Credit Card Cancer

[Kevin_Kennedy]

This week, with his pronouncement that “credit is the lifeblood of a healthy economy,” President Obama reiterated what has been one of his most common themes in diagnosing our economic problem. The president has relied on this bedrock belief to propose policies that place the restoration of credit as the highest priority. However, despite his seemingly earnest intentions, the president and his economic advisors have misdiagnosed the ailment. Savings, not credit, is the lifeblood of a healthy economy. When not used properly credit can be like a cancer that sickens an otherwise healthy economy.

What everyone seems to have forgotten at this point is that credit does not come from thin air. Even in a system in which bank reserves are leveraged many times, someone has to put savings in a bank for the bank to turn around and make a loan. As a result, the bedrock is the savings, which allows for the credit to flow. Credit extended without adequate savings inevitably leads an economy into disaster.

Credit Card Cancer by Peter Schiff

 

[wimpy77]

i actually agree with this. part of the problem is people lived off their credit cards instead of saving. what obama means though is get credit flowing that people who actually have good credit can buy houses and things and small businesses can get credit. right now some banks and lenders aren't even lending to people with good credit.

i actually went a bought a floor model car the other day for what a used dealer was offering on 3 year old car.

i would actually like someone to come up with a way in which credit could be obsolete. i mean didn't people buy houses and things before there was a such thing as a credit score?

 

[Kevin_Kennedy]

i actually agree with this. part of the problem is people lived off their credit cards instead of saving. what obama means though is get credit flowing that people who actually have good credit can buy houses and things and small businesses can get credit. right now some banks and lenders aren't even lending to people with good credit.

i actually went a bought a floor model car the other day for what a used dealer was offering on 3 year old car.

i would actually like someone to come up with a way in which credit could be obsolete. i mean didn't people buy houses and things before there was a such thing as a credit score?

The banks aren't going to start lending until people start saving on a massive scale and the economy turns around. Spending packages and bailouts only attempt to prop up the false foundations of our economy, and do not succeed in getting credit flowing as evidenced by the fact that they haven't. Savings create a legitimate foundation for the economy.

 

[wimpy77]

actually banks are lending to a point it's the secondary markets that are slowly thawing. the days of buying a house without putting money down are hopefully over and hopefully so are the days of living off of credit.

 

[auditor0007]

i actually agree with this. part of the problem is people lived off their credit cards instead of saving. what obama means though is get credit flowing that people who actually have good credit can buy houses and things and small businesses can get credit. right now some banks and lenders aren't even lending to people with good credit.

i actually went a bought a floor model car the other day for what a used dealer was offering on 3 year old car.

i would actually like someone to come up with a way in which credit could be obsolete. i mean didn't people buy houses and things before there was a such thing as a credit score?

The banks aren't going to start lending until people start saving on a massive scale and the economy turns around. Spending packages and bailouts only attempt to prop up the false foundations of our economy, and do not succeed in getting credit flowing as evidenced by the fact that they haven't. Savings create a legitimate foundation for the economy.

I've been saying this for a while now. Once people do begin to save, and those savings actually accumulate, then those people will start spending again, and they won't be putting themselves in jeapardy to do so. No economy can live on unlimited credit. Eventually those debts need to be paid. The good news is that savings rates have been increasing since this recession began.

 

[dilloduck]

Sane, responsible people have known this for decades. Buy only what you need and can pay for. Take care of the things that you have. Worn out tires do not require you to buy a new car. Paris does not dictate when you have to buy new clothes. You don't need a riding mowing simply because your neighbor has one. Happiness does not come from consuming things-- it comes from taking care of people and maintining what you have.

 

[Zoom-boing]

actually banks are lending to a point it's the secondary markets that are slowly thawing. the days of buying a house without putting money down are hopefully over and hopefully so are the days of living off of credit.

Never understood either of these. Why would anyone want to buy a house without putting any money down? The more you put down the less you owe, the less you owe the more money stays in your pocket. Maybe before purchasing a house people should have to take a basic 'personal finance/money management' course to fully understand what they are doing. It truly boggles my mind that people don't grasp the concept of living within their means and using credit wisely.

 

[editec]

This week, with his pronouncement that “credit is the lifeblood of a healthy economy,” President Obama reiterated what has been one of his most common themes in diagnosing our economic problem. The president has relied on this bedrock belief to propose policies that place the restoration of credit as the highest priority. However, despite his seemingly earnest intentions, the president and his economic advisors have misdiagnosed the ailment. Savings, not credit, is the lifeblood of a healthy economy. When not used properly credit can be like a cancer that sickens an otherwise healthy economy.

What everyone seems to have forgotten at this point is that credit does not come from thin air. Even in a system in which bank reserves are leveraged many times, someone has to put savings in a bank for the bank to turn around and make a loan. As a result, the bedrock is the savings, which allows for the credit to flow. Credit extended without adequate savings inevitably leads an economy into disaster.

Credit Card Cancer by Peter Schiff

Sadly, that is NOT the case.

In fact the money we get from credit card companies or to buy mortgages or cars is being created out of THIN AIR.

Now if it were being created by our government, for the benefit of the nation, I would have no problem with fractal banking.

But sadly, we gave that franchise to private banks who use it without any regard for how it effects this nation as a whole.

To those people, this nation is merely a tool to make them rich.

 

[dilloduck]

This week, with his pronouncement that “credit is the lifeblood of a healthy economy,” President Obama reiterated what has been one of his most common themes in diagnosing our economic problem. The president has relied on this bedrock belief to propose policies that place the restoration of credit as the highest priority. However, despite his seemingly earnest intentions, the president and his economic advisors have misdiagnosed the ailment. Savings, not credit, is the lifeblood of a healthy economy. When not used properly credit can be like a cancer that sickens an otherwise healthy economy.

What everyone seems to have forgotten at this point is that credit does not come from thin air. Even in a system in which bank reserves are leveraged many times, someone has to put savings in a bank for the bank to turn around and make a loan. As a result, the bedrock is the savings, which allows for the credit to flow. Credit extended without adequate savings inevitably leads an economy into disaster.

Credit Card Cancer by Peter Schiff

Sadly, that is NOT the case.

In fact the money we get from credit card companies or to buy mortgages or cars is being created out of THIN AIR.

Now if it were being created by our government, for the benefit of the nation, I would have no problem with fractal banking.

But sadly, we gave that franchise to private banks who use it without any regard for how it effects this nation as a whole.

To those people, this nation is merely a tool to make them rich.

exactly-----it's "virtual" money not to be confused with money that someone actually worked for.

 

[editec]

exactly-----it's "virtual" money not to be confused with money that someone actually worked for.

Well not exactly...I have no problem creating money based on someone promising to pay it back.

That is a necessary thing and a good thing if it is done RIGHT.

What I have a problem with is giving that franchise to invent money from debt to private bankers.

I would have no problem if private banks lend money they have...I just object to them inventing money they don't have.

If they can that, why can't we ALL do that?

Why can't you or kite checks for 35 times as much money as we have as they did?

When you or I borrow money for our homes, we ought to be borrowing from the NATION ITSELF.

That way, when we pay back that debt, we are paying the NATION back for that loan. We'd actually be FUNDING our government if we monetarized DEBTS this way, wouldn't we?

Now, we pay bankers to borrow, but bankers whose primary interest is not this nation, but themselves.

Why should we give them the right to forge the chains of our own enslavement and the enslvement of our government, too!?!

We have NO control over private banks.

We theoretically DO have some control over our government.

Now the argument is made that we cannot trust our government to get it right, and there IS truth to that, to be sure. Government bear watching.

But can we trust the private for profit bankers to get it right?

I think a quick reality check should tell you the answer is NO DEFINITLY NOT.

Obama isn't seeking to change that system, folks.

He is seeking to revitalize it so they can make the same god damned mistakes(???) again.

 

[dilloduck]

exactly-----it's "virtual" money not to be confused with money that someone actually worked for.

Well not exactly...I have no problem creating money based on someone promising to pay it back.

That is a necessary thing and a good thing if it is done RIGHT.

What I have a problem with is giving that franchise to invent money from debt to private bankers.

I would have no problem if private banks lend money they have...I just object to them inventing money they don't have.

If they can that, why can't we ALL do that?

Why can't you or kite checks for 35 times as much money as we have as they did?

When you or I borrow money for our homes, we ought to be borrowing from the NATION ITSELF.

That way, when we pay back that debt, we are paying the NATION back for that loan. We'd actually be FUNDING our government if we monetarized DEBTS this way, wouldn't we?

Now, we pay bankers to borrow, but bankers whose primary interest is not this nation, but themselves.

Why should we give them the right to forge the chains of our own enslavement and the enslvement of our government, too!?!

We have NO control over private banks.

We theoretically DO have some control over our government.

Now the argument is made that we cannot trust our government to get it right, and there IS truth to that, to be sure. Government bear watching.

But can we trust the private for profit bankers to get it right?

I think a quick reality check should tell you the answer is NO DEFINITLY NOT.

Obama isn't seeking to change that system, folks.

He is seeking to revitalize it so they can make the same god damned mistakes(???) again.

Private banks control our government. That fact alone creates quite a challenge.

 

[editec]

Dill opines:

Private banks control our government. That fact alone creates quite a challenge.

Absolutely.

We are allowing the tail to wag the dog.

Andrew Jackson understood it.

Wilson did not.

Controlling the curency gives them absolute control over our nation.

They are NOT up to the task because they do not SERVE the interests of the people.

Time to take away their franchise.

Time to take back our government.

It's time to stop pretending that uchecked capitalism coupled with giving MONEY complete control over our political parties is going to give us a DEMOCRATIC REPUBLIC.

What it's given us is the most productive nation on earth as a DEBTOR nation, and 60% of the working population unable to support themselves.

Its time to hang some bankers, folks.

 

[Paulie]

actually banks are lending to a point it's the secondary markets that are slowly thawing. the days of buying a house without putting money down are hopefully over and hopefully so are the days of living off of credit.

Never understood either of these. Why would anyone want to buy a house without putting any money down? The more you put down the less you owe, the less you owe the more money stays in your pocket. Maybe before purchasing a house people should have to take a basic 'personal finance/money management' course to fully understand what they are doing. It truly boggles my mind that people don't grasp the concept of living within their means and using credit wisely.

Because people feel safer if they still have some cash on hand after a loan goes through. Many of these people had hardly any cash on hand to begin with, so putting money down would have broke them AND put them into debt. Smart people know that when you're in a situation like that, you DON'T DESERVE A LOAN.

 

[Zoom-boing]

actually banks are lending to a point it's the secondary markets that are slowly thawing. the days of buying a house without putting money down are hopefully over and hopefully so are the days of living off of credit.

Never understood either of these. Why would anyone want to buy a house without putting any money down? The more you put down the less you owe, the less you owe the more money stays in your pocket. Maybe before purchasing a house people should have to take a basic 'personal finance/money management' course to fully understand what they are doing. It truly boggles my mind that people don't grasp the concept of living within their means and using credit wisely.

Because people feel safer if they still have some cash on hand after a loan goes through. Many of these people had hardly any cash on hand to begin with, so putting money down would have broke them AND put them into debt. Smart people know that when you're in a situation like that, you DON'T DESERVE A LOAN.

Not putting all money down, but putting money down. If they don't have a down payment then they shouldn't be buying a house.

 

[Paulie]

Never understood either of these. Why would anyone want to buy a house without putting any money down? The more you put down the less you owe, the less you owe the more money stays in your pocket. Maybe before purchasing a house people should have to take a basic 'personal finance/money management' course to fully understand what they are doing. It truly boggles my mind that people don't grasp the concept of living within their means and using credit wisely.

Because people feel safer if they still have some cash on hand after a loan goes through. Many of these people had hardly any cash on hand to begin with, so putting money down would have broke them AND put them into debt. Smart people know that when you're in a situation like that, you DON'T DESERVE A LOAN.

Not putting all money down, but putting money down. If they don't have a down payment then they shouldn't be buying a house.

That's the point that my last sentence was conveying.

 

[Dis]

actually banks are lending to a point it's the secondary markets that are slowly thawing. the days of buying a house without putting money down are hopefully over and hopefully so are the days of living off of credit.

Never understood either of these. Why would anyone want to buy a house without putting any money down? The more you put down the less you owe, the less you owe the more money stays in your pocket. Maybe before purchasing a house people should have to take a basic 'personal finance/money management' course to fully understand what they are doing. It truly boggles my mind that people don't grasp the concept of living within their means and using credit wisely.

I actually didn't put a dime down on my house, and am still living well within my means. I simply made sure I locked in on a good interest rate that can't be raised, did all of my homeword, crossed all my t's, and dotted all my i's prior to my cllosing date. I also don't take out things second mortgages and/or refinance to buy a friggen boat, oor big screen TV.

 

[editec]

actually banks are lending to a point it's the secondary markets that are slowly thawing. the days of buying a house without putting money down are hopefully over and hopefully so are the days of living off of credit.

Never understood either of these. Why would anyone want to buy a house without putting any money down? The more you put down the less you owe, the less you owe the more money stays in your pocket. Maybe before purchasing a house people should have to take a basic 'personal finance/money management' course to fully understand what they are doing. It truly boggles my mind that people don't grasp the concept of living within their means and using credit wisely.

I actually didn't put a dime down on my house, and am still living well within my means. I simply made sure I locked in on a good interest rate that can't be raised, did all of my homeword, crossed all my t's, and dotted all my i's prior to my cllosing date. I also don't take out things second mortgages and/or refinance to buy a friggen boat, oor big screen TV.

AND?

You didn't lose your job, get very sick, get sued into the poorhouse, get run over by a bus.

And I think I speak on behalf of everyone here is saying that we're all damned impressed that you had the forsight not to lose your job, get very sick, get sued into the poorhouse, get run over by a bus, too.

Why isn't everyone as smart as you?

 

[alan1]

Never understood either of these. Why would anyone want to buy a house without putting any money down? The more you put down the less you owe, the less you owe the more money stays in your pocket. Maybe before purchasing a house people should have to take a basic 'personal finance/money management' course to fully understand what they are doing. It truly boggles my mind that people don't grasp the concept of living within their means and using credit wisely.

Because people feel safer if they still have some cash on hand after a loan goes through. Many of these people had hardly any cash on hand to begin with, so putting money down would have broke them AND put them into debt. Smart people know that when you're in a situation like that, you DON'T DESERVE A LOAN.

Not putting all money down, but putting money down. If they don't have a down payment then they shouldn't be buying a house.

I beg to differ with you on this Zoom.
When I purchased my house I didn't put any money down on it (VA loan). Perhaps my situation was a bit unique. I could afford the payments, but at the time I wasn't making enough income to accumulate a solid down payment. My credit rating was excellent. At the time, for me to move to another apartment, would have entailed paying first and last month rent plus a security deposit. It was actually cheaper for me to buy a house than to move into another apartment or rent a house. The mortgage company I used actually qualified me for a loan about 50% greater than the cost of the house I purchased. I personally didn't feel like I could afford that much of a payment, so I bought less house than I was qualified for. My house payment was only $25 more than my rent, and the interest deduction on my taxes more than offset that. Additionally, my ex-wife was in some financial trouble at the time, so I (being the swell guy that I am) rented her a room for $100/month for 6 months until she could get back on her feet and get a place of her own.
VA loans carry a slightly higher interest rate than if one uses a conventional loan that includes a down payment. 8 years into my loan, I refinanced my 30 year note because interest rates had dropped to 5%. I didn't take out any equity, and the new loan was a 20 year note. My house payment dropped from $600/month to just under $500/month. Yeah, that's right, my house payment is under $500 and it is the only debt I have. At this point, the interest deduction on my taxes isn't even enough to make itemization worth my while on my fed taxes.
I'm not saying this type of 'no down payment' situation is available or will work for everybody, but in some circumstances not making a down payment on a mortgage is ok. Oh, as a side note, when I refinanced I used the same mortgage company as my original loan because the company I used only sold off 2% of their loans. I assume they only sell off the few high risk loans they make.

 

[alan1]

Never understood either of these. Why would anyone want to buy a house without putting any money down? The more you put down the less you owe, the less you owe the more money stays in your pocket. Maybe before purchasing a house people should have to take a basic 'personal finance/money management' course to fully understand what they are doing. It truly boggles my mind that people don't grasp the concept of living within their means and using credit wisely.

I actually didn't put a dime down on my house, and am still living well within my means. I simply made sure I locked in on a good interest rate that can't be raised, did all of my homeword, crossed all my t's, and dotted all my i's prior to my cllosing date. I also don't take out things second mortgages and/or refinance to buy a friggen boat, oor big screen TV.

AND?

You didn't lose your job, get very sick, get sued into the poorhouse, get run over by a bus.

And I think I speak on behalf of everyone here is saying that we're all damned impressed that you had the forsight not to lose your job, get very sick, get sued into the poorhouse, get run over by a bus, too.

Why isn't everyone as smart as you?

And how would any of those circumstances be any different if one was renting instead of owning?
editec, I generally respect you and think your comments are well thought out, but right now, I think you are being kind of a jerk.

 

[Zoom-boing]

Because people feel safer if they still have some cash on hand after a loan goes through. Many of these people had hardly any cash on hand to begin with, so putting money down would have broke them AND put them into debt. Smart people know that when you're in a situation like that, you DON'T DESERVE A LOAN.

Not putting all money down, but putting money down. If they don't have a down payment then they shouldn't be buying a house.

I beg to differ with you on this Zoom.
When I purchased my house I didn't put any money down on it (VA loan). Perhaps my situation was a bit unique. I could afford the payments, but at the time I wasn't making enough income to accumulate a solid down payment. My credit rating was excellent. At the time, for me to move to another apartment, would have entailed paying first and last month rent plus a security deposit. It was actually cheaper for me to buy a house than to move into another apartment or rent a house. The mortgage company I used actually qualified me for a loan about 50% greater than the cost of the house I purchased. I personally didn't feel like I could afford that much of a payment, so I bought less house than I was qualified for. My house payment was only $25 more than my rent, and the interest deduction on my taxes more than offset that. Additionally, my ex-wife was in some financial trouble at the time, so I (being the swell guy that I am) rented her a room for $100/month for 6 months until she could get back on her feet and get a place of her own.
VA loans carry a slightly higher interest rate than if one uses a conventional loan that includes a down payment. 8 years into my loan, I refinanced my 30 year note because interest rates had dropped to 5%. I didn't take out any equity, and the new loan was a 20 year note. My house payment dropped from $600/month to just under $500/month. Yeah, that's right, my house payment is under $500 and it is the only debt I have. At this point, the interest deduction on my taxes isn't even enough to make itemization worth my while on my fed taxes.
I'm not saying this type of 'no down payment' situation is available or will work for everybody, but in some circumstances not making a down payment on a mortgage is ok. Oh, as a side note, when I refinanced I used the same mortgage company as my original loan because the company I used only sold off 2% of their loans. I assume they only sell off the few high risk loans they make.

MM, thanks for posting this to point out that there are always exceptions to rules. Lots of smart moves on your part but the one that really stands out is that, even though you could have gotten more house , you realized that wasn't what you could comfortably handle and opted to buy less house. There are lots and lots of folks who may not be facing foreclosure if they had done the same.

My dad was (and is) a smart business man who passed down his knowledge. It's engrained in my head that owning is better than not owning (exceptions noted) and buying the best quality you can afford and taking care of it will keep more money in your pocket. I just saw a blurb on the local news this weekend about a new way for folks to save money -- by keeping their current cars and maintaining them, rather than going out and spending money on a new car. I laughed because it's anything but new to me. Sometimes I forget that not everyone has had the benefit of my dad in their life!