take out their knees.
I know it sounds like repetitive common sense, but it's also surprising to see how un-common sense is. |
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| Shakka |
| To be fair, there were plenty of people on the consumer side of the business who knew very well that they were taking advantage of a unique opportunity (even though they were contributing to the bubble). Recommended reading: Extraordinary Popular Delusions and the Madness of Crowds by Charles MacKay. However, I think that most of the responsibility certainly lies in the hands of the loan originators/backers/securitizers who were so busy chasing yield at any cost that they threw underwriting standards and business ethics out the window (as conveyed so well by the long article I posted on the previous page). It's amazing that www.condoflip.com is still up! |
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| zookeeper |
| quote: | Originally posted by Lilith
You'd be surprised by how many people will do this.
Be it for 'sure fire' investments, shares or even just so their bookie doesn't take out their knees.
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WOW! I think you hit on a trend that I never even thought of!
I'm not a gambler, so I don't really pay attention, but now that I think about it... POKER! Both online, casino, basement and televised! This is a new trend within the last 10-15 years.
I just remembered the last time I was inside a casino, I saw rows and rows of cash advance terminals and people advancing as much as their card will let them.
Duh! it's so obvious! GOOD post Lilith!:) |
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| Krypton |
| I think the problem is that too few Americans really know anything about finances. They think wealth comes from getting paid more, getting a raise, promotion, or winning the lottery. No one knows what an asset and liability are. |
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| Lilith |
Problem gamblers aren't something people like to talk about and the behaviour, the high risk, high loss for potential gain takes many forms. The one armed bandits, card machines are the most obvious, a lot of my favorite pubs in Sydney where live bands used to play where gone overnight by publicans simply packing those areas with machines and making a more in a week than a month of saturdays.
The less obvious and to some degree 'invisible' is the online gambling market and share investments (by people who don't know what they're doing), which is done in the home and out of the public eye.
The actual operators of those sites aren't running them as a charity, given some of them are probably away from domestic government regulation and accountability overseas, makes it even more shady... like just who are these obfuscated people running them?
| quote: | Originally posted by Shakka
However, I think that most of the responsibility certainly lies in the hands of the loan originators/backers/securitizers who were so busy chasing yield at any cost that they threw underwriting standards and business ethics out the window (as conveyed so well by the long article I posted on the previous page). It's amazing that www.condoflip.com is still up! |
I agree completely, way back when even :)
I'm still convinced that the government needs to step in on this at some point to at least control the damage being done which we'll start seeing the worst effects of about 5-10 years from now.
A large amount of people will literally lack the free capital to throw towards investments and we'll start seeing a big downturn as the public neither want to spend (either or credit or otherwise out of fear of getting burned) or have the ability to spend because they'll be locked into the credit cycle of economic poverty.
A real fear is the only real reform I expect to see is pressure from the banks to make debt consolidation and reclamation a much more vicious activity which garnishes wages and makes things like declaring bankruptcy all that bit harder. It'll go to court, they'll look at what you earn, what you have and decide, well there's no need for you to be declaring bankruptcy sir/ma'am so what we'll do is take some of your assets you don't need for employment and living. Then what we'll do is take ##% of your wages you owe to the bank out of each pay check and this will continue for ## years until it's paid back. |
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| zookeeper |
| quote: | Originally posted by Lilith
I'm still convinced that the government needs to step in on this at some point to at least control the damage being done which we'll start seeing the worst effects of about 5-10 years from now.
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Mmmmm...Don't know if I agree with ya' on that one. I always get nervous when "The Government" is called in to fix anything (at least in the U.S.) it usually gets bungled, and we end up worse and with a larger federal power base. ie: Dept. of Homeland Security
| quote: |
A large amount of people will literally lack the free capital to throw towards investments and we'll start seeing a big downturn as the public neither want to spend (either or credit or otherwise out of fear of getting burned) or have the ability to spend because they'll be locked into the credit cycle of economic poverty.
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Yes, this is my point exactly, people reaching a point where all credit lines are at maximum and they are unable to pay cash for anything. ie: People who regularly buy groceries with a credit card are reallly at the end of the elastic. Without (responsible)spending, capitalism doesn't work. With irresponsible spending, it "works" all too well.
| quote: |
It'll go to court, they'll look at what you earn, what you have and decide, well there's no need for you to be declaring bankruptcy sir/ma'am so what we'll do is take some of your assets you don't need for employment and living. Then what we'll do is take ##% of your wages you owe to the bank out of each pay check and this will continue for ## years until it's paid back. |
If your scenario happens, this could be a proverbial slippery slope with "The Government" deciding how you live your life and what your spending habits would be. Could you imagine the role of the banking special interest groups, pushing representatives to decide which banks will be paid first.
...But you do have a point..."children" may need to be treated like children. |
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