A debt culture gone awry

[Jaepheth]

So a question for the more economically minded.

Is it a fair bet that the dollar is going to crash? Should I cram all my savings into an overseas account?

[Flagg]

So a question for the more economically minded.

Is it a fair bet that the dollar is going to crash? Should I cram all my savings into an overseas account?

More than it already has? I doubt it will anytime soon. Not until alot of other countries switch to the Euro as a standard, anyway.

[Korvan]

I gleefully look forward to the day when these credit card companies start going bankrupt. Especially considering how they mercilessly go after college students all but offering them free money.

I don't, since my credit cards all have the names of banks on them. Banks that currently are holding onto a good part of my money.

[Uraniun235]

Shit like this annoys me to no end because when the economy tanks, thanks to these idiots, I'm going to be hurting too.

What frightens me sometimes is when, on revealing that I'm paid each month (rather than every two weeks), people almost always seem shocked by it and remark that I must have superb budgeting skills. Well... no, not especially.

I'm not so sure that they view credit so lightly, but the real problem is they feel they need to compete with each other on the basis of their lifestyles.

I'm not so sure. I think a lot of people do view credit lightly, and think nothing of adding another monthly payment to their lives. Myself, I'm horrified at the prospect of needless ongoing debt, and I'm quite deliberately planning on continuing to live with my mother for some time after I graduate college so I can pour all of my resources into getting those loans paid off before I start having to make rent and utility payments. (I'd like to move out, but I'd like to start with a relatively 'clean slate' even moreso.)

[J]

So a question for the more economically minded.

Is it a fair bet that the dollar is going to crash? Should I cram all my savings into an overseas account?

You mean, it hasn't already?

Euro vs. USD


GBP vs. USD


USD vs. CAD


Euro vs. CAD


It's not getting any better from here...

[NeoGoomba]

I've noticed that credit card companies lately haven't even bothered targeting individuals. I get a ton of credit offers in the mail, but not addressed to me. They are sent simply to my address with "to occupant of". I can only imagine how many people they wrangle in with such widespread canvasing.

And thats not even taking into account (ZING) all of the credit offered by major retailers like Target who offer some sort of discount for signing up (which barely covers the sales tax and has outrageous interest rates). The offers are everywhere, and I hazard to say that the less educated people get so enamoured by the constant offers that they start taking them, and thus being their downward spiral.

I'm in enough debt with an auto loan and studend loans, I'll never touch a credit card simply for junk I don't need.

[J]

I gleefully look forward to the day when these credit card companies start going bankrupt. Especially considering how they mercilessly go after college students all but offering them free money.

My bank has me pre-approved for a half million dollar line of credit, that's many times more money than I'll ever make in a single year. I own neither a home nor a car, and yet they're practically begging me to take this "free" credit. I'm 26 and earning well under $100k gross a year, and they're shoving a half million dollar line of credit in my face. If I were dumb enough to take it I'd probably be in debt for life.

[Stark]

What frightens me sometimes is when, on revealing that I'm paid each month (rather than every two weeks), people almost always seem shocked by it and remark that I must have superb budgeting skills. Well... no, not especially.

I think this is the core of the matter, at least in Australia. From what I read, Australia has a similar problem on a smaller scale (abuse of credit, giving bad credit etc).

Like you, I don't make as much as many of my friends, but have far more disposable income and savings. Most of the people I know - as Mike has said before, even the quite poor - constantly waste their money not only on bullshit (like gambling) but on ongoing monthly payments that gradually reduce their disposable income. Instead of prompting a reduction in spending to get that under control, it just encourages getting more credit to continue living their ridiculous lifestyle.

While we might say that Bush isn't fiscally responsible, most of the people I know - almost everyone I've ever met - aren't fiscally responsible either. They just don't think about things, and they don't consider consequences. I'm some kind of paragon of budgeting and credit because I buy stuff on finance and actually pay it off inside the interest-free period, instead of 'forgetting' about it until the 24% interest kicks in.

[Darth Wong]

Part of it is that thing that Americans marketers are so good at: misleading use of language. Look at the way they call it a "home equity loan". That sounds happy. It sounds positive. It sounds positively beneficial, like something is going to grow for you. If they were forced to give it a more accurate name, like the "give away part of your house" loan, I wonder if people would be as upbeat about the things.

[SirNitram]

Part of it is that thing that Americans marketers are so good at: misleading use of language. Look at the way they call it a "home equity loan". That sounds happy. It sounds positive. It sounds positively beneficial, like something is going to grow for you. If they were forced to give it a more accurate name, like the "give away part of your house" loan, I wonder if people would be as upbeat about the things.

How about 'Inflation-Matching Rate' versus 'Adjustable Rate'? Adjustable could be up or down! 'Stated Income'? Even if you knew what it is, you might not realize how insidious the fucker is.

This is on top of a government which openly encouraged this.

[Flagg]

The best example of alot of this is that shit the car companies pulled right after 9/11 with thier 0% APR lies. Basically, to get that rate you'd virtually have to be able to afford to pay off the car on demand. Of course by the time most people who went for it realized they had been suckered and would have to pay a standard APR, they had already driven the car and were so far into the process that "why not just go ahead with it"?

[Broomstick]

...
In short, everyone in America is trying to live an upper-class lifestyle, even if they only make middle-class wages. The American Dream has transformed from a modest "chicken in every pot" to an unsustainably grandiose "two SUVs in every driveway and a 3000 square foot house for every family".

It might be extremely stupid to ask...but: isn't there common sense stopping people from doing so?
I wouldn't personally mind owning my own flat or expensive high-tech gadgets, but when I look at my income I plainly see that it requires some saving and working...

Problem is, common sense isn't that common.

There are some of us in the US living within our means - yes we have two vehicles but they are both fully paid for. We have actual savings. Of course, we're regarded as weird and poor for not having a house but renting, and not having the latest gadgets, or a big-screen TV. We don't buy on credit but rather wait until we have saved the money for most items. Yet I manage to sustain an expensive flying hobby on a solidly middle-class income with no debt. Huh.

The problem, of course, is that if the economy does come crashing down all our prudence may be of little worth.

[PainRack]

Shit like this annoys me to no end because when the economy tanks, thanks to these idiots, I'm going to be hurting too.

What frightens me sometimes is when, on revealing that I'm paid each month (rather than every two weeks), people almost always seem shocked by it and remark that I must have superb budgeting skills. Well... no, not especially.

Out of naivety, is it really that difficult? I mean, I do the impulse buying, nights on town which go out of cost and I don't eat cheaply either, but I only occasionally spend out of my means and eat into my savings....... And that's usually a result of festivals and birthday clashing.

My real problem is trying to save more than 10% of my income, which actually goes into an insurance savings and isn't fluid.

[Stark]

Painrack, I'm in the same situation. I blow money on worthless shit like remote controlled Daleks and 360s I never use. I've somehow still got far more savings than most of the people I know and never do the 'stone broke till next paycheck' thing. I have no idea where people spend their money, since they don't appear to have more stuff. I guess it's all payments, credit bills, etc - a guy I know who recently moved up from Sydney is sinking $600 a fortnight into his credit card debt. He's been doing this for MONTHS.

[acesand8s]

So a question for the more economically minded.

Is it a fair bet that the dollar is going to crash? Should I cram all my savings into an overseas account?

Yes, the dollar will likely fall further, because it appears as though U.S. interest rates will fall and foreign banks are going to stop buying baskets of mortgage backed securities (in other words, demand for the dollar is going to fall). Feel free to invest in an overseas money market fund (I would avoid stocks for the next few months, they're going to be volatile for a while). You can take advantage of the appreciation of foreign currencies as long as you aren't going to need the money in the short-term; it'll earn you a larger return than you would otherwise. Is it necessary? No, not at all. It just might add a couple of extra bucks to your account when you convert it back to U.S. dollars.

[aerius]

Painrack, I'm in the same situation. I blow money on worthless shit like remote controlled Daleks and 360s I never use. I've somehow still got far more savings than most of the people I know and never do the 'stone broke till next paycheck' thing. I have no idea where people spend their money, since they don't appear to have more stuff.

My buddy & I wonder about that all the time too. His dad raised 2 kids and supported his wife on $40k a year in Toronto without going into debt on anything other than his mortgage. My dad did the same thing, except I was the single child and he was paid a bit more. We had prime rib roasts and ribeye steaks quite often when I was a kid, we ate well and there wasn't any cheaping out or going without that I can recall. The only thing my family did to save money was running our cars into the ground before getting a new used car, we'd drive them until they became unsafe and too expensive to fix up properly.

A lot of my co-workers make around as much or more than my dad did, and even though they're single with no family they still can't make ends meet. All they know is that every month, a couple thousand bucks disappears into their credit card bills, and they don't know how. For them it's basically money in, money out, their paychecks go straight to their credit cards after taking a detour through their bank account. Even worse, a fair number of them end up in debt every christmas and spend the next half year or more paying off their bills.

[Howedar]

...
In short, everyone in America is trying to live an upper-class lifestyle, even if they only make middle-class wages. The American Dream has transformed from a modest "chicken in every pot" to an unsustainably grandiose "two SUVs in every driveway and a 3000 square foot house for every family".

It might be extremely stupid to ask...but: isn't there common sense stopping people from doing so?
I wouldn't personally mind owning my own flat or expensive high-tech gadgets, but when I look at my income I plainly see that it requires some saving and working...

Problem is, common sense isn't that common.

There are some of us in the US living within our means - yes we have two vehicles but they are both fully paid for. We have actual savings. Of course, we're regarded as weird and poor for not having a house but renting, and not having the latest gadgets, or a big-screen TV. We don't buy on credit but rather wait until we have saved the money for most items. Yet I manage to sustain an expensive flying hobby on a solidly middle-class income with no debt. Huh.

The problem, of course, is that if the economy does come crashing down all our prudence may be of little worth.

Wrong answer. What's common sense based on? I mean, really? It's based on accumulated life experience, particularly as an impressionable young person. If (seemingly) everybody you've ever known is doing X, and you haven't personally seen any consequences for X, why would your common sense instantly tell you that X is a bad idea?

That doesn't mean that anybody shouldn't be able to think long and hard about it and realize these things are not a good idea, but I don't think it's reasonable to expect common sense to deter anyone.

[Guardsman Bass]

It's all about instant gratification and few people seem to grasp the concept of saving a few hundred dollars every month to buy that big screen TV you've got a hard on for, rather than using a credit card and paying off the interest alone for several years.

Well of course not, all the commercials tell them that they must have shiny crap and that credit cards are good and they can have everything they want. How can the commercials be wrong? They're on TV!

This is a slight sidenote, but this actually reminded me of something I answered on American Express's website. They had a survey type thingie where they asked you questions about Credit Cards, and one of the questions was "What is a credit card?" They had two stupid answers, "A loan", and a "Means for getting what you want, when you want it." Naturally, I answered "a loan", and they said it was wrong; the answer was the latter.

Incidently, aside from tuition, what are all those people of college student age doing to accumulate all those credit card charges? Does anyone have any information as to where I could find a breakdown?

[Flagg]

It's all about instant gratification and few people seem to grasp the concept of saving a few hundred dollars every month to buy that big screen TV you've got a hard on for, rather than using a credit card and paying off the interest alone for several years.

Well of course not, all the commercials tell them that they must have shiny crap and that credit cards are good and they can have everything they want. How can the commercials be wrong? They're on TV!

This is a slight sidenote, but this actually reminded me of something I answered on American Express's website. They had a survey type thingie where they asked you questions about Credit Cards, and one of the questions was "What is a credit card?" They had two stupid answers, "A loan", and a "Means for getting what you want, when you want it." Naturally, I answered "a loan", and they said it was wrong; the answer was the latter.

Incidently, aside from tuition, what are all those people of college student age doing to accumulate all those credit card charges? Does anyone have any information as to where I could find a breakdown?

I would imagine books, food, and mostly totally useless crap they don't need.

[Sturmfalke]

Is there any statistic as to how much US Treasury bonds have been bought and buy whom and the total value of the bonds purchased?

Its on the treasury's homepage: Here and in greater detail here.
The first one is a txt-file with an overview from June 2006 to June 2007, the second file is a much more detailed pdf on foreign holdings.

[TithonusSyndrome]

Is there a really, overwhelmingly simple way for me to explain to blue collar oilfield-working white trash how this affects them? I must admit that while I'm perfectly aware that this will have catastrophic economic consequences for me here in Canada, I can't draw a simple connect-the-dots from start to finish.

[Chardok]

This is why, when shopping for a house recently, I told my agent not to even bother showing me a house where the mortgage would cost more than 1/3rd of my TAKE HOME pay. As a result, I will be getting a house that's 1500 sq. ft., and 20 years old. And you know what? I couldn't be happier. It's got a roof, and a lawn, and the A/C works. Stupid, stupid people buying more house than they need. I kept saying all through the early milennium, this bubble will burst, and when it does that's when I'm buying - and here I am....Took longer than I thought, though, I must admit.

[Superman]

People need to educate themselves when it comes to financial responsibility. I'm always amazed at friends I have who don't even know what things like "APR" actually mean, and yet they charge crap on their plastic all the time.

In my case, my parents did zero when it came to imparting any kind of financial knowledge to me. I learned by making stupid mistakes, but I'm glad I managed to learn. A lot of people don't.

One thing I want to mention is that we as a society don't seem to do much when it comes to helping educate people on things like bank accounts, credit cards, investing, etc. There are probably more than a few classes we could cut out of a high school curriculum and replace with financial education. If students are supposed to be getting prepared for real life, what's more useful than learning to calculate an interest rate on a credit card or even how to write a check? I know this won't solve the overall problem, but shit, it probably will help a lot of people. It's better than the absolute jack shit we're doing now.

[Chardok]

People need to educate themselves when it comes to financial responsibility. I'm always amazed at friends I have who don't even know what things like "APR" actually mean, and yet they charge crap on their plastic all the time.

In my case, my parents did zero when it came to imparting any kind of financial knowledge to me. I learned by making stupid mistakes, but I'm glad I managed to learn. A lot of people don't.

One thing I want to mention is that we as a society don't seem to do much when it comes to helping educate people on things like bank accounts, credit cards, investing, etc. There are probably more than a few classes we could cut out of a high school curriculum and replace with financial education. If students are supposed to be getting prepared for real life, what's more useful than learning to calculate an interest rate on a credit card or even how to write a check? I know this won't solve the overall problem, but shit, it probably will help a lot of people. It's better than the absolute jack shit we're doing now.

I know I sure as shit would have turned out better if I had known the goddamned difference between Standard Declining interest, and Daily Simple interest coming out of high-school.

shit, I would have done better had I known how to recognize PRINCIPAL and INTEREST.

The only reason I'm so well-versed now, is by virtue of having serviced consumer loans and mortgages for the past 5 years. Now I'm moving into retail (Business lending, checking accounts, trusts, savings, retirement, etc.)

Too bad it's ten years and thousands of thrown away money later. Ages 18-23 were rough, rough years financially, let me tell you....

[Superman]

I know I sure as shit would have turned out better if I had known the goddamned difference between Standard Declining interest, and Daily Simple interest coming out of high-school.

shit, I would have done better had I known how to recognize PRINCIPAL and INTEREST.

That's exactly my point. It pisses me off to no end that we can't seem to get our shit together and address the fact that young people are mostly illiterate when it comes to finances. Why can't we get this into a school curriculum? Even a class on writing a fucking basic budget would be great, especially since too many adults don't know how to do it.