Call Out

ScumLord wrote: »

You don't need to get a loan for the most basic human needs. A person can't hit 18, walk into a bank and demand money for things. You need to have at least some savings and quite often have pay slips as evidence that you'll be able to pay off the loan into the future.

Nobody needs to put themselves in debt. People want a new house, or a new car, but they don't need them. So if they put themselves into debt they can't pay it's their own fault really. Rental is a real option, 2nd hand cars are perfectly fine for most tasks. But most people go with the easy instant gratification option of getting a loan. If it's managed properly debt can just be a useful financial management tool.

The likes of Michael Hudson is also operating in the American bubble, he's talking about problems with the American economy and society that simply don't translate into Irish lifestyle or the way our economy works. We all need to be aware of the American bubble when following Americans. For the most part many don't have a clue what's going on outside of their borders, and when they do have knowledge it's more like a caricature of events and people than a respectable opinion.

fair points alright but hudson regularly talks about europe and indeed ireland, we re actually all caught up in the same systems, managed and controlled by the same financial institutions.

as i said previous, i do think group think has a lot to answer for regarding our personal debt accumulation. on a larger scale, we didnt ask to bail the banks out! this is not our debt!

the credit union move during the week is very interesting!

i wonder why people would want micro loans!

i know an 18 year old that just got a credit line with a company without having any savings! im sure theres also plenty of people around me getting high interest loans from some very dangerous people! i hear many get these loans for 'basic needs'! please be aware, i come from a disadvantaged area.

weisses wrote: »

How would you do this in and around Dublin or any other city ? (you have 335 a week)

Net I presume

Which is €1,340

Am looking on daft, accom is as low as 520 per month (and that's in Dub, other cities are cheaper)
It's even cheaper again to flat-share
Charges approx 100
Lets say 650 for accom + charges (even that is expensive, in less than a minute I've found a flatshare for 300 euros in Dublin)

Taking the 650 figure, that leaves 690 euros for food and other basics

Keeping in mind TV, drink, smokes, etc are qll luxuries, not necessary basics

That said, from personal anecdotal experience, I've known people who've lived on less than the amount you just gave, and they were able to afford what would be considered luxuries

With no need requirement to borrow (get into debt)

You Perfectly explained how people are lured into the debt trap

Being able to get a loan or credit is a service. People demand it, so there's a competitive market supplying, a market with has regulations and oversight

We can study default rates, rates at which people cannot pay back loans. This is what lending institutions do. If a majority were unable to pay back their debt, these institutions would not be in business

The vast majority of people are able to manage their debts, and able to cover repayments

Our interest rates that we pay factor this in (like car insurance have to factor in bad drivers and fraud)

Even with the delinquencies and defaults factored in - the vast majority of people are able to cover their debts

So most debt is perfectly manageable

Therefore only unmanageable debt should be the issue here

I've already explained that people (e.g. in Ireland) don't need to get into debt to cover the very basics (even with v low paid jobs or on social welfare)
It does require some hardship, but then again hardship is relative and subjective

Saying that "debt" is some sort of systemic trap is the equivalent of saying McDonalds is a systemic trap to make people fat

People have a choice - it's mainly up to their individual responsibility on the matter

Tzar Chasm

It is worse now than the eighties, back then we had Fcuk all, now we have fcuk all and owe a sh1t load of money for it.

The poverty trap is just that, its a trap, you have just enough to get by but no more.

Its a cycle which has led to the rise in numbers of Working Poor

Tzar Chasm wrote: »

It is worse now than the eighties, back then we had Fcuk all, now we have fcuk all and owe a sh1t load of money for it.

The poverty trap is just that, its a trap, you have just enough to get by but no more.

Its a cycle which has led to the rise in numbers of Working Poor

Don't know about that..

Ireland went from being one of the poorest countries in Europe to one of the wealthiest (although the financial crisis curbed that somewhat)

Where to start? unemployment decreased, more university graduates, illiteracy decreased, emigration decreased, child mortality rates decreased, life expectancy increased, better rights in the workplace, infrastructure has improved immensely, Irish roads are 3 times safer .. the list goes on and on

e.g. "As recently as 1987 Irish living standards as indicated by private consumption per capita were 65% of the EU average. By 1997, Irish living standards had reached 90% of the EU average."
http://irelandnow.com/economy.html

Ireland was virtually a third world country in the eighties, I remember people would have to save to get a dishwasher, cars were bangers, a lot of second hand clothes, **** quality stuff in the shops, petrol queues, erratic inflation, sky-high emigration, getting a loan was next to impossible "because there wasn't any money in the country", power outages, higher taxes

Dohnjoe wrote:

Don't know about that..

It is a complicated one to argue alright, our standard of living sure has increased in the matters you have mentioned and in some circumstances dramatically, but I do think Michael Hudson has nailed this one on the head also, we have confused wealth with debt, I.e. we think we have become wealthier but all we 've done is accumulated debt

Wanderer78 wrote: »

It is a complicated one to argue alright, our standard of living sure has increased in the matters you have mentioned and in some circumstances dramatically, but I do think Michael Hudson has nailed this one on the head also, we have confused wealth with debt, I.e. we think we have become wealthier but all we 've done is accumulated debt

Absolutely, we have magnitudes more debt than we did in e.g. the 80's

It's absolutely massive. However size of the debt itself is not really a problem, it's the capacity (or incapacity) to service that debt which can be an issue

Take US national debt, it's an astronomical figure, yet during the worst of the global financial crisis - investors were flocking to buy it

Why? because it's literally "safer than houses", they'd gone from investing in .. houses (US mortgage market), fled from that when the housing bubble started to burst.. and went to US treasuries

Many more people pay back their debt, than don't pay it. Most people can afford to service their debt. As mentioned, lenders wouldn't be lending if they didn't think they weren't going to get it back.

The major risk to all that is systemic risk - i.e. the market infrastructure going into melt-down, which is precisely what started to happen in the perfect storm of 2006/2007

The metrics that gauge market fear were actually twice as high during the 2007 crisis than during the 1929 crash, and household wealth loss was I believe 5 times greater than 1929

It took the US about 2 and a half years to pull out of that crisis, the rest of the world, esp Eurozone much longer

However that gave impetus to governments to introduce some really heavy duty regulations, overhauling of the system.. basically fire fighting equipment and shock absorbers for any potential systemic (and normal) financial crisis

Of course it's affected growth (less), but things are a good bit safer

Meaning the credit officer in your local bank will still give you a loan for a house, but he's doing so under much stricter guidelines than in the free-for-all just before the crisis

TLDR: size of debt is not really an issue, capacity to repay is

Dohnjoe wrote: »

Absolutely, we have magnitudes more debt than we did in e.g. the 80's

It's absolutely massive. However size of the debt itself is not really a problem, it's the capacity (or incapacity) to service that debt which can be an issue

Take US national debt, it's an astronomical figure, yet during the worst of the global financial crisis - investors were flocking to buy it

Why? because it's literally "safer than houses", they'd gone from investing in .. houses (US mortgage market), fled from that when the housing bubble started to burst.. and went to US treasuries

Many more people pay back their debt, than don't pay it. Most people can afford to service their debt. As mentioned, lenders wouldn't be lending if they didn't think they weren't going to get it back.

The major risk to all that is systemic risk - i.e. the market infrastructure going into melt-down, which is precisely what started to happen in the perfect storm of 2006/2007

The metrics that gauge market fear were actually twice as high during the 2007 crisis than during the 1929 crash, and household wealth loss was I believe 5 times greater than 1929

It took the US about 2 and a half years to pull out of that crisis, the rest of the world, esp Eurozone much longer

However that gave impetus to governments to introduce some really heavy duty regulations, overhauling of the system.. basically fire fighting equipment and shock absorbers for any potential systemic (and normal) financial crisis

Of course it's affected growth (less), but things are a good bit safer

Meaning the credit officer in your local bank will still give you a loan for a house, but he's doing so under much stricter guidelines than in the free-for-all just before the crisis

TLDR: size of debt is not really an issue, capacity to repay is

Isnt the point the OP is making that inorder to properly function in todays society one is required to build up significant debts ?

from my link earlier (US figures)

In 1950, a family sending their child to the University of Pennsylvania would only spend 18 percent of their annual income (if they paid in cash) to send their kid to study. Today it would consume 79 percent of gross annual income. Even if we look at net take home pay a regular family in no way could send their child to school without going into massive student debt.
A good portion of inflation over this time has been masked by massive amounts of debt and financing. Car purchases, mortgages, and college are now financed long-term. Low rates have masked this erosion but with rates reaching the lower bound of the range, the pain of inflation is now being felt by many households.

1950 Home price / income = 2.2

2013 Home price / income = 3.7

weisses wrote: »

Isnt the point the OP is making that inorder to properly function in todays society one is required to build up significant debts ?

I've highlighted that in order to survive in e.g. this country, debts aren't essential

I also understand what is meant by properly functioning - but ultimately that is subjective

However in order to own property, then a mortgage (debt) is needed, much like the 50s and stretching a long way back before that

Due to increasingly land scarcity, larger houses (US houses are typically 2 to 3 times larger than their 50s counterparts), more disposable income (increasingly families are dual income whereas in 50s predominantly single income) and many other factors - the market pricing of housing has been rising higher relative to wages

It's a situation that exists in almost every country

However, taking modern default rates, it shows that people can afford it. If people weren't able to afford to pay their mortgages, then there would be a serious problem

There was a serious problem in the US (and Irish) housing market in 2007 because a bubble built up, but the crash has largely readjusted prices to their "normal" levels

If people are having problems paying for a house, then they should buy a cheaper house or rent - house ownership has never been an entitlement

If they are having problems paying back cc debt for buying large TVs etc, then they need to reevaluate their finances

Dohnjoe wrote: »

I've highlighted that in order to survive in e.g. this country, debts aren't essential

I also understand what is meant by properly functioning - but ultimately that is subjective

Your first line is subjective also

We don't talk about surviving ... (I can survive under a bridge if needs be)

Again

A good portion of inflation over this time has been masked by massive amounts of debt and financing. Car purchases, mortgages, and college are now financed long-term. Low rates have masked this erosion but with rates reaching the lower bound of the range, the pain of inflation is now being felt by many households.

Overheal

weisses wrote: »

Saipanne wrote: »

Only the omniscient ever make these kind of threads.

Weird.

It also attracts the trolls

Weird

Everyone behave please. Read the Charter and Site rules.

weisses wrote: »

You almost cannot buy a house on 1 income anymore ..Heck even renting families need two incomes sometimes to even afford renting

Well, that is economics. Indigent people are discouraged by society because its anarchaic to the model granted (drive through Dallas, all you see on the interstate overpasses and crap is homeless and tents everywhere), but you can play or you can opt out in a sense.

The cost of a house is quite high, out of natural causes: anyone can chop wood (provided they have or make a tool) and fashion a hut or other covering. It takes far more to cut a long story short to get a home with engineered solutions such as appliances, electricity, heat exchange (cooling/heating), manufactured lumber, particle board, tile, adhesives, fasteners, insulation, have everything specced to code, have the building foundation built and graded, have all materials transported and constructed on the site, etc. etc. and there's a governing factor of money and cost. At the end of the day, if you spend 40 hrs a week putting in a minimal work effort/economic contribution (cashiers may have hard jobs, but their contribution is economically competitive for instance so their value is low) then you will have a difficult if not impossible time affording a home in addition to your other living needs. In contrast if you're an engineer contributing time and knowledge and experience to a multi-million dollar project that itself is being invested in in order to generate billions of dollars of productivity in a given industry (for example, building airplanes for commercial travel) then yeah, you're going to earn a lot more. Just my rant.

Indeed it's subjective, but as explained, it's possible to live without debt in this country. Even on lowest wage or social welfare. And I certainly don't mean living under a bridge, although that would be even more cost effective

It's even possible to have luxuries at those levels and still live better than 90% of the world's pop

Is debt slavery?

a) it's possible to live without debt

b) people have a choice, everyone wants what others have, e.g. large TV, but it's still a luxury, and still a choice

c) the biggest asset; a house, can be rented if it can't be bought (it just often makes sense to buy rather than rent bc rent is considered "money down the drain", whereas with buying you can recoup costs, potentially make a gain)

Is debt some sort of nefarious system set up by elite/bankers/etc to keep people working to make them money?

There's a market demand for lending and credit all over the world, and there has been for thousands of years. Lending institutions charge interest, but they also take risk on the borrower. There are many competitive sources to borrow from.

Is there too much debt in the world?

Bubbles and systemic crashes aside, as long as default rates don't significantly increase then it's manageable.

But college debt in America! (which fuels a lot of this angst against "debt" in general)

People have a choice not to go to the most expensive universities in the world. But they choose to, and the increasing prices they have been willing to pay over the decades has set the market rate

(Personally I think the government should cover university fees but then again people don't like paying taxes either, which is why it's still a political tug of war)

Overheal

Well everyone is born and yadda yadda yadda eventually needs a place to stay and food to eat. Even animals take care of their own sleeping arrangements and their own meals. People need to at a minimum do that, whether as part of a society or a recessed individual.

On the global debt, its pretty big. Global Debt is triple that of Global Domestic Product. Further, a very rudimentary search suggests that the debt is having less and less of an impact on the GDP (in other words, money borrowed is not being invested into growing the economy for one reason or another). http://www.nytimes.com/2015/02/06/upshot/global-debt-has-risen-by-57-trillion-since-the-financial-crisis-heres-why-that-is-scary.html?_r=0

Because of the way all this debt is accumulated (private, business, public and other entity ingrained debts) its really difficult to reconcile, or do debt cancellations on. Im no economist but the suggestion seems to be this will lead to more recessions and more conflicts If entities borrow more than they can repay we're in for trouble. For instance, a graduate who borrowed 120k and enters into a 40k/yr salary is in for a very rough time ahead, vs. someone who borrows 60k and makes 60k/yr, or someone who borrowed less than their salary. That former example is where the globe seems to find itself, with most of the debt structured around debts that are not going to be paid off any time soon.

Overheal wrote: »

For instance, a graduate who borrowed 120k and enters into a 40k/yr salary is in for a very rough time ahead, vs. someone who borrows 60k and makes 60k/yr, or someone who borrowed less than their salary.

This is where it starts, stuck in a job paying of only 1 debt ... No CC yet No car loan yet, No Mortgage.

Look at it this way.. I believe if people who are doing a job that they don't like are given the opportunity to pursue what they really want the economy will collapse instantly ... The mechanism to prevent that is debt, ad a false sense of choice, and you have your trap

Tzar Chasm

In the case of social welfare the debt is shifted to the state, but its still there, its not some magic free money system

Tzar Chasm wrote:

In the case of social welfare the debt is shifted to the state, but its still there, its not some magic free money system

We really shouldn't be paying a private banking system for our money, we really need to take back control of our monetary systems

ScumLord

Tzar Chasm wrote: »

It is worse now than the eighties, back then we had Fcuk all, now we have fcuk all and owe a sh1t load of money for it.

The poverty trap is just that, its a trap, you have just enough to get by but no more.

Its a cycle which has led to the rise in numbers of Working Poor

I grew up in the 80s, there's absolutely no way today can be considered worse than the 80s. I remember English cousins bringing all their toys home to us poor paddies.

People had quite literally nothing in the 80s, now we have people who think not having sky is poor.

Wanderer78 wrote: »

We really shouldn't be paying a private banking system for our money, we really need to take back control of our monetary systems

We have credit unions, building societies, mutual savings banks, mutuels and cooperatives

Rabobank and Credite Argricole are coops

There are nationalized and semi-nationalized banks, and of course central banks to keep them all in line

Dohnjoe wrote: »

We have credit unions, building societies, mutual savings banks, mutuels and cooperatives

Rabobank and Credite Argricole are coops

There are nationalized and semi-nationalized banks, and of course central banks to keep them all in line

the system isnt working though, the crash in 2008 has shown major flaws in the whole design in the euro system as explained very well by people like yanis varoufakis etc. its clearly obvious now that eu organisations such as the ecb are not there for the people of europe but are only truly there for the benefit of large financial institutions such as the imf. the crash occurred due to fundamental failings in our financial systems, amongst other things, and we havent really dealt with these fundamental design flaws therefore it will happen again and it could very well be far more serious than the crash in 2008. i personally think the next crash will be catastrophic. our money is not safe in these systems, i do think ellen brown is probably right in saying, we re moving into the era of bank bail ins, hence why i believe in the public banking system. its a safe guard. the private banking system is too unstable and engages in far too much risky activities such as hedge funds and derivatives trading. our own central bank doesnt have enough power and control in the eu central banking system. countries need some sort of control back over their monetary systems in order for the eu to survive. the eu is polarizing, there are countries with large surpluses and countries like ireland, greece, spain, italy, portugal etc that are ending up with large deficits. this is unsustainable.

an interesting story which i think fits in well into this thread:

http://www.rte.ie/news/2016/0729/805579-bankruptcy/

....personal debt is still a major problem for some irish people

Wanderer78 wrote: »

....personal debt is still a major problem for some irish people

Forget Ireland

33000 euro here vs 130000 dollar in the states. on average

Well we know what caused the 2007 crash and many steps have been taken to rectify those causes, many more safeguards and shock absorbers have been put in place

It's almost overregulated at the moment, making growth more difficult

Between 1929 and 2007 there have been quite a few economic crises, however the banking system has generally weathered these, 2007 was real edge of the abyss stuff, but once politicians finally made the correct decisions we (barely) pulled back from the brink

I agree, it's not exactly the ideal system, but unfortunately we want nice things, so if we wanted a far more risk free safer system we'd have to put up with lower growth and less choice

There's also little consensus on what alternatives could plausibly work to the same efficiency, e.g. Bernie Sanders has said he strongly supports breaking up larger banks, but when asked for details on this, he can't give any.. it's sentiment, rather than a plan

If another large crisis or bubble starts to emerge, I am pretty confident the current system could contain it

Remember, as horrendous as the 2007 crisis was, the US pulled out of it in 2.5 years and actually made a return on bailout funds lent to distressed institutions

Dohnjoe wrote: »

I agree, it's not exactly the ideal system, but unfortunately we want nice things, so if we wanted a far more risk free safer system we'd have to put up with lower growth and less choice

Choice is not a factor in many cases

http://www.zerohedge.com/news/2015-07-30/debt-slaves-7-out-10-americans-believe-debt-necessity-their-lives