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Old 08-22-2017, 02:00 PM
 
Location: Kalamalka Lake, B.C.
2,984 posts, read 3,781,544 times
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Quote:
Originally Posted by freemkt View Post
I have made the wry observation that exorbitant interest rates on debt are self-fulfilling:

Higher interest rates inherently hinder repayment, as every dollar paid in excess interest is a dollar that cannot be applied to principal. Slower reduction of principal entails longer repayment times, thereby extending the duration of the debtor's vulnerability to income interruption and disruption of repayment.

i.e. higher interest rates increase delinquency and default rates all by themselves.
While the US economy took off in the early eighties, Canada's bank rate (we only have six big banks and virtually no small banks) got up to 25% (literally Pawn shop rates). I'm beginning to think it was an EXPERIMENT on a small industrial economy to see what would happen, and if you could BREAK an economy. You can experiment on Canada and see if the lab rats and rabbits start rioting in the streets.

What it did do was BREAK small entrepreneurs, destroy the jobs they created, and make sure those that already had all the money kept keeping all the money. Some of those entre. are renters today, and/or govt. employees, hence no job creators. And the rich kept getting richer. That's the idea.

 
Old 08-22-2017, 02:07 PM
 
2,274 posts, read 1,409,762 times
Reputation: 4943
Quote:
Originally Posted by thedwightguy View Post
While the US economy took off in the early eighties, Canada's bank rate (we only have six big banks and virtually no small banks) got up to 25% (literally Pawn shop rates). I'm beginning to think it was an EXPERIMENT on a small industrial economy to see what would happen, and if you could BREAK an economy. You can experiment on Canada and see if the lab rats and rabbits start rioting in the streets.

What it did do was BREAK small entrepreneurs, destroy the jobs they created, and make sure those that already had all the money kept keeping all the money. Some of those entre. are renters today, and/or govt. employees, hence no job creators. And the rich kept getting richer. That's the idea.
The u.s economy was in a recession during the early 80s and saw massive interest rate hikes to 21 percent.
 
Old 08-22-2017, 02:22 PM
 
28 posts, read 10,570 times
Reputation: 18
Quote:
Originally Posted by hitpausebutton2 View Post
YES!!.. the entire system is happy that we are in debt. If we didnt have debt, they be broke and no money be floating around. Funny how those that have more give less, and those that have less give more..

But our nation thrives on debt, thus keeping us in "slavery" till that debt is paid off..
If debt is so toxic then dont take a loan. I fail to see the problem?
 
Old 08-22-2017, 02:23 PM
 
33,046 posts, read 20,793,586 times
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Quote:
Originally Posted by oregonwoodsmoke View Post
Not impossible, but hasn't happened yet. If my tenants with great credit have some sort of financial disaster, they give me notice, apologize, and move out. They know they can't pay the rent so they don't stay.

People with good credit protect their credit score. People with trashed credit do not care. One or two more judgements are not going to damage them any worse then what they already have. It's the ones who already have bad credit who dig in and force the landlord to evict them to get them out. People with good credit strike a deal with the landlord and move out without having any court action.

Back to the topic of the OP, if a person is offered a loan with $500 monthly payment and they can't afford to make the $500 a month payment, they should not take the loan. I don't know why this is so difficult to understand.

The OP was about the $500 a month car loan. Well, there are better ways to get a car than to go to a "buy here pay here" car dealer who is going to write that 28% auto loan. It's financial indifference like taking out a 28% car loan that trashes people's credit. Nobody gets bad credit out of thin air. Bad credit is earned by bad financial decision and financial irresponsibility.

Helpful hint for the low income people here: Just because someone is willing to loan you money that does not mean you can afford it. Check your budget before you borrow money to make sure you can afford the payments (and also that you are borrowing for something you really need and not something frivolous). Shop around a little bit to see who will give you the best loan. You don't have to, for example, finance that used car at the car dealer's lot. A local credit union might give you a much better rate. Better rate means lower monthly payments.

I sometimes wonder if low income people are born with some sort of birth defect where they can't do math.

What if you can afford the credit and then have an abrupt hospital stay and extended loss of income?
 
Old 08-22-2017, 02:24 PM
 
28 posts, read 10,570 times
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Quote:
Originally Posted by craigiri View Post
More than one thing can be true...and so many here seem to think it all comes down to "personal responsibility" as opposed to "I got cancer" or "interest rates were near zero and professional marketers with millions in advertising money talked me into it"....

But all that aside, there is little doubt that the government created "free money" which has gone on for a decade or more. This was done because the alternative was the complete disintegration of our economy....and maybe even country. So the decision was made to put the heavy thumb of government onto the DEBT side of the scale. Meantime, a person who "played by the rules" and saved up a million dollars over 40 years of work went into the band to buy a CD or a treasury and found they were unable to make ANY decent return.

So, debt was rewarded. Whether one believes it or not, human are like other smart animals that quickly understand the "reward" game. If, on one hand, they scrimped and saved and came up with a million, they were unable to make squat on it. On the other hand, if they kept refinancing their already low 6% mortgage...to 5, 4 and then 3.5%, they made REAL money. Not only that, they could deduct the mortgage interest, whereas that "saver" who owns his house doesn't get that break.

Our entire economy and tax system is set up to reward debt.

Anyway, what the Fed did worked to a large degree. They saved us from complete ruin. But at the same time they threw millions of baby boomers and other "savers" under the bus in favor of those who borrowed and spent more.

We can say, as individuals, that we are frugal. But the USA prays at the altar of GDP and Capitalism. If people were as frugal as some here say they are, the country would simply fall apart.

That's given the current economic policy and system.

It's plain silly to act as if the Fed policy has nothing to do with debt and GDP growth, etc. - if interest rates were "real" I should be able to lend out money for mortgages at 10% or so (I did this in the 1980's and even 1990's)...but how can I compete with free money?

NONE of the interest rates we are seeing are "real" - except perhaps the payday loans and cc balance charges. The rest of it is fake so that the government doesn't have to take another couple decades to even out the housing bubble.
You realize that a CD is debt, right? How did the boomers get thrown under the bus, precisely? This is quite interesting.
 
Old 08-22-2017, 02:25 PM
 
33,046 posts, read 20,793,586 times
Reputation: 8928
Quote:
Originally Posted by RE Banking View Post
If debt is so toxic then dont take a loan. I fail to see the problem?

If your choice is between "pay the rent on time" or "take a predatory loan" then the person should just stiff the landlord? Low-wage workers often have variable work hours directed by their employers for employer convenience - not for paying rent timely.
 
Old 08-22-2017, 02:26 PM
 
28 posts, read 10,570 times
Reputation: 18
Quote:
Originally Posted by freemkt View Post
Why should my ability to earn money be impaired by SOMEONE ELSE'S BAD ACTIONS? THAT is what I'm complaining about.
Indeed. Thats why there are underwriting standards. I wont let someone line you impair me from earning money.
 
Old 08-22-2017, 02:28 PM
 
64,941 posts, read 66,427,728 times
Reputation: 43332
Quote:
Originally Posted by freemkt View Post
If your choice is between "pay the rent on time" or "take a predatory loan" then the person should just stiff the landlord? Low-wage workers often have variable work hours directed by their employers for employer convenience - not for paying rent timely.
no, a reasonable person would work on fixing the income problem , whatever it took .
 
Old 08-22-2017, 02:30 PM
 
33,046 posts, read 20,793,586 times
Reputation: 8928
Quote:
Originally Posted by mysticaltyger View Post
Simply not true. I screwed up in my early 20s. I was able to get a credit card several years later, in my late 20s. My credit score is in the 790s now.

Some one-time credit issues tank your credit indefinitely.
 
Old 08-22-2017, 02:31 PM
 
28 posts, read 10,570 times
Reputation: 18
Quote:
Originally Posted by hitpausebutton2 View Post
your stil missing the point.. Jacking up interest rates and less to the principle doesnt solve the problem. It puts more burden on the person that is taking the loan. They will default faster on higher note than a low note that you give to the rich.
Ok so they default and I take the house. Game over. But I dont just have 1 note. I have hundreds of notes. And I have made the calculation that people of similar credit risk will pay additional interest rates to offset my risk so that overall I get a similar yield as a pool full of lower risk borrowers.

If you want to lend your money to people with poor credit for cheap rates, have at it. Nobody stopping you.
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