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Has living beyond our means finally caught up to us?

Old 11-05-07, 11:10 PM
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Has living beyond our means finally caught up to us?

More of a general discussion thread rather than a right vs. left-wing thread. But I'm sure it will somehow degenerate sooner or later, thus I chose to post it here.

The stock market seems jittery and investors are uneasy. The general housing market is a disgusting mess. Credit markets are in upheaval, and banks are now becoming increasingly worried over non-secured personal debt. Understandably so since bankruptcies have been on a steady uptick for the past 20 years. Average savings is non-existant. It all seems to boil down to one common prevailing factor. The majority of Americans have been living beyond what they can afford. Has it finally caught up to us? Nobody saves up to buy anything anymore. Is the evolution of the credit card culture coming back to bite us in the ass? Another train of thought; if we were living within our means would our QOL be that much better than, say, 20 years ago? Thoughts?
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Old 11-05-07, 11:46 PM
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I hope so. Being just above average, I will be able to look down at the average people.

My guess is that putting money in the market today and holding it there for at least 5 years, is still going to pay off a lot more than doing other things.

I would also guess that things are hyped to sound worse than they are because that gets more coverage than the idea that things are still okay. But I would agree that the housing market needs to adjust. When people buy something for $200,000 to rent out for $1,000 they are betting on appreciation because the return is not there. And people have been doing that for a long time. Greenspan was too slow in raising the rates, imo, and that more than anything caused the housing situation we are in. Money was so cheap and people bought based on payments rather than value, especially with sub-prime money. That doesn't mean they didn't have good credit, as many did, but the rates were effectively the same to buy a "no doc" loan as a regular loan.

And banks may take a beating, but most of them have anough assets that they will be fine. Scores of sub-prime lenders have already folded, but the actual banks will be fine because enough people are paying high interest credit cards.

It is just correcting. When people who were just out of bankruptcy could get zero down loans, you had to know this was coming.
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Old 11-06-07, 12:52 AM
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Bwagh-haaa-haaaaaa!

That's why I'm stockpiling money and waiting for it to crash, crash, crash.
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Old 11-06-07, 04:49 AM
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The majority of Americans have been living beyond what they can afford.

I really feel this contradicts with the article you posted awhile back about inflation (which I feel is the real culprit and why people feel so much poorer these days). I don't feel that people have been living beyond their means- it's just that the items they need to have - like shelter, healthcare, food, energy - have been rising at such an incredible pace compared to incomes that people can't keep up. If home prices had been more stable, the subprime mess would probably not have been as bad. When you have 1940's ranch homes going for $600K, that's a real problem when you start looking at wages. I agreed 100% with the article you posted and found it to be a refreshingly honest take on what's really happening.

If being barely able to pay for the basics is "living beyond what you can afford" I'm scared to think of the future in the US.

Last edited by shifrbv; 11-06-07 at 04:54 AM.
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Old 11-06-07, 07:16 AM
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Originally Posted by shifrbv
The majority of Americans have been living beyond what they can afford.

I really feel this contradicts with the article you posted awhile back about inflation (which I feel is the real culprit and why people feel so much poorer these days). I don't feel that people have been living beyond their means- it's just that the items they need to have - like shelter, healthcare, food, energy - have been rising at such an incredible pace compared to incomes that people can't keep up. If home prices had been more stable, the subprime mess would probably not have been as bad. When you have 1940's ranch homes going for $600K, that's a real problem when you start looking at wages. I agreed 100% with the article you posted and found it to be a refreshingly honest take on what's really happening.

If being barely able to pay for the basics is "living beyond what you can afford" I'm scared to think of the future in the US.
what came first, the chicken or the egg?

prices don't rise in a vacuum, you need a lot of money in the system to fuel inflation which many economists define as too much money chasing the same amount of goods and services

i've been hearing this living beyond one's means thing for a long time now and once in a while the newspaper provides an example to back up their story. i'm still waiting for herds of people on the news to say that they bought luxury cars and all kinds of crap they couldn't afford.

Last edited by al_bundy; 11-06-07 at 07:19 AM.
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Old 11-06-07, 11:56 AM
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Originally Posted by shifrbv
The majority of Americans have been living beyond what they can afford.

I really feel this contradicts with the article you posted awhile back about inflation (which I feel is the real culprit and why people feel so much poorer these days). I don't feel that people have been living beyond their means- it's just that the items they need to have - like shelter, healthcare, food, energy - have been rising at such an incredible pace compared to incomes that people can't keep up. If home prices had been more stable, the subprime mess would probably not have been as bad. When you have 1940's ranch homes going for $600K, that's a real problem when you start looking at wages. I agreed 100% with the article you posted and found it to be a refreshingly honest take on what's really happening.

If being barely able to pay for the basics is "living beyond what you can afford" I'm scared to think of the future in the US.

It doesn't really contradict if you think about it. Prices of necessities have gone up. Price of junk has gone down to compensate. The problem is people don't adjust accordingly, and over the long haul it adds up to either debt or lack of savings. A quick and dirty example. A family who used to spend 40% of their earnings on necessities, now spends 50%....but they haven't decreased their free spending. Also, the inflation & "living beyond your means" phenomenon over the past 20 years is obscured by women entering the workforce and people working longer hours. When your take-home pay increases (by whatever means)......it's easy to ignore the underlying factors, that is, until they come back to bite you in the ass!
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Old 11-06-07, 12:33 PM
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Originally Posted by kvrdave
Being just above average, I will be able to look down at the average people.
Must be nice.
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Old 11-06-07, 01:05 PM
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It is.
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Old 11-06-07, 01:31 PM
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Originally Posted by DarkestPhoenix
Bwagh-haaa-haaaaaa!

That's why I'm stockpiling money and waiting for it to crash, crash, crash.
I hope you were just joking there as money would be worthless in the case of a crash. You would want to have hard assets or better yet, gold.
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Old 11-06-07, 01:33 PM
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I'm stockpiling Garbage Pail kids cards. Let's face it, no matter how bad things are, everyone will want those in a bad way.
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Old 11-06-07, 01:33 PM
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Money wasn't so bad to have after the 1929 crash. Money just isn't as good to have if there's hyperinflation.
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Old 11-06-07, 01:41 PM
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Originally Posted by shifrbv
inflation (which I feel is the real culprit and why people feel so much poorer these days).
We're talking about America, right? Not Mugabe?
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Old 11-06-07, 01:46 PM
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Originally Posted by John Galt
I hope you were just joking there as money would be worthless in the case of a crash. You would want to have hard assets or better yet, gold.
Why would money be worthless?
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Old 11-06-07, 01:50 PM
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Originally Posted by kvrdave
I'm stockpiling Garbage Pail kids cards. Let's face it, no matter how bad things are, everyone will want those in a bad way.
Are you locating these cards on your Pokemon excursions or is this a separate business venture?
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Old 11-06-07, 01:51 PM
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Originally Posted by classicman2
Why would money be worthless?
OK, not necessarily worthless per say, but it would be majorly devalued, as has been stated there are much better assets to have than cash. Hell, even having a large debt would be preferred than having cash (see Turkey's market crash).
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Old 11-06-07, 01:54 PM
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The same amount of cash money after the 1929 crash was worth more than it was before the crash. Along with the concept of "inflation", there's also the concept called "deflation".
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Old 11-06-07, 01:55 PM
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Originally Posted by classicman2
Why would money be worthless?

Probably has sentimental value though
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Old 11-06-07, 01:56 PM
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You first have to define what "living BEYOND your means" is

Is that simply spending more in a given year than you earn? (implies no savings)

Is it evenly spending everything you earn in a year and not leaving any room for savings?

Is saving a small amount in your 401k (like 5%) and then spending more than what you earn in a year?

Living beyond your means is different things to differnent people. I have friends that are happy to spend more than what they make in a year and not have any savings to speak of. They seem to manage the payments, so it can't be beyond their means
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Old 11-06-07, 02:04 PM
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Originally Posted by John Galt
I hope you were just joking there as money would be worthless in the case of a crash. You would want to have hard assets or better yet, gold.
I don't recall where I heard it but someone mentioned to me the other day that silver is actually better than gold.
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Old 11-06-07, 02:22 PM
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Originally Posted by nemein
I don't recall where I heard it but someone mentioned to me the other day that silver is actually better than gold.
That's true, I just mentioned gold because it's what people usually mention as an alternative source of money. Silver is projected to go up 10x in the next 3-5 years while Gold is only 3x.
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Old 11-06-07, 02:26 PM
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It amazes me how many people in this country spend more money than they earn(or spend all that they earn) and then complain when there is a rainy-day type emergency and they have no money saved for it.
My parents have a term called "American Math". For example if they see an item that is $2 each but 5 for $10.50 they say "hmm...American math." There are a lot of people who don't think twice about buying the latter.
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Old 11-06-07, 02:47 PM
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^ Americans call that "new math"

"Oh, 1 for $2 or 5 for $10.50, that must be a deal for people learning the 'new math' they are teaching these days"

It is the math dumbed down so that no child is left behind in our school systems...
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Old 11-06-07, 02:49 PM
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Originally Posted by John Galt
I hope you were just joking there as money would be worthless in the case of a crash. You would want to have hard assets or better yet, gold.

what's so good about gold? do they take it at supermarkets when you buy food like they do dollars?
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Old 11-06-07, 02:53 PM
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Originally Posted by al_bundy
what's so good about gold? do they take it at supermarkets when you buy food like they do dollars?
We're talking about in the case of a major crash. Gold would hold it's value much better than a dollar would, as has already been covered. We'll take the past month for example. Would you have rather had your entire life savings invested in gold, or in dollar bills?
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Old 11-06-07, 02:56 PM
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Originally Posted by John Galt
We're talking about in the case of a major crash. Gold would hold it's value much better than a dollar would, as has already been covered.
This is not true at all! Where are you coming up with this stuff?
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