Debt is Inevitable because the cost of living is artificially high

1. 69

   bgamallposted 14 years ago

   Consumers are being squeezed and the reason is that the cost of living is too high. Commodities, housing, insurance, utilities, medical care, etc are all too high based upon the small increase of wages over the past 20 years.
   
   I am not saying that people cannot live frugally, but I believe that the game is rigged for banks to profit, for families to suffer, for the consumer to be squeezed.
   
   The game has been set up by the Federal Reserve Bank, which has allowed easy money credit and looked the other way. Shoddy underwriting made great profits for the financials while the consumer was swindled by the bubble crash.
   
   Now banks are getting sweet deals when borrowing from government while consumers pay enormous interest getting no deals from the banks. The banks are literally bleeding the USA to death.
   
   There is a way that consumers can fight this high cost of living. The way is to be frugal, try to charge less and pay with cash, but most importantly, WALK AWAY FROM DEBT. Yes Americans can protest this bubble and bust mentality of our leaders and bankers by simply walking away from all their credit, all loans you have. Just quit paying on your credit cards, as a protest, and quit paying on a mortgage if you are underwater.   
   
   This is a protest that will give Americans healthy balance sheets. All the government really cares about is the healthy balance sheets of the banks, yet the consumer carries the economy. So, I say, deleverage all you can. This is not financial advice as I am not a financial advisor, but this is a protest and an advice that in the long term, in a deflationary environment, can help your family return to sanity with your finances.

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      livewithrichardposted 14 years agoin reply to this

      Yes walk away from everything you worked so hard to obtain.  Ruin your credit and your ability to get housing, insurance, a job.  Let the rest of us taxpayers take up the slack so those greedy bankers oh and shareholders can continue raking in all the rewards. Nevermind that your retirement accounts are pegged to those freely traded markets.  You don't need retirement money anyway.  You can invest in a tent and squat on government property... Make sure you get a fishing pole too and learn how to fish so you will never go hungry.  In just a few years you'll regain some credit maybe even a job in a fast food place.
      
      Or, if you so "underwater" in debt you can do the responsible thing and file Chapter 13 and pay off your debt under a control system set up by the courts, possibly save your home and at least one car, your job if you stil have one, and insurance.
      But hey, it's your protest, do what works for YOU!

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      1. 69

         bgamallposted 14 years agoin reply to this

         It wasn't my idea to bail out the banks instead of the consumer. That was Geithner's very ill fated idea.
         
         My wife's 401k is out of the market. It is called capital preservation. If you are twenty you can ride it out, but if you are over 50 you should preserve capital. Did you know that the hedge funds on light trading have been pushing this market up since March 09 by highly leveraging themselves? Did you know this market is a bear market bubble?
         
         This is what will happen. If the consumer doesn't come back, and he won't, Christmas and back to school will squeeze margins for companies who cannot charge full price. Consumers comprise 70 percent of the economy of the US and have been virtually forgotten in the bailout of the banks who are putting their money into excess reserves, ie a black hole.     
         
         It used to be the responsible thing to pay your bills and work out a payment plan, but the banks are loan sharking and the government is afraid to cap their interest rates. Your taxpayer money was given to banks that abused the American people with liar loans. This is class warfare from the top. The banks have alienated the people and we need to stamp these pests out by not paying.
         
         I realize that some people, slaves that they are, may need to maintaina their credit ratings. They need to do what they need to do. The rest of us can just walk away. The banks made a business decision to gouge us and swindle us and we can make the business decision to forget them.

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            livewithrichardposted 14 years agoin reply to this

            I think that's a little mixed up.  MOST people need to maintain their credit and FEW can walk away.  Without credit, then your choices are limitted.  I live in Chicago where insurance is mandetory and getting good rates is determined by your credit rating. And not just auto insurance, all insurance.  I need errors and ommissions insurance for the business I'm in.  I've been fortunate to maintain a decent credit rating so my plan is low.  I have colegues that are not so fortunate and have policies that are ten times my rate.  Their lack of credit makes it difficult in other areas of their lives, such as getting decent housing or transportation.   
            
            You say it was the banks that lied to us and swindled us but in reality it was the government for the past 16 years that squeezed the banks into easing the restrictions on homeownership thus creating SISA and NINA loans (your liar loans.)  Who did the lying?  The banks or the homeowners?  Banks did make a bad business decision when they agreed to easing those restrictions but suggesting that consumers just walk away from their debt will only compound the problem.
            
            Individual responsibility is the only way to solve our financial problems.  Giving up the wants in order to have the needs.  Paying down or off your debts instead of letting your neighbor and your children to pay off your debts is the responsible thing to do.
            
            What you suggest is called anarchy where people consume all that they want and when it comes time to pay they walk away.  Explain how your utopia will work without a sound fincancial and credit system in place.

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            1. 69

               bgamallposted 14 years agoin reply to this

               I agree that in your case you probably cannot kick the banks in the nuts. But I can. And I will. You make the argument that I have heard about the banks wanting to please the government. I say they used that pleasing of government to abandon sound banking principles and they did it voluntarily. They could have kept all that stuff on balance but they erred in thinking they could get rid of it all to unsuspecting investors. But then you wonder why they just didn't quit the cocaine addiction knowing how it would turn out?
               
               You know how to help an addict, Live, you take away the drugs. That is what we all need to do, take away the payments. Then they survive rehab or they die.
               
               We don't have a sound credit system in place already. We need new banks, an end run around the too big to fail banks. Other countries have been smart enough to do so but we are stupid and are risking all on helping banks that may be doomed to failure. Then what?   
               
               Finally, a little anarchy has its place. At least mine is peaceful

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   toby26posted 14 years ago

   the article read: "There is a way that consumers can fight this high cost of living. The way is to be frugal, try to charge less and pay with cash,"
   
   My question is that: how can people pay with cash all the time for such items as car or house?
   
   Sometimes, Paying by Credit card is a good way since we can earn the interest for those $$ in the bank before the CC payment.

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   1. 69

      bgamallposted 14 years agoin reply to this

      Don't buy a house. They will be going down in value anyway. Car payments are really tough. Most people bought cars recently by pulling money out of their houses. That little episode is over so many will be stuck with car payments. But car payments really hurt people in this economy because cars are overpriced.

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3. 87

   Paragliderposted 14 years ago

   Greetings - it's a high risk protest but one that could work if enough people signed up for it. In my most recent hub we are discussing the many ways in which the majority can fight back against the extremely powerful minority who are stitching us all up. Yours is a new idea!

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      livewithrichardposted 14 years agoin reply to this

      Sounds like an interesting hub.  I would think that the majority would have to all have something in common in order for the protest to be successful.  Being finacnially irresponsible is not a good common ground to stand on for a fight. 
      I think it's up to the individual to get out from under the binds they're in.  Learning sound financial strategies and chipping away at their debt without building new debt is the only way to get free.  Being debt free should be the ultimate goal but passing the debt onto another party (taxpayers) will do even more harm.

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      bgamallposted 14 years agoin reply to this

      Ah yes paraglider, extreme measures need to be taken against extreme attacks from the banking class.

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4. 87

   Marisa Wrightposted 14 years ago

   I think you're all aiming at the wrong target.
   
   Debt is only inevitable because we've been brainwashed by the government and corporations.  Things that were luxuries thirty years ago, we now see as essential.
   
   When I first got married (back in the 70's) we didn't have a car.  All our furniture was second-hand, including an old television with such a bad picture it looked like it was snowing. We bought a tiny old apartment and took two years to renovate it ourselves, as we could afford it.
   
   It never occurred to us to go into debt so we could buy a car, or new furniture, or a TV, or get the renovations done faster, or move to a bigger house.  We waited and saved until we could afford it.  We never felt deprived, because all our friends were doing the same.
   
   Look around your home and ask yourself, how much of this stuff do I really NEED?  Then ask yourself why you're in debt.

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      Kidgasposted 14 years agoin reply to this

      Nice comment

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      Mishaposted 14 years agoin reply to this

      Voice of reason! Respect Marisa

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      pgrundyposted 14 years agoin reply to this

      I still live the way you describe you did when first married, and I'm 56. When I was first married at 25, you could get an apartment in the midwest for under $300 and you could buy a livable home for under $30K. Now that same apartment will run you $750, the modest house $100,000, and utilities are off the chart.
      
      I hear people make the point you are making all the time, and I think there is some truth in what you say, but it doesn't discount that much of what bgamall is saying is also true. Both things are true.
      
      In my own life, I find costs have gone up dramatically, basic costs for basic items---food, shelter, heat, electricity, medical care, insurance--but my wages have fallen year after year. Last year I was left with a huge debt, with insurance, for one night in the hospital that I had to accept.
      
      Some people may be living too high on the hog, and so now they'll have to quit that. But statistically over half the people in the U.S. don't make enough money to afford a modest home, and rents are insane. People have to live somewhere, so they pay for housing first, and then every thing that goes wrong goes on the charge card because it has to. It's something that doesn't get talked about enough.

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   4. 66

      emievilposted 14 years agoin reply to this

      A lady with a good head on her shoulders! Even here, people manage to accumulate a ridiculous amount of debt because they do not want to sacrifice and save for something that they want (not need) to buy. I've seen people max out their credit cards even before the bonuses come in, and all because they can't wait for the actual cash payout. Some people are so into debt that it has become a habit (a form of disease, perhaps?). When they can't pay, they borrow from somebody else and it becomes a cycle.
      
      To address the forum topic, Debt is not inevitable. My father died at age 68 two years ago debt-free and he never had a high amount of debt in the first place (I think he just borrowed for our house and our car like 30 years ago and nothing else). The key is frugal / simple living. Avoiding debt like a plague will also not hurt.

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5. 69

   bgamallposted 14 years ago

   A Rodney King sort of moment. But I don't want to get along. While she has a point Misha, the issue is whether wages have kept up with debt requirements for households. It isn't just a question of furniture, but rather is a question about the gouging by the medical community, by the banking community, by utilities, by bubble prices for cards and homes and gas which should be way cheaper than it is. These things have driven up prices to unsustainable levels.
   
   Meanwhile the stock market keeps going up until mom and pop come in, we have another lousy Christmas selling season, and the pumpers get out of the stock market leaving the middle class long term investor holding the bag yet again.   
   
   They are already talking about 401k recoveries and the like. Watch out.

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   Kudlitposted 14 years ago

   I am not an American but I am aware (somewhat) of what is happening in the US. What I admire is the way you guys discuss an issue, disagree and remain respectful of each other.

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      bgamallposted 14 years agoin reply to this

      We get along. I don't hold any ill will to any of the posters, and in fact welcome the posts!

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   Research Analystposted 14 years ago

   Learn how to use good debt to purchase big items such as real estate and then turn that asset into a cash generator by leasing and renting it out to consumers.
   
   Increase skills and knowledge that will prepare you for higher paying careers, then spend less than you earn.
   
   Financial education and learning money management along with acquiring the technical skills necessary to demand a higher salary will allow people to be responsible for their own lives and actions instead of looking to the banks to bail them out of a economic crisis.
   
   Budget and plan your spending habits, don't get sucked into the credit trap or the consumerism choke hold.

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8. 87

   Marisa Wrightposted 14 years ago

   Thanks for your insight Pam.  We're a bit spoiled in Australia - of course there are people living in poverty, but it's not nearly as bad as the States, from what I gather. 
   
   I just get mad when I see a feature on television about an(Australian) family about to lose their home - then they interview the couple while their son is sitting on the leather couch playing a DVD on the plasma television behind them, in his $200 sneakers.
   
   I also think you'e got it slightly back to front - costs always go up.  Just ask anyone from earlier generations!  What has happened is that wages have fallen drastically behind.
   
   That's why unions were invented, to fight for workers' rights to a wage that kept up with inflation.  If we're looking for conspiracy theories, look at the rise of the Human Resources industry which has managed, on behalf of the corporations, to turn unionism into a dirty word.

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      bgamallposted 14 years agoin reply to this

      Australia has the good fortune to ride the coattails of China. Otherwise the cost of living there simply could not be maintained.

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         Marisa Wrightposted 14 years agoin reply to this

         That's a slight over-simplification.  Yes, China is our biggest  customer but the real reason is that we have natural resources the whole world wants to buy.
         
         We were also lucky, in the Global Financial Crisis, that our government has always had pretty tough legislation preventing banks from lending irresponsibly.  financial institutions are also obliged by law to carry large amounts in cash reserves.  Those safeguards meant that none of our banks needed bailing out.  The government is offering a guarantee on deposits, but really that was just to stop panic runs.

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            bgamallposted 14 years agoin reply to this

            Yes, sound banks are important and they need big reserves. However, natural resources are all overpriced. At least they have speculators who are pricing them out of the reach of the common man. That will increase. Some may be in diminished supply, but speculators use them to hedge against currency declines and that should be limited.
            
            The primary purchaser of world commodities right now is China.

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9. 0

   pgrundyposted 14 years ago

   Marisa, I think it's true--the fall of unions accompanied falling wages. But we also shipped so many jobs overseas from the U.S. Now there's not much here, and there's this huge gap between the 50%+ struggling at the bottom, and the top earners. Most of the wealth here is in the pockets of the top 1/2 of 1%. We live simply so we're fine, but lots of people aren't. I feel bad for families with kids where parents are working two jobs and still not making it.
   
   We have the 'recession porn' people here too though--the ones who have to cut back to only two pairs of $200 sneakers and only FOUR SUVs. I want to slap those people just like you do.

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10. 58

    james1122posted 14 years ago

    Yes I agree with your insights,
    These days consumers are having to bay £1 for what 30 years ago would have been 30 pences, with unreasonable rates of inflation, and high prices and low wages, plus the availiabilty of credit cards, is it any wonder why people are in debt these days?????

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11. 0

    Ghost32posted 14 years ago

    The economic downturn is actually helping us.  Walked away from a $2000 mortgage payment (house mighta just got sold, if not it'll face foreclosure, I'm fine either way), bought land for a $500 payment.
    
    Also walked away from a job and we're getting by doing things like using actual DIRT for kitty litter--who'da thunk it?
    
    But we're living in the best place on Earth for the two of us (Arizona desert), and that might never have come to pass had not the Big Crunch hit.  Probably WOULDN'T have happened.
    
    So YOU GO, you bankers you.  Oh, yeah, and take your credit card with you.  I've maxed it out and won't be paying the danged thing anyway.
    
    Let's see, there's a few dumpsters over in Bisbee I haven't checked out this week....

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       bgamallposted 14 years agoin reply to this

       Yeehaaa. A true populist battling the scumbag big bankers!!!

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12. 59

    eyaelposted 14 years ago

    From my point of view cost of living has nothing to do with debt.
    
    people get into debts cause we want things now. we don't want to wait for them. we live our life in the fast lane and when we get a ticket for speeding we blame it on the banks and financial institutions because they have all this terms and conditions and high interest etc, etc.
    
    debt is bad planning, how do you buy a house or a car??? easy save the money for it, it may take you five, ten or 15 years to get your dream house or your dream car but you won't have any debts.

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13. 54

    bobertoposted 14 years ago

    I think in todays climate all the prices have gone up rediculously high especially prices for petrol!! Everyone is stressing out and worrying about money and it is the talk everywhere.
    
    I think prices need to come down for petrol as there was no reason for it go up in the first place.
    
    people are taking out loans and credit cards because it is the only way to afford things for families, i think it is rediculous!!

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       ledefensetechposted 14 years agoin reply to this

       Welcome to a world of central banks.  You people like central banks during the boom times, but when the inevitable bust comes, well, nobody likes that.  You should have been paying attention to guys like Peter Schiff several years ago.  He, and others, saw this coming, but they were considered crackpots and madmen.  You might want to look him up and see what he's saying now.  If he was right about this, what else is he right about?

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          bgamallposted 14 years agoin reply to this

          He sees an asset inflation. But take it one step further and you have an economic meltdown as asset inflation becomes an illusion. Read this, Led: http://www.georgewashington2.blogspot.c … other.html

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             ledefensetechposted 14 years agoin reply to this

             Wow, I'm surprised the BIS had the balls to tell the truth.  I'm not sure they're the central bank's central bank though, I'll have to study up on it.  The reason I say that is that their economic reasoning stands in direct opposition to the economics of a central banker.  The Fed BoE and other central banks are responding just as I'd expect a central bank to respond. 
             
             They do that because the premise behind a central bank is that they are needed to provide liquidity during an economic crisis.  That's exactly what they are doing right now.  The problem is that economic crisis can be attributed to banks and their habit of A) practicing fractional reserve banking and B) issuing far more paper than they can redeem with the reserves they have on hand.  People aren't stupid, if they think they won't get their money back, it's a run on the bank.  If they think the paper issued by a bank will lose value, they'll dump the paper.  Really it's no different when the government does these things.  People sooner or later will dump the dollar and move on to something that won't depreciate in value because you can just make more.  That's the economic meltdown you see coming.  I see it as not a meltdown, but a correction that's been brewing for almost a century.

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                bgamallposted 14 years agoin reply to this

                I think what they are saying is that bubbles need to be stopped before they fester. The housing bubble should have been stopped before house prices got so overvalued. I noticed that China fears a stock market bubble and they will cut back on credit to the markets in late 2009 to try to keep the market in check. That is a very different approach than the irresponsible acts of Greenspan and company.

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                   ledefensetechposted 14 years agoin reply to this

                   That would be a neat trick, but have you considered that the housing bubble started in response to efforts to re-inflate the stock bubble of the late 90's?  Also how do you decide when you're in a bubble?  When is the "right time" to end such a thing.  Nobody wants the party to end.  China can do as it wishes because they're authoritarian.  It'll be interesting to see what effect their intervention will have.  I predict it'll be a bad effect.
                   
                   If we didn't allow fractional reserve banking there would be no call for a central bank and we'd not have these sorts of problems.  If we had a free money, people could decide for themselves what their destiny is.  Until we have those two things, we're only slightly better off than slaves.

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                      bgamallposted 14 years agoin reply to this

                      I have argued in my hubs that Basel 2 allowed off balance sheet banking. It also allowed, apparently, the imposing of mark to market. So it appears that both the bubble and the bust were imposed by the BIS, whose building can be known as the "Tower of Basel":  http://www.alipac.us/modules.php?name=F … p;t=160108

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14. 69

    bgamallposted 14 years ago

    And apparently, Fasb, which I believe is an arm of the Bank of International Settlements is talking about putting Mark to Market, or M2M back ON the banks, which will cause another leg down in our economy. We will see won't we?

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15. 0

    pgrundyposted 14 years ago

    Everyone is very focused on banking, the Fed, monetary policy--It's understandable that economics is now an issue when banks have done so much damage. But lots of other issues are in play here. It's not simple, people just want it to be simple.
    
    The U.S. has let it's industrial base erode to the point where we are dependent on foreign manufacturers for almost everything. The 'consumer economy' was based on plenty of decent-paying industrial jobs and a large middle class PLUS easy credit. Now the jobs are gone, the credit is gone, and pretty much the main game in town is moving money around in ever more insane ways. You can't base an economy on just moving money around.
    
    It's as if we're all trying to fix a furnace when the problem is there's no fuel. It wouldn't matter what kind of furnace we had, we'd still be cold.
    
    Empires fall. We're witnessing that with ours.

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    ledefensetechposted 14 years ago

    Ever ask yourself why, Pam?

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       bgamallposted 14 years agoin reply to this

       I know why, the international bankers want all countries under their thumb. They want all countries to be banana republics. They want all countries to be brought down so they need more credit.
       
       Pam, it is a plan. It is a plan initiated by the international bankers and until someone rises up like Andrew Jackson at the risk of his own life, these bankers will fleece us until we have no more to give. Then they will move on to another country. Why do you think Japan has been so hurt? Because in their weakest moment, they had to increase reserves in their banks because the bank of Settlements demanded it.
       
       And they also are doing the same thing to us. They will try to conquer China as well although the Chinese are trying to stop their stock bubble with preemptive loan cutbacks at the end of 2009. They don't want to end up like Japan or the USA.

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    ledefensetechposted 14 years ago

    Lenin, I think, or maybe it was Marx said, whomever controls the economy controls the people.  That's what this is all about, power and control.  I know that, I'm not sure other people do.

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       bgamallposted 14 years agoin reply to this

       Rothschild said that if he controlled the money supply it mattered not who was in power.

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    ledefensetechposted 14 years ago

    Looks like he was right.

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       bgamallposted 14 years agoin reply to this

       You can say that again.

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