Without cheap, easy, abundant and fresh credit, what will become of the American consumer? What will become of the American economy (70% of which is consumer spending)? What will become of our self-image?
Because you know we don't earn enough to actually PAY for all of this stuff...
November 04, 2007
HousingPANIC Stupid Question of the Day
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That was the funny thing about USD - that it seemed to be supported more by how much is consumed in its homeland rather than owned or invested.
But I bet my (now accumulating) pile of greenbacks that the deconsumerization experinence is going to be informative - we actually need to learn something like this: abstinence syndromes, depression (economic as well as psychological) from underconsumption, church-sponsored reformatories for the worst offenders, and, of course, outdoing Jones with your savings!
"deconsumerization"
New word for HP. Beautiful. I'm going to be using that one Andrew. Nicely done.
Went out to dinner last night with my husband-Friday night. A decent Mexican restaurant had no wait for a table,practically empty...only a handful of cars in the parking lot.
Trying to get out of the lot was a different story...the restaurant is at the entrance of a shopping mall, with a non-stop stream of cars going into the mall.
dinner or shopping? Dinner or shopping?....it must be cheaper to go shopping!
I have come up with the new name for our currency. Henceforth, it shall be called the xera. That's a combination of Xerox, for the piece of Xerox paper that it is; lira, which in the past was one of the world's chronically weak currencies; and, most importantly, the fact that it sounds like zero. That is ultimately where the xera is headed.
Brother can you spare a ruble?
Watch as Russia rises from the ashes, as the U.S.A. swirls down a toilet bowl of economic despair.
Be afraid, be very afraid.
It will mean an immediate end to China growth, and end to India Growth
Oil prices will tumble.
And yes Keefer and end to the EU as we know it.
The entire culture and economy needs a sort of intervention and re-hab for our addiction to debt driven consumerism. It's destroying our culture and environment. And all for what? A bunch of crap we can load up in our SUV's, drive to our McMansions? In my ex-urb neighborhood in SoCal, nobody parks in their 2 or 3 car garages because they use them to store all of the extra stuff they can't fit in the house. Seems like "hoarding" (psychological disease) to me.
ARE YOU A CREDIT WHORE???
Speaking of DECONSUMERIZATION, after viewing the Peter Schiff video: 1) is it true that we've bundled credit card debt in this country and sold it off to investors the same way we did with mortgage-backed securities? Aren't these unsecured debts? How is that possible and do ratings companies have their corrupt fingers involved in this too? 2) If so, isn't this a final death sentence for our already floundering economy and confidence in the dollar by foreign investors? I didn't know this before and please say it isn't so!
Everything will return to normal soon. Benny is retooling the presses to print 1000, 5000, 10000,20000, 50000, 100000 bills. We were just wasting to much ink and paper and that could be inflationary!!
Should a small investor take any particular precautions to avoid a certain class of investments as this CC receivables are marked to market?
So are credit card receivables traded as money market investments?
Money market funds come to mind but I haven't any idea.
Thanks
Keith said:Because you know we don't earn enough to actually PAY for all of this stuff...
I dont know. Based upon the people on this blog stated self worth on previous posts, I would say either #1. They were in on the con game of stated income applications or #2. They really are rich and no one here has anything to worry about since we'rfe all self made millionaires.
A business associate and friend of mine from Germany has frequently mentioned how ridiculous it is to issue credit here without any real means of paying it back.
He mentioned in Germany it is not easy to obtain credit, which forces the borrower to actually have the means (their own cash) to pay debt back.
From student loans to entitlement programs, we've created a society which has become dependent on using money we would have to spend a life-time paying back, if we had to use our own money.
The housing crisis would never have happened if people actually had to use a good chunk of their own money in the first place to make a downpayment on a house, but we're well beyond being to correct this catastrophy in residential real-estate.
We'll see where all this goes as we head further into 2008, but it looks very bad for the overall health of our economy.
#2. They really are rich and no one here has anything to worry about since we're all self made millionaires.
Agreed. That was a real exercise in penis stroking. I paid for my own university and I'm doing well compared to my other university friends OF THE SAME AGE. Especially considering I've only been in the work force for 5 years. But compared to presumably 65yo retiree's I'm not doing so well after all.
who is going to pay for it all?
US corporations, US investors and US shareholders with some of that cash they have. I think US corporations have the highest levels of cash(savings) than they ever have. just look at last week and the week before with all the writedowns. the shareholders are paying for it too.
"He mentioned in Germany it is not easy to obtain credit, which forces the borrower to actually have the means (their own cash) to pay debt back.
From student loans to entitlement programs, we've created a society which has become dependent on using money we would have to spend a life-time paying back, if we had to use our own money."
In Germany they have an even bigger entitlement system. no, this has everything to do with the mentality of US consumerism/keeping up with the Jones'. if entitlements were the problem, Germany would be an even bigger mess.
People will learn the hard way to actually PAY for shit.
People will learn that if you can't pay for it outright, you don't deserve to have.
I'm extremely fortunate to have had bad credit the first 7 years of my adult life (years' worth of student loans I couldn't pay), because I either paid cash for something, or I didn't get it. I never used credit and still don't. My inability to get credit has made me financially sound.
Now when I get endless credit card offers in the mail every week they go straight into the trash. I keep 4 cards at zero balance to keep my credit score high and have an Amex I charge everything to and pay off in full every month.
That's it.
Now it's time for the average lazy self-entitled American to learn to do the same thing.
KW:
A German coworker of mine, who previously worked in banking indicated to me that their banking people must comply with a code of ethics- that is, they are essentially barred from loaning people too much money and must ensure that the people have the ability to pay the money back. Also, it is my understanding that it is very difficult to get a credit card.
"But compared to presumably 65yo retiree's I'm not doing so well after all."
Anon, I know the feeling. I obtained my undergrad and professional degrees all on my own (with a little help from the US Army) and have only been in the workforce about 5 or 6 years- I am even. Of the people I know, most have tons of student loans at or near 100K+.
Credit Cards should only be used as a convienience so you do not have to carry cash and worry about losing it/robbery. Plastic also makes refunds and exchanges go very smoothly when you buy something. As soon as the bill comes it should be paid in full the very next day. I've done this since I got my 1st credit card (I only have 2 of them now) in college. If you can't pay for something cheap like clothes or meals in full you have no business buying them.
I have not even ever financed a car. I'll always buy from the first owner after it has been on the road and depreciated to about 25-50% of the new MSRP and pay in CASH.
Right now home buying is stupidity but when I do buy to make a home for life (not use it as a piggy bank or an investment property) I will put at least half down in cash and finance the rest at a fixed rate. This is the ONLY purchase I plan to make on credit in my whole life.
"It will mean an immediate end to China growth, and end to India Growth Oil prices will tumble.
And yes Keefer and end to the EU as we know it."
Yes and the citizens of Rome said exactly the same thing namely ""But Rome is too big to fail, if Rome falls bang goes the world economy etc etc. They too believed every word they were saying right up to the point where the barbarians put their heads on a spike!!
The only credit I use for more than one payment cycle is a 6.125 fixed mortgage on my third house.
I work my butt off as a NYC Ironworker and my wife is a designer, and we have no other debt.
If I need to, the mortgage can be paid off with savings.
(We're in our late 50's, and my wife is from Central Europe, so it was easy to learn from her how to be frugal).
Went to walnut Creek today...
Not many people strolling around the downtown area like there ususally is on a Sunday afternoon.
Big huge banner across the front of Bombay Co.
"GOING OUT OF BUSINESS"
Stopped by a furniture company in Pleasant Hill to check out there sofas...they're going out of business too.
Drove to Pleasanton to buy some fabric, another small private owned furniture store going out of business!
If you listen to the FEDS, they say everything is great.
BTW...
I shopped by a couple of consignment shops to check out their sofas in San Ramon-they are packed to the gills with the cheap china furniture and home accessories! At first glance, they look nice, but closer inspection tells the truth. These shops use to carry nice quality vintage pieces...but no more.
Only this cheap crap you see in all the stores.
Not going to waste my gas checking these places out again!
As I said before the stores are starting to empty out. I think people are looking more than they are shopping. The grocery stores are really empty looking and it appears they don't feel the need to fill the shelves, no one is buying it anyway. I am hearing so much less spanish these days, come to think of it I am seeing a lot less hispanics period. WalMart moved to the next city to far away for me to drive there so I can't vouch for W-M, but if anyone feels the way I do about that W-M drive and I know why I won't go the traffic backs up for miles that has to have an impact on visits where it wasn't a problem before. I noticed at the beginning of the year stores were starting to empty out and now it is just so much more obvious. Here in California the filipino's don't believe that in the land of milk and honey and gold paved streets there is a problem there is only a glitch in their pursuit of riches they are the only one's who are still packing the stores and spending like they are so rich they don't have to worry about a recession. Wait until they get a dose of American finance and they'll be the last to know. LOL Happy Shopping. I stopped cold turkey two months ago, it's painful but necessary. I am a girl and everyone knows what shopping means to us. LOL
All our speculation here has me remembering (though not in a nostalgic way) the last housing bubble of the 1980's.
The mechanisms were different, but the outcome was often the same, except this bubble-implosion will clearly be worse.
We bought a modest condo in 1983 in a highly bubblicious Florida town. Interest on the loan was 13.65% -- we put 20% down. Still, the application process was probably tougher than getting a top-secret clearance.
This house was sold at about breakeven price six years later when that particular bubble started deflating.
Just checked realtor.com to be sure but the price of an equivalent unit is exactly double what we paid in '83--24 years ago! That's a pretty anemic return.
Even with far better financial controls on the issuance of mortgages, the fraudsters of the time still managed the S&L scandal, after all, which took a huge chunk out of everyone's real estate "equity."
Are credit cards the "new new" thing in financial collapse? Quite possibly. For awhile credit card "banks" have been paying better-than-average rates to depositors. Hey, they have to get the money somewhere (other than the 20% they charge the debtors, that is).
I hope those "banks" are paying their FDIC insurance. I guess we'll find out.
I don't think we're anywhere near the end of this multi-part bubble yet.
Hmm... pay the electricity bill or buy that pair of UGGs? What to do what to do...
Maybe people will start to appreciate what they already own instead of buying something new every other minute.
No more credit? Probably mass suicide.
Anon said:"I am hearing so much less spanish these days, come to think of it I am seeing a lot less hispanics period".
I'm hearing a lot less spanish here in the bay area as well, but a friend burst my bubble yesterday, told me the illegals go back to Mexico now until January, for the holidays...
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