Why should I care about my debt if we're in for a hard crash? Who's going to come and collect?
1. Self-respect.
2. Until the hard crash, if it occurs, the debt will be hanging over you.
3. Hard crash may not happen, or may not happen for many years. I think a soft crash is much more likely but no one knows for sure.
4. Financial prudence is a good habit to get into. It's much easier to get into good habits now than later.
5. Inflation may not occur; there are also deflationary tendencies.
I saw how debt trapped my father and is trapping my brother... no thank you!
If we have a hard crash, I'm not going to worry about debt. To me, a hard crash is 50%+ unemployment, starvation on the streets, electrical grid down, etc. Which I don't think is going to happen for quite some time. Seriously, I'd imagine I'll be trying to find food and water if it comes to that. I'm not going to worry about my student loans. I'm sure most of you would agree with me on that. I sure as hell wouldn't take my day's supply of food and sell it to make a payment to a bank.
Much more likely in my eyes is inflation. If we see 20% inflation per year for 2-3 years, that 100K in debt is peanuts. Frankly, I think the best way for me to improve my situation is to go back to school and learn a useful trade/skill/craft that's going to be in need forever.
If I was just trying to look over my investments and these were normal economic times I'd be right next to you. I'm currently debt-free and in the black to a small extent, and I haven't been more than $500 in debt ever. Unfortunately, I don't happen to be sitting on a pile of cash I can use to finance my education.
Seriously, I'm not going to sweat it. I think the soft crash is much more likely, and it'll drag on for years and years while we sort out what to do next. I'll be able to pay on my student loans.
Posted: Wed Nov 17, 2004 12:44 pm Post subject: Sven -- that doesn't make sense
Sven -- your post about house mortgage doesn't make sense to me
Quote:
They can and probably will demand more $$ toward the equity and if you can't pay, they will take your house.
The mortgage is a contract, and unless it has some kind of accelerator clause, they couldn't care less what your equity is. You might care, but as long as you make your payments, they can't touch you.
OTOH, if you're going to file a bankruptcy or not pay other debts, then your equity becomes a target, and if it's at 10% or more, I would think you'd be stuck paying them, over time, to save your house.
Joined: Oct 12, 2004 Posts: 599 Location: The Pit of Despair
Posted: Wed Nov 17, 2004 1:00 pm Post subject: Paying off debts...no brainer
With regards to debt, the best advise is not to have any. There is always the chance a creditor might want to collect on the debt in a way that is detrimental to your well-being.
The idea that inflation will hit 20% and make the debt seem trivial is silliness, unless it is fixed-interest debt. The only fixed-interest debt that comes to mind is mortgages, auto loans. Unsecured debt is generally a variable APR (unless someone can give me an example where it isn't...?). As inflation increases, you can bet that the rates on your credit cards and any other unsecured debt will increase as well. Even student loans have variable interest, but there is a cap of like 8.9% or something.
So here are my preferences for indebtedness:
1) No debt. No brainer. This is the best scenario to be in.
2) Fixed-interest debt for items like mortgage & auto, where it would be unreasonable to save up the cash to purchase these necessary items. This debt is not a big gamble.
3) Unsecured (variable rate) debt and to some extent ARM's (adjustable rate mortgages). Taking out this kind of debt is the equivalent of gambling. You should never gamble with your hard-earned money.
Like many here, I believe tough times are probably ahead, but I don't have a crystal ball, so...why risk it all?
Say you have a house worth $200K, that you put little down on, say 5%. Then the value drops 50%. It's now worth, 100K but you still owe almost 200K. To the bank that means you are almost 100K in the negative and they don't like that. They can and probably will demand more $$ toward the equity and if you can't pay, they will take your house. It could and has happened.
Maybe I'm wrong here, but I don't see how the bank is going to have much to say one way or the other if you're continuing to make the payments. Isn't the issue more if you stop making the payments? Then they could seize your house, evict you, and sell the house for lots less than you paid for it. You could end up with no house and owing the bank $100,000. It's the same concept as being "upside down" on a car loan, right? If you're still making the payments, that's what they want. It's a lot easier than trying to get money out of someone they just bankrupted and made homeless.
Does anyone have thoughts about whether the same devaluation issues apply to land as to houses?
As soon as I really started thinking this peak oil thing might be for real, it occured to me that the most important thing I could possibly do was to get my med school loans (all $160,000 worth) into a fixed rate consolidation loan. I figure that's a winner either way. I can't imagine the prime rate is going to get lower than it is right now. My consolidation loan came in under %4. If the economy does tank, seems to me that runaway inflation is an integral part of that. If that happens, my loans will shrink pretty quickly. My next project, hopefully accomplished within the next 1-2 years is to get myself a couple hundred acres in the mountains and work like heck on becoming self sufficient. Again, seems to me like a win-win. Things go well...I pay it off...no harm no foul. Things go south...after a few years of run away inflation, I pay it off in Monopoly money.
The down side will be commuting an hour to work, but I figure worst case, I get a motorcycle. If and when TS really does HTF, won't be needing to do no commutin at all. Just store the harvest, take care of the goats, and gaurd the property.
With inflation having risen by 1.7% in October (3 X what was expected by the market) I'd say you'd be very well advised to get the med-school loan onto a fixed rate arrangement ASAP.
regards,
Backstop.
PS: Assuming a decline of industrial medical supplies, might it be worth getting paralell skills in herbal medecine ? Maybe you already are ??
With inflation having risen by 1.7% in October (3 X what was expected by the market) I'd say you'd be very well advised to get the med-school loan onto a fixed rate arrangement ASAP.??
Already did. Finished the paper work 2 months ago. Like I said, it's between 3 and 4 percent fixed rate. Just hoping I can get a morgatge locked in before they really climb.
Quote:
PS: Assuming a decline of industrial medical supplies, might it be worth getting paralell skills in herbal medecine ? Maybe you already are ??
Well...part of the plan, after getting land, is to convince several friends, fellow believers in the way of the roach, to move there and start a collective. One of them is an awesome herbalist who's lived in those mountains for decades and knows the local plants. I will still be able to do minor surgical stuff post-crash. Surgical instruments last for a long time. I'm hoping anti-biotics will be one of the last things to go. It's going to be an unhappy thing for everybody if we find ourselves in a world with lots of strife, lots of people getting injured, and no anti-biotics.
The way of the roach, btw, is my personal philosophy on life. Roaches can survive anything. Roaches can survive a nuclear war. That's because they have almost no needs and can live off almost nothing. I figure the key to survival is learning to think like a roach.
Re - antibiotics, while they're plainly going to be produced as long as possible, they are of course being 'lost' as immune stains of bacteria evolve, apparently due largely to agribusiness malpractice in stock-rearing.
- In the UK many hostitals are infected with a lethal bug immune to a.b.s, and it's now killing many thousands per year. Going to hospital is getting increasingly dangerous !
What's your professional take on the rate of loss of a.b.s due to immune strains ?
Joined: Oct 15, 2004 Posts: 2196 Location: Arkansas
Posted: Wed Nov 17, 2004 5:52 pm Post subject: debt consolidation
smallpox,
Debt consolidation can be a good idea, but it depends on what you are consolidating. I don't think its a good idea to consolidate student loan debts or credit cards blah blah with a home mortgage, for the simple reason that your home is or should be your legal castle. Most states will protect your home from judgment debtors (as opposed to the mortgage holder). Therefore, my personal legal opinion is not to consolidate a bunch of debts into a home mortgage.
As far as the way of the roach, its simply stating that things don't make people happy, happiness is perspective, in fact, as most eastern philosophies would say, happiness is the absence of desire. The roach desires nothing, therefore, it survives. The difference between people that survive or don't catastrophies or any event, even a marathon, is only a difference of attitude. As JFK said, all obstacles are opportunities.
What I have disagreed with on this particular thread is that some people want to use peak oil as an excuse, a twisted opportunity, to not repay obligations (debts). I think that's an outlook that is very selfish, not conducive to anything, and is the very reason that we are in the mess we are in, bc somewhere along the line, people have come to think only of their own selves, justify only their own needs, without realizing we are all connected in many ways, including oil, and have forgotten that we have a social moral obligation to each other, that begins with things like accepting responsibility for what we do at an individual level.
I think, though, that man is more akin to the wolf than the roach. The wolf is highly intelligent, a pack animal, a hunter, has rules for the pack, lives a hard life, can withstand anything, may go weeks without eating, plays with its young, morns the loss of their members, but never takes nothing more than he/they need. So, I like your analogy of the roach, but roaches eat each other, wolves don't. People have multiplied and acted like roaches too long, so I hope that its the wolves that survive peak, not the roaches, although I'm afraid the roaches will survive, bc they always do.
Posted: Wed Nov 17, 2004 6:06 pm Post subject: Re: Sven -- that doesn't make sense
Wrong..look into it..The can call in the note at ANY TIME...And historically speaking if you look at the Great Depression, they DID call in notes and take people's homes, and demand more money. They CAN and probably will do that if you have little or no equity and the value drops significanly thus creating substantial negative equity for you.
MrGresham wrote:
Sven -- your post about house mortgage doesn't make sense to me
Quote:
They can and probably will demand more $$ toward the equity and if you can't pay, they will take your house.
The mortgage is a contract, and unless it has some kind of accelerator clause, they couldn't care less what your equity is. You might care, but as long as you make your payments, they can't touch you.
OTOH, if you're going to file a bankruptcy or not pay other debts, then your equity becomes a target, and if it's at 10% or more, I would think you'd be stuck paying them, over time, to save your house.
I don't think its a good idea to consolidate student loan debts or credit cards blah blah with a home mortgage, for the simple reason that your home is or should be your legal castle. .
Consolidating student loans with anything else seems pretty dumb to me. Student loans are gauranteed by the government, the interest on them is less than anything else that I can think of.
Quote:
I think, though, that man is more akin to the wolf than the roach. The wolf is highly intelligent, a pack animal, a hunter, has rules for the pack, lives a hard life, can withstand anything, may go weeks without eating, plays with its young, morns the loss of their members, but never takes nothing more than he/they need. So, I like your analogy of the roach, but roaches eat each other, wolves don't. People have multiplied and acted like roaches too long, so I hope that its the wolves that survive peak, not the roaches, although I'm afraid the roaches will survive, bc they always do.
I hear aspects of what you're saying. I think humans currently are behaving not like roaches, but like a cancer. Roaches live off waste. Cancer wastes the living. We have been taking nature at it's most beautiful and selfishly and stupidly plundering it, rather than looking for waste products we can turn to a usefull end. While I love and admire wolves, they're pretty finicky. They have very specific requirements about where they will live and what they will eat. Roaches can be perfectly content living under your sink or eatting the crumbs from your counters. I think the adaptability and the ability to live off what others consider waste will serve us humans well. Maybe we can be non-canibalistic roaches?
Quote:
What I have disagreed with on this particular thread is that some people want to use peak oil as an excuse, a twisted opportunity, to not repay obligations (debts). I think that's an outlook that is very selfish, not conducive to anything, and is the very reason that we are in the mess we are in, bc somewhere along the line, people have come to think only of their own selves, justify only their own needs, without realizing we are all connected in many ways, including oil, and have forgotten that we have a social moral obligation to each other, that begins with things like accepting responsibility for what we do at an individual level. .
I agree completely that we need to take more individual responsibility for our actions. I'm not sure that paying your credit card bill is the highest expression of that. To me, if you are growing your own food in an ecological way and making your own clothing and doing your best to stop consuming manufactured goods and you are taking responsibility for protecting yourself and you're homeschooling your kids, that is way more responsible than driving your SUV to work at an environmentally destructive job and leaving your kid at home alone playing video games all evening, just so you can make money to pay to a credit card company. Certainly not getting the debt in the first place would be ideal, but you have to bloom where you're planted.
Personally my drive is not to get out of paying off debt, it's to live in a world more interesting, more real than this borrow, work, consume, repeat stupidity. We're all just killing time between being born and when we get injected full of formaldehyde and permanently warehoused in some inane "memory garden". What happens in between is all we've got, and were wasting it working at jobs we hate so we can buy entertainment to distract us from how bad our lives suck. Our lives are pointless and boring and dumb and it doesn't have to be that way. If modern society keeps going...fine...I will buy some land in the middle of nowhere, work as much as I must to pay my mortgage, and otherwise do my own thing. If the capitalist house of cards implodes on itself, all the better.
----------------------------------------
"We're the middle children of history.... no purpose or place. We have no Great War, no Great Depression. Our great war is a spiritual war. Our great depression is our lives.. "-Tyler Durden
What's your professional take on the rate of loss of a.b.s due to immune strains ?
Well...I guess everything is relative. Certainly antibiotics are the sort of thing that will work for a certain period of time and then will quit working. Some bacteria are smart. They've figured out almost everything we've been able to come up with. Others are dumb..still responding to penicillin. Antibiotics are a pretty amazing gift to us from the world of fungi. If we were even remotely sane as a species we would save them..use them carefully. but we're not sane. As is so often our way, we have taken the approach of using antibiotics with wreckless abandon and then waiting to see if some catastrophe ensues. Eventually it probably will if other factors don't intervene first.
Those threats, though, are currently still theoretical. I have never personally seen someone who had an infection that couldn't be treated with antibiotics due to resistant organisms. Right now it's mostly an issue of having to use an IV antibiotic, because the bug has become resistant to the oral antibiotics or needing the $1000 course of antibiotics instead of the $10 course...that sort of thing. Antibiotics will eventually loose their effectiveness, but it will be a gradual process over hundreds of years. I don't think modern society will be around long enough to see more than the very begining of it.
Joined: Sep 18, 2004 Posts: 58 Location: Australia
Posted: Wed Nov 17, 2004 9:57 pm Post subject:
I like to keep things simple because there's less stress and life has enough burdens. So I've always been a cash guy. If I can't afford it with cash, I don't buy it. A little old fashioned perhaps, to be the only guy in a queue who pays in cash, as everyone else has plastic cards, but I can account on what I have a lot easier that way. I've never been a sucker for fads and fashions so I don't use a credit card. I've only ever had 3 loans in my life. Paid off my student loan. Paid off my house loan. Paid off my business loan. Got together some savings. I was going to buy a 2nd property, but chose not to on the basis of the real estate cooling. I'll buy later.
Joined: Nov 11, 2004 Posts: 978 Location: Heart of Canada's Oil Country
Posted: Fri Nov 19, 2004 12:48 pm Post subject:
From Matt Savinar's The Oil Age is Over (I hope it is ok to post this)
What’s going to happen to people in debt?
Big business is already lobbying the government to slowly reinstitute a
feudal style system of slavery/indentured servitude here on American soil.
The future will not be a good time to be in debt. Our prison population
has grown by approximately 500 percent since 1980. We now incarcerate 1 out of every 75 men in the US at any given time. About 1 out of 20 men can expect to be incarcerated at some point during their life. The debt loads carried by many Americans have skyrocketed during that same time. As the economy begins to dissolve, and unemployment becomes endemic, many people will not be able to pay their debts. Although the practice of debtors’ prison was abolished centuries ago, it could again become viable for the following reasons:
1. People unable to pay their debts will receive the opportunity to do so.
2. Industry will benefit as it will be able to outsource labor to domestic
work camps.
3. The construction and maintenance of work camps will provide
additional jobs.
If the prospect of debtors’ prison seems outrageous to you, consider the
fact that many states punish low-level drug transactions with 10-, 15-, and
even 25-year-to-life prison sentences. Simple drug possession is now the
number-one crime for which people are incarcerated.
If the government is willing to incarcerate an individual for 25 years as
punishment for a $20 drug transaction, what makes you think they will
hesitate to incarcerate an individual for a $20,000 bankruptcy, especially when that person will provide a source of cheap labor (energy) to a crumbling economy?
If you find this hard to believe, I ask you: where did big business get
labor/energy prior to the advent of fossil fuel-powered machinery?
Now that the supply of cheap fossil fuel energy is diminishing, big
business will have no choice but to return to a system of slavery to maintain its profits.
Legally, big business is practically required to take this course of action.
Remember, the corporate officers of any publicly traded corporation have a fiduciary duty to do what is best for the company, so long as their actions are not illegal.
There is nothing illegal about lobbying the government to slowly bring
back a system of labor resembling slavery and then making use of this system once it’s in place.
It’s relatively easy for these corporations to effectively lobby government
officials as these government officials, more often than not, used to work for the same corporations now lobbying them.
This will work out great for the big business interests that both George W.
Bush and John F. Kerry have courted throughout their presidential campaigns. Regardless of who is installed in the White House come January 2005, these contractors will have access to an ever-increasing pool of cheap, domestic labor.
I have never gone into debt, or even used a credit card until web shopping and the prospect of getting an apartment in the near future convinced me (and boy was it hard to get one!).
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