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No, I'm a retired economist. Which is why I understand that the normal state of an economy is slow and steady expansion in line with population and productivity growth. Rumors of any sorts of inherent cycle-like thingies are wildly out of tune with observable fact.
Meanwhile, credit in a modern economy is a more efficient means of financing transactions than any other. Which is why all such economies are dependent upon credit today. Put a few too many pieces of worthless paper into credit markets and the whole global economy can be brought into serious question. That's all the Great Recession was about.
Finally, someone using education and common sense vs 'gloom and doom' or idiotic re-babbling what they hear on talk radio without proper context.
I'm the opposite, when the economy gets better I pay off my debts as fast as I can. When the economy goes bad I put more on credit so I can preserve capital. If something bad were to happen, I can let the banks have my debt but I keep the money.
I'm the opposite, when the economy gets better I pay off my debts as fast as I can. When the economy goes bad I put more on credit so I can preserve capital. If something bad were to happen, I can let the banks have my debt but I keep the money.
No debt is really "good" debt. About the only debt I will say ok to is a mortgage
Obviously, you don't understand the concept of using leverage.
Let's say, I have a really solid business plan that I realistically think can generate 10% ROI, but I don't have any money. I borrow money at 5% and make my idea work. Why do you think major corporations have debt? Because the opportunity cost of missing those opportunities often is higher than the debt service. Why not use equity financing? Because debt financing is locked in at a known rate...whereas equity costs can be variable depending on how good my idea is...and my debt is tax deductible.
Or I'm a student...I borrow money to become a CPA and then make stable income for decades...I would have never had the cash to pay for school upfront.
Or I own 3 rental properties...but I want to expand that to 10.
Let's say I have $5,000 cash. I also have $5,000 of credit card debt on an 18 month no interest card. Do I pay the debt off to be debt free? Or do I keep my cash to offer financial flexibility AND also keep the non-interest debt? In other words, I now have access to $10,000. Now I can pay other debts off that are carrying an interest rate. I'm earning cash back rewards. I have financial flexibility. I do this indefinitely to manage cash flow.
"Credit has done a thousand times more to enrich mankind than all the gold mines in the world. It has exalted labor, stimulated manufacture, and pushed commerce over every sea."
Last edited by Thatsright19; 09-16-2016 at 03:02 PM..
Yes, the return of a healthy economy means people are spending on major purchases such as cars, home remodeling, and travel that require them to use credit.
Not to argue with you, but why, then, is there such a movement to make people not use credit, drive an old car, stay in their homes, not go into debt for college, etc, etc, etc? Guys like Dave Ramsey just swear by it. If we all took Dave's advice, would the US economy crumble into the dirt? what's the balance between what is healthy for a household to have on it's books as debt, and at what age do you turn off the debt incurrence by a household?
I ask these questions because our country seems to preach spend spend spend, but at the same time our political leaders and heads of state preach personal responsibility. Thoughts?
Obviously, you don't understand the concept of using leverage.
Let's say, I have a really solid business plan that I realistically think can generate 10% ROI, but I don't have any money. I borrow money at 5% and make my idea work. Why do you think major corporations have debt? Because the opportunity cost of missing those opportunities often is higher than the debt service. Why not use equity financing? Because debt financing is locked in at a known rate...whereas equity costs can be variable depending on how good my idea is...and my debt is tax deductible.
Or I'm a student...I borrow money to become a CPA and then make stable income for decades...I would have never had the cash to pay for school upfront.
Or I own 3 rental properties...but I want to expand that to 10.
Let's say I have $5,000 cash. I also have $5,000 of credit card debt on an 18 month no interest card. Do I pay the debt off to be debt free? Or do I keep my cash to offer financial flexibility AND also keep the non-interest debt? In other words, I now have access to $10,000. Now I can pay other debts off that are carrying an interest rate. I'm earning cash back rewards. I have financial flexibility. I do this indefinitely to manage cash flow.
"Credit has done a thousand times more to enrich mankind than all the gold mines in the world. It has exalted labor, stimulated manufacture, and pushed commerce over every sea."
I understand the concept of leverage. Don't be ridiculous. I just don't need to use as much as others do. Our investments being in plenty of money. We reinvest that. I don't NEED to leverage or hocus pocus finances to make money You don't understand my finances. You can do things your way I'll do it mine.
Not to argue with you, but why, then, is there such a movement to make people not use credit, drive an old car, stay in their homes, not go into debt for college, etc, etc, etc?
There is a movement to convince people to accept Jesus Christ as their Lord and Savior as well. And one claiming that the all new C-class coupe has design, performance, and technology features that command your efforts to purchase one. (PS. Exceptional financing offers are available at your local dealer.)
Quote:
Originally Posted by ashpelham
Guys like Dave Ramsey just swear by it.
Dave Ramsey is a preacher man. Suze Orman is a preacher woman. Richard Simmons and Ron Popeil were in the same line of work. Credit at the personal level is still a tool. Just like a chainsaw. Having either one handy when you need it is quite a good thing.
Quote:
Originally Posted by ashpelham
If we all took Dave's advice, would the US economy crumble into the dirt?
If it meant that we all cut back on spending or swore off of credit, the broad economy would indeed suffer. Remember that it takes a consumer to support a producer and that most people play both roles. You need to be careful what you wish for. "Low prices. Always low prices." is the same thing as "Low wages. Always low wages." Are you sure that's the sort of direction you want to be going in?
Quote:
Originally Posted by ashpelham
what's the balance between what is healthy for a household to have on it's books as debt...
Capacity to carry debt will vary from one household to the next. You may need to do some actual work to understand what's best in your own circumstances, as push-button, one-size-fits-all approaches are not apt to be of much use.
Quote:
Originally Posted by ashpelham
...and at what age do you turn off the debt incurrence by a household?
There is no such age. The books that St. Peter will examine have nothing to do with your finances. Your debts -- whatever they may be at the time of your death -- will need to be satisfied by your estate or by your heirs. It's the same at 85 as it is at 45.
Quote:
Originally Posted by ashpelham
I ask these questions because our country seems to preach spend spend spend, but at the same time our political leaders and heads of state preach personal responsibility. Thoughts?
I don't think either premise is valid or makes any sense. Nor would I understand why anyone would consider such incoming messages to be relevant in the first place. I would suggest that anyone who is just sitting there waiting to be told what to do in life is simply doing it wrong.
Last edited by Pub-911; 09-17-2016 at 08:02 AM..
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