Author Topic: Take on more debt ó itís the American way  (Read 3320 times)

Threshkin

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Take on more debt ó itís the American way
« on: July 28, 2014, 09:01:51 AM »
Most of us recognize that debt is a tool that can be used properly or improperly just like any other tool.  But this article is ridiculous!

http://www.marketwatch.com/story/take-on-more-debt-its-the-american-way-2014-07-28?dist=lcountdown

Edit: Fixed typo

EricL

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Re: Take on more debt ó itís the American way
« Reply #1 on: July 28, 2014, 11:54:08 AM »
Well the article title is sensationalist.  It's really not too bad.  He's not arguing it's every Americans' duty to blow up their credit buying crap, luxuries, or crappy luxuries.  He does argue debt can be used as a tool to greater wealth.  We all know it's the anvil tied to a sturdy pulley that can be used as a counterweight to lift us to a higher income bracket.  Or it can be the weight tied to our necks on a one way deep sea dive.  Where he loses me is the blasť assumption it is or ought to be the primary fallback for the average American when he or she hits hard times and going into debt for houses and expensive college educations automatically equals a higher income.  If the average American saved even 10% of their income and stuck to using debt as a tool that 'stache would cover most conventional financial setbacks.  Whole libraries could be written about all the poor bastards who went underwater on their mortgage during the last crisis.  And the writing would provide much needed work for all the English Majors struggling to pay their student loans.  But even debt as a tool has its limitations.  Prior to the Great Depression farmers in the mid west leveraged their farms with bank loans to buy modern and more efficient equipment to plant and harvest their crops.  It was a "smart" investment and what could go wrong?  When the Depression and the Great Dustbowl hit they found the banks nearly as ruthless as gangster loan sharks when they got evicted.  Actually more ruthless-gangsters at least had cash flows to afford mercy if it pleased them.
« Last Edit: July 28, 2014, 07:26:07 PM by EricL »

Donovan

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Re: Take on more debt ó itís the American way
« Reply #2 on: July 28, 2014, 02:41:00 PM »
It's not the worst article ever, just way too defeatist (because debt and no savings is CLEARLY the only way anyone can get by).

It makes me want to go do some research on median home prices now though, since this is the first time that I've seen median income and median home price reported side-by-side. I find it interesting that I make over the median income, but I'm looking at houses well under (1/2) the median house price. I'm assuming that it's because the figure is inflated vs income due to the fact that it does not take renters into account, particularly in low-income areas.

frugalecon

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Re: Take on more debt ó itís the American way
« Reply #3 on: July 28, 2014, 05:51:25 PM »
Leverage can be a powerful tool for creating wealth...unless the wager goes south. Our leverage is down to the point where debt (mortgage) is only 15% of assets! and falling fast, so I guess we will never become super-rich.

EricL

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Re: Take on more debt ó itís the American way
« Reply #4 on: July 28, 2014, 07:37:03 PM »
In the Dust Bowl '30's the crops dried up and went to the four winds; the good debt wager went south; the farms went to the banks (for all the good it did them) and the farmers went west to Cali.  Those that could get past the LAPD sent to turn them back at the border, that is.  Sad days indeed.