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how do you know someone who 'cant afford' went for that program and not the the wiser ones. it was designed for the frugal types holding on too much on their cash.
I'm sure there were a lot of "wiser ones" that went for it but I'm also sure a lot of those that shouldn't have (or couldn't afford it) also went for it. The frugal types thrive in this type of environment, because they can now invest in companies/real estate that is cheap in relation to their actual value. The problem is 95% of America isn't frugal.
Wow, this is great news for the economy! Especially if they're spending this extra money on stuff made in China. Let's keep exporting our wealth to the Chinese, while we get a few crumbs of it.
Actually, if we Americans were willing to live within our means and allow the market to work as it is supposed to do and be competitive with China we would have a better chance.
Actually, if we Americans were willing to live within our means and allow the market to work as it is supposed to do and be competitive with China we would have a better chance.
Old habits die hard. Apparently consumers have reached their limit of self denial and begun once again to spend more than they earn. The "me" generation seems to have a very short attention span. With the economy still reeling from the first stage of the recession, consumers are now planting the seeds of what will surly be a more severe second stage. Apparently credit addiction is as hard to kick as drugs or alcohol. As we dig ourselves deeper and deeper into abyss of debt, the eventuality of our reckoning is becomes more tragic.
Yeah, all those articles back in 2008 and 2009 about how a new era of frugality was being ushered in were a complete joke, as I suspected.
Yes, the new era of frugality was a big joke. Face it, shopping, spending, consuming, and keeping up with the Jones's is our only entertainment. No "shiny new" = depression/ despair
I like to think of the whole situation as trying to light a fire in a raging hurricane with wet wood and your last match. Better hope that thing catches.
This is in a sense good news. If people try to save too quickly it will crush the economy, ideally people would do this until the economy stabilizes and then start to slowly reduce consumption.
Though the title of the article is misleading, the savings rate is 2.7% not negative and it has increased around 2% from the lows during the housing bubble.
So much pessimism on the business forum. After reading some of the posts in this thread you think the end of the world would be coming tomorrow.
America has always spent more than it has taken in and has been in debt since day 1 of this nations existence. Hell, we fought for our right to form our own nation due to our supposed debt to Britain.
how do you know someone who 'cant afford' went for that program and not the the wiser ones. it was designed for the frugal types holding on too much on their cash.
Are you serious? The wiser ones? Let me explain to you why your logic is poor.
1. Buying a brand new car is NEVER a good idea. The "wiser ones" buy a car that is 2-3 years old and just broken in for a TON less than the person who bought the new car.
2. If anyone wanted to go buy a brand new car, they could easily get 4k off the sticker price just by negotiating and could have kept their "clunker" or sold it.
3. I personally know several people who traded in their "clunker" and bought a brand new car that shouldn't have.
If we didn't have these bail outs people would be forced to save. But "thanks" to the government we are living in this illusion that we can continue spending when the average American household currently has 5.5x as much debt as they do disposable income. But it's ok, Obama says we're recovering because people are spending MORE! HELLOOO, we have 5.5x as much debt as we do disposable income and he's applauding that we are spending MORE?!?! HAHAHAHAHAHHA, this is why we need common sense economists and financial experts in Washington and not career politicians/lawyers.
I was reading a banks quarterly report today (reported up to March 31, 2010) and their non-performing loans are UP 26% from last quarter. This bank never participated in sub-prime mortgages and these are the loans that they kept on their books (didn't sell to the secondary market) so you know they thought they were the safest loans they wrote.
There have only been two stats that politicians and so called economists keep pointing to in relation to our "recovery." They point to increased GDP. GDP is a function of spending. As of March the average US savings rate is down below 3% (in the 60's and 70's we averaged around 8% savings). As you saw in the article above we are spending more than we take in. Nearly half of ARM mortgages haven't even reset yet (they will reset in 2011 and 2012). By then interest rates will have to be higher than they currently are, which is based on many factors. The second thing they point to is that housing prices are "stabilizing." They are stabilizing because the government is paying banks to keep their bad mortgages on their books so they don't add to the supply of houses. Eventually they will run out of this TARP money and will have to let banks release these houses and put them up for foreclosure. We are currently on pace for more bank closures this year than last. And housing prices are a function of rent, and using this principle housing prices (in general) are still severely overpriced. I could go on and on, but my main point is things aren't getting better. We shouldn't be spending more because we have to pay off our debts before we can spend (so increased GDP, in this situation, is bad even though the government doesn't see it that way). And when we have 5.5x as much debt as we do disposable income, we can't keep putting off paying off our debt because sooner than later we will be forced into individual bankruptcy or forced to quit spending (resulting in a drastic drop in GDP).
I like to compare our current situation to the calm before the tornado. In the midwest we get severe thunderstorms. The first thing that happens is severe rain, hail, wind, etc (this was 2008 and part of 2009). Right before the tornado hits the rain, hail, and wind all stop. It is dead silence (this is our current situation). After the silence....the tornado hits (that is what we're headed toward). After the tornado hits and the destruction is done the skies open up and you see nothing but blue skies. At this time people start rebuilding (that's off in the distant future but something our economy drastically needs). We desperately need to rebuild our economy based on exports not imports. This starts by us first paying off our debts and then saving a substantial amount of money. At that time we can then invest in basic infrastructure companies or companies that export basic goods to other countries. That is the definition of a sound economy (we are currently the exact opposite of that).
Terrific post that is dead on. I enjoyed reading it.
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