Bankrupting America

[Spiffor]

Originally posted by Kidicious
Thriftiness isn't the way to go either. You have to spend money to make money, and that means jobs, not just for people in the US but in Europe and the rest of the world. The whole world economy depends on people spending money in the US.

I'm advocating caution, not thriftiness. I think it wouldn't be a too terrible blow to the economy (actually, it would be very good after the transition period) if decisions were based on what things are, rather than on what they should be in the future.
I'd rather have this game only played by speculators who know the risks and make it their full-time jobs, than by an entire population that can fall victim to conmen such as scum mortgage companies, scum insurance companies, or scum credit-card makers.

[Kidlicious]

Originally posted by Spiffor

I'm advocating caution, not thriftiness. I think it wouldn't be a too terrible blow to the economy (actually, it would be very good after the transition period) if decisions were based on what things are, rather than on what they should be in the future.
I'd rather have this game only played by speculators who know the risks and make it their full-time jobs, than by an entire population that can fall victim to conmen such as scum mortgage companies, scum insurance companies, or scum credit-card makers.

But individuals must take risks. A lot of the mortgage crisis played out in my home town area of Fresno, CA. Rents seem to have almost doubled in only a few years there. I know this from personal experience. The poor were being squeezed out. Then all of the sudden they could get loans to own houses. This must have looked like a great idea, because people had always done very well investing in homes in California. You could double your wealth in just a few years.

[snoopy369]

Originally posted by chegitz guevara


And the Democrats SUPPORTED IT!

Because it is a sensible law.

The new bankruptcy law did a few things, primary among them:

Under the new rules, the first step in figuring out whether you can file for Chapter 7 is to measure your "current monthly income" against the median income for a household of your size in your state. If your income is less than or equal to the median, you can file for Chapter 7.

Chapter 7 = liquidating debt; Chapter 13 = repayment plan.

Basically, if you make a decent wage but have a lot of debt, you can't liquidate it.

Further, for your medical cases et al:

The purpose of the means test is to figure out whether you have enough disposable income, after subtracting certain allowed expenses and required debt payments, to make payments on a Chapter 13 plan. To find out whether you pass the means test, you subtract certain allowed expenses and debt payments from your current monthly income. If the income that's left over after these calculations is below a certain amount, you can file for Chapter 7.

So if you don't make enough to pay off your medical expenses under a reasonable repayment plan, you still can liquidate.

This primarily negatively effected people who made lots of money but used bankruptcy anyway. IIRC there is a wealth building strategy that used Chapter 7, though I don't remember specifics. It also affected people who make solid income but overspent on credit cards - they used to get a free pass before, now they have to pay it back, which is certainly not unreasonable. The medical case argument is a red herring; people with huge medical expenses still get to liquidate them.

(Quotes from NOLO, a leading self-help legal press: http://www.nolo.com/article.cfm/obje...3/161/176/ART/ )

[Spiffor]

Originally posted by Kidicious
But individuals must take risks. A lot of the mortgage crisis played out in my home town area of Fresno, CA. Rents seem to have almost doubled in only a few years there. I know this from personal experience. The poor were being squeezed out.

Yep, we have a similar problem in the Paris' area with rent. The only sensible solution (if we consider the squeezing-out of the poor as a problem, of course ) is to have a good part of public housing. Their rent isn't dependent on supply and demand no matter the market conditions, and thus allows for the poor to pay their rent, unless they're really destitute (that's another matter)

Then all of the sudden they could get loans to own houses. This must have looked like a great idea

So do ponzi schemes.

because people had always done very well investing in homes in California. You could double your wealth in just a few years.

And we see how it played out
I really consider those variable-rate loans to be scam, because no banker could possibly expect the FED rate to remain at 1% for any long period of time. And yet, I'm sure those mortgages were agressively pushed for.

I see the subprime crisis as an example of the inherent evil of capitalism: a reasonable bank doesn't lend to the poor. When it does, it creates an economic crisis

[Garth Vader]

Originally posted by The Mad Monk


Debit cards generally don't have the same protections as credit cards over here.

Certain credit cards also have bonuses when you use them, like money back or airline miles.

Right, if somebody cleans out your bank account with your debit card info you don't have any money until you can get it back from the bank. If they run up your credit card you don't lose any of your own money.

[snoopy369]

I get 0.5% back from using my debit card when I select credit

[Arrian]

Originally posted by chegitz guevara

Actually, about 75% are forced into bankruptcy by a job loss or a serious illness.

I can't help but think such stats are meaningless, because the vast majority of financial problems have no single cause.

Did a person go bust because they got fired, or because they got fired and had no savings? Both, of course.

People who spend within their means, save their money, etc., will be better able to suffer the slings and arrows of outrageous fortune. Now, for the very poor who are unable to save money, that's not the problem. But for the middle class - and there's plenty of credit card debtors in the middle class - the problem with managing personal finances is real.

People buy too much **** they don't need and cannot afford.

Credit cards rock for those of us who use them simply for convenience, instead of as a loan.

-Arrian

[Jon Miller]

If you look at medical expenses.. it is obvious that people can't afford it. One ER visit, and I have good insurace, ran me several hundred dollars. My 20k$ provides not much more than food, car payments, and housing... in the past when I drank more and bought more toys.. I ended up having to take out loans (school loans, so a different type than the credit card loans.. I hope).

My freinds who lived within their means, weren't/aren't able to save either. If I didn't have my good health insurance, then the ER visit would have killed my finances. Even with insurance, if there had been something seriously wrong with me, the costs would easily be outside of my ability to pay.

Most of the US doesn't have the money to create a large savings. Definitely not on the order of what you would need to survive a serious medical problem (which is 100k+$).

Now, I agree, we shouldn't be in debt. When I was spending 25k$ a year (and only making 20k$) that was a bad idea. And later, after I have graduated and am making a lot more money (2x - 4x what I make now), for a few years (or several years if I take a low paying job) I won't have all that more to live on than I do now.

JM

[Spiffor]

Originally posted by Arrian
People buy too much **** they don't need and cannot afford.

I've read that compulsive shopping as an addiction is rapidly progressing in the west. I seem to recall it has grown to 4% of the French population. This source says there are 24 million Americans suffering from buying addiction.

I wouldn't look solely in the individuals as a reason for such widespread behaviour, just like I don't look solely at the individuals if a society is tendentially more alcoholic than others.

[Kidlicious]

Originally posted by Spiffor
Yep, we have a similar problem in the Paris' area with rent. The only sensible solution (if we consider the squeezing-out of the poor as a problem, of course ) is to have a good part of public housing. Their rent isn't dependent on supply and demand no matter the market conditions, and thus allows for the poor to pay their rent, unless they're really destitute (that's another matter)

The tide is turning the other way in the US unfortunately, and least it is in CA.

So do ponzi schemes.

It's nothing like a ponzi scheme at all. It's call providing shelter for your family.

And we see how it played out

Hindsight is 20/20. Everybody is a financial guru looking at the past.

I really consider those variable-rate loans to be scam, because no banker could possibly expect the FED rate to remain at 1% for any long period of time. And yet, I'm sure those mortgages were agressively pushed for.

Fixed rate is generally higher because it's less risky. You pay a premium for it. And you don't have to believe that rates would stay at 1% to see a variable-rate loan as better than a fixed rate loan.

I see the subprime crisis as an example of the inherent evil of capitalism: a reasonable bank doesn't lend to the poor. When it does, it creates an economic crisis

So if banks didn't lend to the poor they wouldn't be capitalist (evil)? Where do you draw the line and call people too poor for loans? The banks take risks with every loan. Even though someone has a good job it doesn't mean there is no risk to loaning to them, certianly not with the economy the way it is these days.

[Kidlicious]

Originally posted by Arrian
Credit cards rock for those of us who use them simply for convenience, instead of as a loan.

-Arrian

Sure, but the banks don't make any profit off of you.

[Spiffor]

Originally posted by Kidicious
It's nothing like a ponzi scheme at all. It's call providing shelter for your family.

I used the comparison because you said "this must have looked like a great idea".
Yes, mortgage scumbags conned their customers into taking a loan they knew full well would have the rate multiply several times. Just like ponzi scumbags con their customers into investing in something they know full well has no future. Or just like politican scumbags con citizens into believing their empty promises.
Be they mortgage, ponzi or politician scum, these people are sure to find customers, because those people have no hope otherwise.

So if banks didn't lend to the poor they wouldn't be capitalist (evil)?

Of course they would. Our system is evil. When it works normally, our system excludes the poor from loans. When capitalism is dysfunctional and lends to the poor, then there's a crisis. It's capitalism we have to ditch, rather than hoping there are solutions within.

[Aeson]

I saw this on another website. Pure awesomeness:

[Kidlicious]

Originally posted by Spiffor
I used the comparison because you said "this must have looked like a great idea".
Yes, mortgage scumbags conned their customers into taking a loan they knew full well would have the rate multiply several times.

Really? You think people don't know what variable rate means? Maybe in some cases ok, but you have to hold people accountable when they make and investment like that. It's the very minimum to know what variable rate means. And nobody new what the rate would be in the future. I think you are assuming that people know a lot more than they actually do. They had some idea, but it hardly a ponzi scheme to sell a house with a variable rate loan.

Just like ponzi scumbags con their customers into investing in something they know full well has no future. Or just like politican scumbags con citizens into believing their empty promises.
Be they mortgage, ponzi or politician scum, these people are sure to find customers, because those people have no hope otherwise.

But Spiffor, the banks don't want to loan people money that they can't pay back. They lose when they do that. The banks haven't made out in this, far from it.

No, this is just an example of the failings of capitalism, not of how evil bankers can be.

Of course they would. Our system is evil. When it works normally, our system excludes the poor from loans. When capitalism is dysfunctional and lends to the poor, then there's a crisis. It's capitalism we have to ditch, rather than hoping there are solutions within.

I agree with that mostly. But I disagree that it's so easy to decide who to loan money too. It's very complicated.

[snoopy369]

Originally posted by Aeson
I saw this on another website. Pure awesomeness:

Awesome