Posts
1103
Joined
11/1/2006
Location
Washington, DC, USA
Edited Date/Time
1/22/2012 1:00pm
Can someone please explain to me in laymans terms how all of this economy bullshit is going to effect me?
Companies you deal with may have credit lines.
Farmers use credit lines to buy needs to start their season and repay at season's end
Transportation lines work on revolving lines, because no one walks around with thousands or millions in cash for fuel
While it may not touch you directly, it would touch you by third party by eliminating or reducing the ability of those in your lives from being able to conduct business, and that will hurt you through higher prices or unavailability
I don have a retirement account either. I find it funny that they want to scare people by telling them they wont be able to borrow money for their kids educations etc. Do people really do that? Thats lunacy! What I dont get and never have about credit is why people are willing to spend even more money on a product by a huge margin than that item would cost if they paid cash. Sure homes would be hard to save for. So rent. And anyone can save enough to buy a car cash. Ive done it all my life and I never made more than 30k a year. And if you cant afford to pay for something then try this on for size: DONT BUY IT. Ok I know Im probably the only person on VItal that thinks this way so Im not looking for an adda boy, I just wanted to throw out and share another perspective.
No one REALLY knows what could or would happen, and that is what the Fed and Gov't fears.
I know as a small business, I don't want the economy to collapse because it could run me out of business. If everyone is broke, no one is buying.
I'm OK with the loan as long as some provisions are inserted, much of which is likely to happen.
From all I see and read, this has to happen.
Banks freezing up will lock up this country and the economy, driving tons of people out of work, businesses closing (businesses that did nothing wrong), farming and transportation sectors being frozen...It'd be a really bad mess, IMO
and not something we can afford.
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thre financial institutions if i understand this correctly, make a living off of writing loans.....and then selling them off to stay liquid....they are not able to sell them off now so they cant make new loans!
Thats the way their entire country lives. They save for what they need and then pay cash for it.
By the way Holland made lots of money in the 18th century loaning the other European nations and our country money to fight wars with each other.
The other bad business model was allowing unregulated investment products based on those loans that presumed people would pay back loans they couldn't afford, or at least the value of the property would hold to secure the loan.
I don't think those bad business models are going to continue after this, so it's not that much about propping up a bad business model.
To me, and this is not advocating for or against the bailout, what they are talking about here is not saving the bacon for these companies, but preventing the much wider fall out to the economy. If there was some way you could isolate the pain to the individuals who caused it, that would be a good way to go. But it has extended to a broader collapse of the credit and financial markets, and thus to the general economy.
I save a large percentage of my income for retirement via 401k.
You have nothing Dougie? get back to us when we're kicking back at 65 and you are working at Home Depot or attending carts at WalMart. Who will need a loan then, not me, you - unless you are physically able to work. May not be, who knows, all that tri stuff you do might make it so you can barely walk at 65.
My dad is 70 and living off his 401k - now an IRA. I learned from watching him save up.
My father in law is 69 and works at Home Depot just to put food on table. He doesn't have a dime saved up. It hurts my wife to see him grind away there every day just to survive. He didn't plan enough when he was younger.
Paying cash for stuff, good job if you can do it. Everybody has a different tollerance for personal debt level. Majority of Americans have crazy debt.
MANY businesses work on revolving credit lines to maintain liquidity and ease of use.
A farmer is the easiest example. Farmers do not make tens of thousands of dollars a year in profit, but that's how much it takes to start a season.
So the farmer utilizes a line of credit to buy seed, fertilizers, conditioners, fuel for the equipment and payrolls, paying it back at season's end at harvest...same applies to cattlemen.
Without credit, farmers and cattlemen dry up and are out of business...what will that do to your food costs?
The same applies to the trucking industry and many other segments.
This is less about your credit than it is about business credit.
not so much simple credit cards - although personal credit card debt is, or is near, all time highs.
Out of curiosity, what is the 3rd source of income you put together?
The guy was saying that the government is essentially becoming the "scratch and dent" market for Wall Street.
The "Scratch and dent" market is where loans are sold cheep, because nobody else wants them or the intended investor won't purchase it. When we sell a loan on "scratch and dent" it's usually for 50%-60% on the dollar (If we sold a $100,000 mortgage on scratch and dent, someone would pay us $50K-$60K for the $100K loan). Keep in mind, just because a loan is sold on scratch and dent, does not mean it's in default or even that it will default...there could be a huge number of reasons why.
Anyway, the Feds are essentially going to be purchasing $700Billion in "scratch and dent" loans from wall street. And the word on the street is that they are getting them far cheeper than a typical scratch and dent servicer would (the guy said he'd heard rumors of as 10-20 cents on the dollar). So they are getting a huge number of mortgages for very very little.
Keep in mind the government will not be servicing these mortgages...they are just buying the note...the mortgage holders will make their payments to whomever they make their payments too now. (the servicing and the notes are commonly sold to different places).
He also said that the government will hold these mortgages until the housing market stabelizes and they are able to sell them back to wall street for face value.
Obviously, some of these loans are going to foreclose....but not all of them maybe 10% will forclose? Who knows). And the government will sell the remaining mortgages back to wall street at face value.
Anyway, he was saying (and I've yet to find any literature to back this up....I'll keep looking) that the government would put themselves in a position to earn over 2 trillion dollars.
Assuming he is correct, I think Warren Buffet saw the light as well, and that is why he just gave Merrill Lynch $5Billion. Same thing...Buffet bought $5Billion in mortgages for $.20 cents on the dollar...and plans to sell them back to Merrill at face value once the storm passes.
Just what I heard...take it for what you will....
What do you mean "if you can do it" - Anyone can do it - you just dont live beyond your means and do without. No instant gratification and save your money. There are folks who come to this country with nothing but a funny spelled last name and dont even know english who work hard, save and pay cash and get ahead just fine. You dont hafta buy into the hype and keep up with the Jones. Do you know any Depression era people? I do, lots of them. And they live their life prepared for the bottom to fall out any second. Theyve been there. They see everything different because of them days, and rat hole money and pay cash always.
Im just like Dougie, Im a cheapskate and live in a rural area. I dont make big bucks, but I dont have big lifestyle expenses. All my friends live or commute like lemmings to Houston to make that big salary working a corporate job that can dissapear any second, all that stress and chaos just to make payments on their huge house, several financed way overpriced vehicles, plasma this and hi-def that gizmos, toy hauler trailers and dirtbikes/quads all on the payment plan. Me? I have a dinky house with a teeny mortgage (and once my son graduates college I will sell it ), all 3 of my vehicles, dirtbikes, trailers everything paid for and the titles in my gunsafe. My TV is an old tube type (no fancy plasma/LCD), my stereo is 35+ years old bought cheap offa Ebay one piece at a time - no fancy home theatre for me.
Dont feel alone Dougie, you arent alone.
Pit Row
The excessive pressure being put on congress to rush it is a very very bad idea. I don't support the bail out at all, but it's going to happen, and IMHO, it needs to be done right.
They won't get a second chance.
Personally, I think the bail out is just as likely to create a long period of economic hardship as simply allowing the market to run it's course. The only difference is........we'll have pissed away 700 billion, diluted the value of the US dollar significantly, and created massive inflation. I mean really..........when you boil it down here.......we're printing off one big Wemar Republic Note here.
It may take decades to stabilize our economy. Fuckers better get it right.
Sure, I will borrow for a house one day but that's it. Credit is too dangerous for me. With that said, and I am curious how you guys feel about this but I think lines of credit is what caused prices to rise so much. It was no longer, let me save for that car and automakers had to keep a reasonable price. They can now raise the prices to a point where the normal person can't afford to just write a check but can still move cars because of loans. It's no longer what can I afford it's what I can afford monthly.
Blame Politics, Blame Silly Season. The way some of these posts come off it makes me wonder if some of you have ever left your parents basement.
You know that until 2 months ago lenders were loaning 130% on cars PLUS TL? Now they're at 105%!!! Can you believe that shit? Nobody goes into anything with equity anymore.
But as long as money was cheap............it drove explosive growth and everybody was happy..........but eventually, everybody has to pay the piper.
Most people cant afford their lifestyles if the money they owe was interest free.
Most people only worry about monthly payments.
People are so concerned about keeping up with the next door neighbor when it comes to car, toys, houses, children, cell phones, etc.
Being upside down on the house, car, student loans is the norm in this society and now good economical folks have to feel the brunt of this shit.
I told my wife we should have spent like crazy, bought new equipment for our business yearly, ran up credit card debt like no other, financed everything we owned because doing it the correct way has not really helped us out any when it comes to the burden these other loons have done to our economic system.
Finance 101 says you cant borrow your way out of debt.
Now you cant even buy a decent work truck They all are chock fulla overheard consoles fulla widgets, fold down seats with center consoles for an 'office', luxury this & that, high end wheels, plush carpet and tons of other crap that has nothing to do with being a work truck. Hell I dont think you can even get a one-piece bench seat anymore.....
I refuse to pay what they are charging......
LOL, just kidding.
Funny story though. I have a half sister. Shes well educated (my dad paid for her education) She is a professor and the head of some phsyc dept at UCI in Calif. She got divorced a year ago and moved in with her sister (my ex stepsister) and she and her daughter lived there for over a year paying no rent. According to Pops (who likes to brag up his daughter) says she makes big coin. Then (I get this from the stepsister as Im not supposed to know) she "borrows" I heard 60k from Pops for a down payment on a home. Smooth move on her part, how do you pay back someone older than dirt? I by the way in my 58 years have not borrowed $1 from the old guy.
Well he lives in Mexico in a condo he owns on the beach in Puerto Vallarta so maybe he has a few bucks, I dont know, dont care.
He was up stateside the other day doing some medical followup shit and he wanted to go to lunch with me. During our lunch the subject of money came up and somewhere in the convo he remarked that " you have very low aspirations in life" Im guessing this was his way of dealing with my not being sucessful (like he sees my sister as being) Funny thing, she is on her 3rd marriage and just got thru living in a back bedroom for a year and just married another loser (long story and this is not the place) Me Im happy, have been happy and plan to remain that way for as long as possible. For me personally I like the low stress lifestyle Ive carved out for myself. Now I know its not for everybody. And maybe I'll see you one day when you come into Home Depot where Im the greeter. I'll be easy to spot, I'll be the the tall skinny old guy with the big smile on my face greeting everyone at the front door. Hmmm I wonder what I look like in an Orange apron?
Well, not in personal finance terms, unless you finance an asset that provides a rate of return greater than the interest rate.
Business does it all the time.
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