Poor Lickle Innocents - Save Them From The Credit Monster

[Venger]

The policy recommendations on p42 of the report suggest more financial education, and counselling. Now if anyone has read Rich Dad Poor Dad, there is an institutionalised neglect for financial education (and it is worse than that in his more recent conspiracy of the rich book - and you can pick up these books for a couple of quid). Change will never happen. Big business need people to take on debt, to be on the treadmill, the rat race. We want a nation of debt slaves, how else can receiver of debt interest prosper? A debt is an asset to the receiver of the interest. An asset puts money in your pocket, a liability takes money away. The bigger the debt, the bigger someone else's piggy bank.

In a world where the fishermen are in control, would they seriously invest in time and money telling the fish not to bite the bait?

And so it will carry on... first world problem? No, it is a system where some people profit, and some believe they are empowered in their social circles by the debt so they can have a big house and a new car.The information is out there, you just have to choose between the blue or the red pill.

You know you want me, I can make your dreams come true....

It won't change? Do you mean improved financial education?

It's up to people to educate themselves. Against these house prices.. well they're extreme for me.. $1Million AUS thrown around all the time like nothing.... we're in a market... I'm not interested in 'educating' (which is all too often a cry for stimulus/intervention/debt forgiveness) for the very people who outbid me with housing and all the car toys/holidays/spending, when their incomes weaken or they hit a debt-stress situation.. loss of a job etc. Some people will not be satisfied until people have spent 25 years studying financial-education - PhD, until they can be told they are responsible for their own financial decisions in a competitive market.

2011: http://www.housepricecrash.co.uk/forum/index.php?/topic/101429-australia-faces-its-demons/?p=2884303

http://news.domain.com.au/domain/real-estate-news/damaged-wreck-sells-for-790000--90000-above-reserve-20141122-11rt0o.html

(Thinking for younger people.. perhaps not extreme, but 'value', for older baby-boomers looking at BTL seeing value everywhere vs the values of their own homes).

I can only hope it will change (HPC). For it not to change is just hoping for renter-saver young generations to carry more unfairness.... for these debt loving "they had no education so couldn't know anything about anything.. purest innocence.. just wanted a home.. couldn't know $Ms was a tad expensive" victims. One of my renter-saver pals recently dropped dead from heart-attack at 41 year of age btw.... so who is wrong? Will never know anything of joy buying a home with his wife... (as 'the $1m+ victims' did, and their years of at least pretending they were the best) Had his money in the bank. Let's keep on thinking about the debt soaked victims eh.

[Up the spout]

I think IRRO has

If I have debts over £300k but Assets of £2 million how does clearing those debts improve my life ? I have been in massive debt and not, the actual quality of my life was independent of that balance sheet position

My health, family, friends and general life balance had a much bigger impact

Okay, so you're saying having debts is usually/always better than not having them? I have been quite consistent in saying not having debts - regardless of whether you think those debts are 'good' or 'bad' (I prefer 'productive' and 'unproductive') is better than having them. Maybe some businesses have found taking on debt at 0% and using those funds to buy government gilts is profitable, maybe your £300k of debt is at a lower interest rate than the yield you're receiving because you took that debt on - in which case the debt is productive and you taking it on has been beneficial.

I'm sure you could make up or cherry pick a special scenario to fit any point of view, that doesn't take away from the fact that most people would rather not have debts, because having debt is more expensive than not doing so.

[Venger]

Okay, so you're saying having debts is usually/always better than not having them? I have been quite consistent in saying not having debts - regardless of whether you think those debts are 'good' or 'bad' (I prefer 'productive' and 'unproductive') is better than having them. Maybe some businesses have found taking on debt at 0% and using those funds to buy government gilts is profitable, maybe your £300k of debt is at a lower interest rate than the yield you're receiving because you took that debt on - in which case the debt is productive and you taking it on has been beneficial.

I'm sure you could make up or cherry pick a special scenario to fit any point of view, that doesn't take away from the fact that most people would rather not have debts, because having debt is more expensive than not doing so.

Consistently wrong. Most people? The debts people are carrying are their own choices.

And in many instances the debt has empowered them for further gain / equity wealth. Greg most likely wouldn't have been able to start and advance his business / buying a house at much better value (at the upper end of market) in 2009/11ish, without borrowing.

We're in a market. We're not going to your have a no-debt economy / no-debt house prices. Line me up for a six-figure mortgage into the hpc.

Longgone might irritate me with his 'profit' perspective... but he could have got the debt and be less priced out now (+ equity gains)... in this MARKET, if he had borrowed. It's a market. Try and convince longgone that he shouldn't have signed up for debt, before the 0.5%/QE reflation.

Since the conception of this site , the collective message was don't buy now you are crazy !

The bets are still placed we are just waiting to find out which year of doomongers was correct if ever.

Its all down to locality not just timing , had I gone with my gut in 2008 I would be sitting on 500k profit now

A very expensive mistake !

[canbuywontbuy]

but this will of course never happen if the amount of debt an individual takes on in the first third is so great in comparison to income and projected future realistic income...

We reached a point a few years ago where people are now actively counting themselves out of the debt game....people who COULD afford a mortgage, but go the way of my username. As you say, debt obligations are simply too big these days - often requiring two full-time salaries to pay off. When debt becomes too much, suddenly a simpler way of life is much more appealing. Freedom FIRST, not even in the last third of your life. When the debt path is too heavy, why walk down it? There's no incentive to be an FTB in the UK / Canada / Aus in 2015. It's a hassle to rent, but financially it's far far safer to rent than to borrow deep into 6 figures and be a hostage to fortune.

Edited May 3, 2015 by canbuywontbuy

[Venger]

As you say, debt obligations are simply too big these days - often requiring two full-time salaries to pay off. When debt becomes too much, suddenly a simpler way of life is much more appealing. Freedom FIRST, not even in the last third of your life. When the debt path is too heavy, why walk down it? There's no incentive to be an FTB in the UK / Canada / Aus in 2015. It's a hassle to rent, but financially it's far far safer to rent than to borrow deep into 6 figures and be a hostage to fortune.

I thought the same 10 years ago... and house prices doubled again, my position far worse, and still buyers setting ever higher prices for houses.

What if UK prices follow Canada/San Fran... ever more stimulus and financial engineering. I would prefer to think it's a trap to lure in market participants (no one is dragging anyone into the banks for mortgages).. over-extenders, BTLers etc, with HPC to come... but hard-experience has shown renter-saver positions can just get worse. Values up 40%-80% up in London last few years... so quickly after a 'financial crisis' with global rates floored and $TRILLIONS QE.

£550,000 http://www.rightmove...l?premiumA=true

Sale Date: 25 Jun 2004. Price Paid: £285,000

http://www.rightmove...country=england

This property has now gone SSTC within days of being listed so i can only imagine 500/525 if not the full price.

This literally means the price of this type of house is circa 200K more than 2011 a near 30% increase. New highs tested now each listing assuming this carries on like this (7.5% per year) you talking 800k by 2020.

Its utterly ridiculous the price has increased by 50k per year since 2011 which is about the pre tax household income of the area.

It's difficult to believe there will be HPC when there are socialist-paradise positions who worry about the big debtors (instead of younger generations and renter-savers)... claim there is no such thing as good debt (there is.. at the right buying price, currently with market participants setting prices/values beyond my 'good debt' position)... and that borrowers are 'w@nkers' who somehow don't know what their doing, despite multiple year-on-year HPI and all the studies expecting ever more HPI (OBR for one). (Below promises between people, vs bankers and mortgage applicants... apparently all 'w@nkers' who know nothing.).

On the one hand you have moral obligations predicated on consenting informal 'contracts' between autonomous individuals, on the other you have bullsh!t debt contracts written by w@nkers and signed by w@nkers.

If you make a contract of the first kind with me, and abrogate it, I have the latitude to decide that you are dead to me*, and make my peace with it. If you as a money debtor enter into a contract of the second type then I can bring the force of the state to bear to ensure that you are compelled to keep your promise.

I question your notions about 'Real Conservatives' and 'hard markets'. They own you, because you are willing to accept their right to issue money as your obligation to accept the reality of the debt.

If this really was just about house prices, it would have been done in 2003. Wake. The. F**k. Up.

* Flagging the possibility of a rather important unspoken message.

[Venger]

We reached a point a few years ago where people are now actively counting themselves out of the debt game....people who COULD afford a mortgage, but go the way of my username. As you say, debt obligations are simply too big these days - often requiring two full-time salaries to pay off. When debt becomes too much, suddenly a simpler way of life is much more appealing. Freedom FIRST, not even in the last third of your life. When the debt path is too heavy, why walk down it? There's no incentive to be an FTB in the UK / Canada / Aus in 2015. It's a hassle to rent, but financially it's far far safer to rent than to borrow deep into 6 figures and be a hostage to fortune.

Also the chronic apologist situation.. just creating more coarse 'play innocent' entitled buyers. Not about prices being too high (and wanting hpc).. just not being able to.. struggling to meet the asking prices. It's a market.. not protect the people pushing and falling over each other to pay ever higher prices... "they couldn't know anything about debt bless em.. so innocent."

The entitled

April 17th, 2015

Nonetheless, this is an interesting Canadian thing. Kinda like the #Occupy movement, but in reverse. The 99% crowd who stormed Wall Street and other financial capitals around the world wanted to Eat the Rich and railed against the growing income disparity around us. The #DontHave1Million kids actually want to be rich, and think they’re entitled to buy a $1,000,000 house. The overriding reason for this seems to be [a] they went to school a long time and they’re clearly special. Mom said so.

Now what does this have to do with #DontHave1Million?

Everything.

On Friday I spoke with a couple who have $72,000 in liquid assets, most of it in RRSPs, a combined income of $125,000, are in their mid-30s with two kids (five and three) and have just been approved by a major bank for a mortgage of $800,000. They were moaning. “Do you understand how few houses there are for sale for $900,000,” she asked? “This is simply not fair. There is nothing decent or in a neighbourhood I’d let my kids run around.”

I patiently explained that putting all of their net worth into a house, plus taking on mountainous debt, was completely irresponsible. In 15 years when the kids need gobs of money for schooling, and they’re both over 50, they’ll still be struggling with a mortgage so fat it prevented them from saving. Of course by then rates will have normalized and house prices likely retreated. Hard to imagine a worse potential situation – all to get a house they feel entitled to.

[..]All the self-serving bodies (Vancity, Re/Max, Royal LePage) forecasting prices will bloat far more in the next few years are wrong. Ditto for the realtors who have been trying to scare people over an invasion of horny Chinese or panting Americans. Ain’t gonna happen. Same goes for those who tell us central bankers will never raise interest rates, and soon banks will be paying people to buy houses. Nuts.

You’d think 30-year-olds who spent more than two-thirds of their lives in school would have figured this out. But I guess they skipped that bit in sociology and films arts classes. Truth is, mortgages will cost more next year and houses will cost less – pretty much everywhere. Those who take on massive debt now to buy at the top of the cycle will long regret it.

Nobody, after all, is entitled to a house. Getting a university degree doesn’t guarantee you to a six-figure salary. And maybe these virgins will have to do what so many in the past have done – move to the burbs, find a starter home sans granite or (horrors) get a job in PG.

Better still, get ready for what’s coming, and invest in financial assets. On Sunday I will give you the first lesson. Tweet that.

http://www.greaterfool.ca/2015/04/17/the-entitled/

Edited May 3, 2015 by Venger

[Greg Bowman]

Okay, so you're saying having debts is usually/always better than not having them? I have been quite consistent in saying not having debts - regardless of whether you think those debts are 'good' or 'bad' (I prefer 'productive' and 'unproductive') is better than having them. Maybe some businesses have found taking on debt at 0% and using those funds to buy government gilts is profitable, maybe your £300k of debt is at a lower interest rate than the yield you're receiving because you took that debt on - in which case the debt is productive and you taking it on has been beneficial.

I'm sure you could make up or cherry pick a special scenario to fit any point of view, that doesn't take away from the fact that most people would rather not have debts, because having debt is more expensive than not doing so.

For the average person in the street minimum debt is probably a wise choice. Your generalisations I guess I don't agree with 'most' people. Since we are dust eventually if I borrow in my eighties for that trip of the lifetime perhaps? is it an investment who knows ?

I have earned in excess of the magic £75k for twenty five years or more the figure that is supposed to flatten the happiness curve ie loads more doesn't mean loads more happiness, and whoever wrote that probably got it about right.

So I stand by my original post in my personal case I am not happier or or less so per se because of debt or it's lack. If I am using calculated debt to invest (and sometimes that was a damm good holiday with the kids) I feel happier then when I am in Uriah Heep mode and paying down every last cent.

I guess what probably agree on is that it is not debt per se it is the hopelessness of not being able to pay it off which grinds people down. If I earn £150k but borrow £40k for a nice second hand motor, knowing I can always sell it and stump up the difference, that is very different to someone using Wonga to feed the kids but the debt is much smaller

[longgone]

I have earned in excess of the magic £75k for twenty five years or more

i did not realise 75k a year is still not even a grand a week , income tax is way too high

[isg]

My bet would be BTL all spurned on by negative gearing

Aussies love their margin loans for equities trading and it was rather good fun listening to the calls from people having margin calls during the darkest days of the GFC I heard a few crying that they were going to lose their houses.

[jammo]

What on earth does 'almost $100,000 on investment loans' mean? Is the average household running a hedge fund?

The day you pay off your debts it's like a weight lifts from your mind. Never a borrower or lender be.

[gf3]

Just as a matter of interest.

Say there were two islands. One was full of prudent people that spent wisely and the other was full of people that borrowed and spent like drunken sailors.

Which island do people think would have the best economy and standard of living? (assuming the Islands don't trade between each other)

My guess would be the one that spent like drunken sailors would have more work and more fun.

[cock-eyed octopus]

Who are the drunken sailors borrowing from?

[Greg Bowman]

Just as a matter of interest.

Say there were two islands. One was full of prudent people that spent wisely and the other was full of people that borrowed and spent like drunken sailors.

Which island do people think would have the best economy and standard of living? (assuming the Islands don't trade between each other)

My guess would be the one that spent like drunken sailors would have more work and more fun.

The most aggressive with weapons bought on credit ?

[gf3]

Who are the drunken sailors borrowing from?

Surely you know by now money comes out of thin air and is borrowed from nobody.

[Venger]

Just as a matter of interest.

Say there were two islands. One was full of prudent people that spent wisely and the other was full of people that borrowed and spent like drunken sailors.

Which island do people think would have the best economy and standard of living? (assuming the Islands don't trade between each other)

My guess would be the one that spent like drunken sailors would have more work and more fun.

Going back a few hundred years, and setting it out that way (no debt vs debt). The non-debtors would soon fall behind and be backward.. then lose everything to the debt/capitalists, for some glass beads.. "and our priest want to speak to your tribal leaders".

The Gunpowder Revolution blew away ban-on-lending (Europe), when European markets realised they could exploit global opportunities... and needed capital for a new era of commerce and growth. (It remained in place in Middle East as they had too many destabilising periods from lending/high interest rates... where debtors paid, sometimes losing their rights in society... misery.... Muhammad exploited a time of such weakness when he took Mecca, when it was weak from so many insolvent debtors.. those who had lost lands with no stake in society.) It's the reverse now... the renter-saver-capitalists come 2nd to those willing to take on mega debt for their entitlement.

Capitalism is the money-from-many-hands (markets.. self-advancing/self-interest market participants seeking returns) that was needed for industrial revolution, plant, .. to get things done. Protestant reformers discarded the Middle Ages ban on lending at interest,.. Zwingli set Zurich on the path to become a world banking centre.. emphatically denying that lending at interest was sinful or contrary to the Bible; he argued "the obligation to pay interest flows from the commandment to 'render all their due'. Luther and Calvin also disputed that it was sinful for a Christian to lend money. Catholic church didn't lift its position against money lending until 1836, but capital markets and banks began to function in Western Europe almost as soon as the change in megapolitical conditions (metal suits of armour / long-bows etc very quickly disappeared from the battlefield.. with gunpowder weapons coming through) made investment on a larger scale possible.

There's nothing wrong with debt.. it's how we use it as individuals... what price we're willing to pay for houses. This place really is House Price Compassion at times.. (for buyers/owner side, vs renter-savers). We're not going to have the socialists 'no-debt' paradise; "people in the market will give away their position freely and we'll share it out as we see fit, fairly". House prices in my area I gauge to be way too high - and market buyers are setting higher and higher prices ever year.... but I only want hpc... not a socialist paradise massacre.

Edited May 3, 2015 by Venger

[Sandwiches33]

Debt is perfectly ok, I didnt want to tap my savings but needed some equipment for some projects, I buy what I need on interest free credit cards within 3 months it is all repaid but now. I can now tackle jobs with the kit and it can be a nice little earner. Even without savings I could still borrow to invest in myself, this is good.

This article shows me australians can be everybit as spectacularly stupid as brits. What is bad though is the few sensible folk who are just trying to live get utterly battered in this chaos. It is getting harder and harder to live a humble and restrained life. I know a few regular ozzys completely priced out of sydney now, not to buy but just to live.

[Neverwhere]

...One of my renter-saver pals recently dropped dead from heart-attack at 41 year of age btw.... so who is wrong? Will never know anything of joy buying a home with his wife... (as 'the $1m+ victims' did, and their years of at least pretending they were the best) Had his money in the bank. Let's keep on thinking about the debt soaked victims eh.

Sorry for your loss Venger. And for his.

[Venger]

Sorry for your loss Venger. And for his.

Thanks Neverwhere; I hadn't been in contact with him for quite some time - we'd known each other from 11 years old at school. He did at least live life to the full (apart from avoiding debt and saving). He was like top athlete at school, and by choice, throughout his life, never drank alcohol, never smoked, (never tried a spliff etc in our social group in our 20s etc).

Indulge in mortgage debt asap and hard... they should have taught us that at school - that ultra-strict math teacher we had.. if only he'd known about forever hpi.

Edited May 4, 2015 by Venger

[Bloo Loo]

Just as a matter of interest.

Say there were two islands. One was full of prudent people that spent wisely and the other was full of people that borrowed and spent like drunken sailors.

Which island do people think would have the best economy and standard of living? (assuming the Islands don't trade between each other)

My guess would be the one that spent like drunken sailors would have more work and more fun.

for a time,yes

Edited May 4, 2015 by Bloo Loo

[gf3]

for a time,yes

Well I would say on island one if no one was stupid enough to borrow and buy a new car. No one would be stupid enough to borrow and build a car plant.

Ann Pettifor seems to say that Africa doesn't get very far because of the lack of banks and borrowing and is pro Fractional reserve banking.

If island one and two started trading between each other island one would be Germany and island two Grease.

[winkie]

Well I would say on island one if no one was stupid enough to borrow and buy a new car. No one would be stupid enough to borrow and build a car plant.

Why borrow to buy a new car when you can save to buy the secondhand castoff car.....then if clever make new cars from parts of the old cars......one island would still become prosperous but at a slower pace.....their wealth would be real as long as they held the natural resources that they will require.....air,water,light and the earth and the resources it contains. Edited May 4, 2015 by winkie

[cock-eyed octopus]

Surely you know by now money comes out of thin air and is borrowed from nobody.

Sounds like the money my granddaughter uses when playing shops.

[canbuywontbuy]

The island one/two analogy is to polarise the debate - to say whether debt is good or bad, rather than look at debt as a sliding scale, or even type/quality of debt e.g. borrowing to invest in a business versus a liar loan mortgage. Here's another two islands - one bans immigration, the other allows it (as a pro-immigration argument). Again, it comes down to scale and quality, not should it exist at all, or exist in as much abundance as you like.

Edited May 4, 2015 by canbuywontbuy

[gf3]

Why borrow to buy a new car when you can save to buy the secondhand castoff car.....then if clever make new cars from parts of the old cars......one island would still become prosperous but at a slower pace.....their wealth would be real as long as they held the natural resources that they will require.....air,water,light and the earth and the resources it contains.

Impossible to save without some one else going into debt all second hand cars were new to start with.

I think you are missing the point in my earlier post about the two islands.

[Bloo Loo]

Well I would say on island one if no one was stupid enough to borrow and buy a new car. No one would be stupid enough to borrow and build a car plant.

Ann Pettifor seems to say that Africa doesn't get very far because of the lack of banks and borrowing and is pro Fractional reserve banking.

If island one and two started trading between each other island one would be Germany and island two Grease.

Well, if Greece made things the Germans wanted, then there wouldnt be a one way trade.

At some point, if an entity has to keep borrowing to buy from another entity, then there will come a time when the credit stops, and so does the buying.

forget even the Island. Imagine two people, one grows food by the toil of his labours, the other, who has the same amount of land, decides to borrow and lie in a stupour on his land.

At some time, the non labourer is not going to be able to buy food from the one who makes it. (not sure where he gets the alcohol from, maybe he buys potatos on credit).

The one who makes it, might still have a surplus, but he cant sell it to the other guy. He still, however, will get fed and survive.

This illustrates the importance of wealth over credit.

Edited May 4, 2015 by Bloo Loo