Have We Angered The Economy?

GeorgeC said:
Thread unlocked. Rather than home-on-jam, please remember to hit the report button.
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you know what would make a great youtube channel? "Mods Discuss Thread Locks". would love to be a fly on the wall in one of those pow wows. also please publish all 'reports' you get. no need for names, just for a good laugh I'd love to read what people whine about. I would most definitely like and subscribe.
 
eman1200 said:
you know what would make a great youtube channel? "Mods Discuss Thread Locks". would love to be a fly on the wall in one of those pow wows. also please publish all 'reports' you get. no need for names, just for a good laugh I'd love to read what people whine about. I would most definitely like and subscribe.
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You think there's really a discussion? I always figured it was just @GeorgeC getting PO'd, locking a thread, then going off and having a couple of beers to calm down for a while, then unlocking it again (undoubtedly with a heavy sigh). Pretty boring YT stuff.
 
Half Fast said:
You think there's really a discussion? I always figured it was just @GeorgeC getting PO'd, locking a thread, then going off and having a couple of beers to calm down for a while, then unlocking it again (undoubtedly with a heavy sigh). Pretty boring YT stuff.
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Aint nobody got time fo dat. We are all VERY busy people, what with being members of the vast right wing conspiracy, the deep state, the trilateral commission, the illuminati, and various moneyed interests.

That said, yes, it would be very boring. We don't get many reports. Of the ones we get:
* 48%: a right-of-center person is butthurt because they got a warning, so they report a left-of-center person
* 48%: a left-of-center person is butthurt because they got a warning, so they report a right-of-center person
* 2%: someone's feelings are hurt because someone on the internet said something they disagree with
* 1%: a regular who likes to push the overton window, and occasionally the window pushes back
* 1%: the dread pirate roberts recidivist troll du jour going through the warning/points justice system

GeorgeC,
who knows where he is, and cares, but doesn't drink
 
GeorgeC said:
what with being members of the vast right wing conspiracy, the deep state, the trilateral commission, the illuminati, and various moneyed interests.
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No surprise; I always assumed C was your middle initial and your last name was Soros... :devil:

But in the interest of fairness you really should include a basketful of deplorables. ;)
 
Getting back on track, Ray Dalio and others are forecasting economic horror right around the corner. See also Jamie Dimon. How credible are these people? Or are they in it just for the publicity and attention?

Piperonca,
Who doesn't know who to believe
 
ArrowFlyer86 said:
reinforcing the previous comment re:car loans... WSJ Article Here

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People were buying cars with a $5-$50k 'market adjustment' OVER MSRP and at 8%+ interest for 84 months.

Yes people made bad decisions but the banks allowed this. Giving out a 7+ year loan to a person with a 600 credit score and $45k annual income? Bank can repo and sue for the balance but a judgement is just a piece of paper. Most will be written off or sent to collections to never be paid. Not sure how this is a path to profitability for financial institutions.

Yesterday (no kidding) my 2014 with 230000 miles died in the parking lot of Harbor Freight. $150 tow home and $175 starter I am running the next day. My wife, who was with me) said 'You should get a new car'. Today I showed her the cost to fix my car and asked her how spending $50k for a new car solves a $325 problem.

Even if I had to go to a dealership and got ripped of for $800 to fix, going $50k into debt (well most like $65k+ with interest) for 7 years is not the answer.
 
pfarber said:
People were buying cars with a $5-$50k 'market adjustment' OVER MSRP and at 8%+ interest for 84 months.

Yes people made bad decisions but the banks allowed this. Giving out a 7+ year loan to a person with a 600 credit score and $45k annual income? Bank can repo and sue for the balance but a judgement is just a piece of paper. Most will be written off or sent to collections to never be paid. Not sure how this is a path to profitability for financial institutions.

Yesterday (no kidding) my 2014 with 230000 miles died in the parking lot of Harbor Freight. $150 tow home and $175 starter I am running the next day. My wife, who was with me) said 'You should get a new car'. Today I showed her the cost to fix my car and asked her how spending $50k for a new car solves a $325 problem.

Even if I had to go to a dealership and got ripped of for $800 to fix, going $50k into debt (well most like $65k+ with interest) for 7 years is not the answer.
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But don't you think of the social cachet that comes with sinking capital into a depreciating asset shiny new status symbol? And Land Rover throwing money at actor Theo James to appear in a pretentious TV spot is not enough to sway you?

But yes, it is nice to have a paid-off car. The dealership I bought it from knows that my last payment is in the past though, and my sarcastic responses to their texts do not stop them from coming regularly.
 
Piperonca said:
Getting back on track, Ray Dalio and others are forecasting economic horror right around the corner. See also Jamie Dimon. How credible are these people? Or are they in it just for the publicity and attention?

Piperonca,
Who doesn't know who to believe
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There are always nay-sayers who have read the chicken bones and made predictions. Gov't debt is always something people complain about... but the US is nowhere near in debt (as % of GDP) as Japan (118% vs 235%). The last 4 years the gov't printed money as no one was working and it was the easiest solution to a once in a 100 year problem.

One reason the current admin is furious at the Federal Reserve is because high interest rates are weighing down the economy. If I could refi my mortgage from 7 to 4 percent I free up almost $1000 for discretionary spending. New homes would be affordable and other high ticket items usually financed would pick up.

No politician is ever going to be elected on a 'cut social spending' platform. So we can't reduce the budge as a solution. The only reasonable path forward is more tax revenue aka increase consumer spending aka lower interest rates (also reduce regulations and get as many people off social programs as possible).
 
Piperonca said:
I wasn't paying attention, tbh...are you saying their forecasts were right up there with the rapture(s)? :biggrin:
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More like forecasting results on par with your local weather guy. None of these folks publish a batting average and most if not all need to generate some type of anxiety to keep their business in business or their importance important.
 
Baked Potato said:
But don't you think of the social cachet that comes with sinking capital into a depreciating asset shiny new status symbol? And Land Rover throwing money at actor Theo James to appear in a pretentious TV spot is not enough to sway you?

But yes, it is nice to have a paid-off car. The dealership I bought it from knows that my last payment is in the past though, and my sarcastic responses to their texts do not stop them from coming regularly.
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My wife has a nice car. She wanted a Toyota but what was available (used in 2023) was ridiculous. I found her a 2013 Accord with 89k miles. Two years later it has 103k.

Every once in a while I'll browse for a new Toyota Camry (the entry level status symbol for Asian girls) but when I show her the $700+ monthly payment she says 'I'd rather buy gold'.

She's definitely a keeper.
 
pfarber said:
There are always nay-sayers who have read the chicken bones and made predictions. Gov't debt is always something people complain about... but the US is nowhere near in debt (as % of GDP) as Japan (118% vs 235%). The last 4 years the gov't printed money as no one was working and it was the easiest solution to a once in a 100 year problem.

One reason the current admin is furious at the Federal Reserve is because high interest rates are weighing down the economy. If I could refi my mortgage from 7 to 4 percent I free up almost $1000 for discretionary spending. New homes would be affordable and other high ticket items usually financed would pick up.
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The problem with that logic is that it treats borrowing like a game you're playing with a rubber band: "If it can stretch this far, it can stretch a little further" type of thinking. It can until it can't.

Japan can only sustain that borrowing because their cost of borrowing is essentially zero. Their cost is zero because they're not growing. They had to fight hard against deflation. They also have a fed that holds like 1 out of every 2 yen they issue in debt. But Japans bill will come due and when it does it will be ugly for the country.

We do not want America to be in those shoes.

Re:mortgages.
The federal reserve rightfully should not be focused on someone refi-ing their mortgage at a lower rate to free up $. Their mandate is not to try and turbocharge the US economy at every turn and help pump up asset prices by dropping borrowing costs. There's a time and a place for that, and the time/place is usually in a crisis. Behaviors like that when you're not in a crisis inevitably lead to inflation and out of control speculation.
 
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pfarber said:
If I could refi my mortgage from 7 to 4 percent I free up almost $1000 for discretionary spending
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In the most polite way possible, I could not disagree with this statement more strongly. That $1,000 should go to accelerated debt service and pay off, NOT “discretionary spending”. The living on the edge were income matches payments while having high net negative wealth and living beyond their means while displaying a “ paper tiger” facade of being well off with expensive depreciating consumer non durable goods bought with credit is at plague levels.
 
Flatiowa said:
The living on the edge were income matches payments while having high net negative wealth and living beyond their means while displaying a “ paper tiger” facade of being well off with expensive depreciating consumer non durable goods bought with credit is at plague levels
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Hey, that's the American way! Why do you have to be so anti-American?
/s
 
Piperonca said:
Getting back on track, Ray Dalio and others are forecasting economic horror right around the corner. See also Jamie Dimon. How credible are these people? Or are they in it just for the publicity and attention?

Piperonca,
Who doesn't know who to believe
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Jamie Dimon has pretty much always had a negative outlook. He always lists the risks, and says the upside is very generalized. If Mr. Dimon was to list positive and be positive, if something happens and the economy goes south, he would get f**ked. If however he has a negative outlook, and things go positive, he is looked at as a genius that knew how to handle the situation.

Tim
 
Flatiowa said:
In the most polite way possible, I could not disagree with this statement more strongly. That $1,000 should go to accelerated debt service and pay off, NOT “discretionary spending”. The living on the edge were income matches payments while having high net negative wealth and living beyond their means while displaying a “ paper tiger” facade of being well off with expensive depreciating consumer non durable goods bought with credit is at plague levels.
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Paying off debt is a discretion. What are you on about?
 
schmookeeg said:
Paying off debt is a discretion. What are you on about?
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While this is true, I would label it priority spending, “discretionary spending” I (and many laymen outside of buisness or finance) associate it with consumer spending. It might be a regional or age thing. By true definition you are correct, by common usage I stand by my statement. Taking in account the rest of the post I was responding to I think my interpretation of “discretionary” is more accurate in this particular circumstance.
 
eman1200 said:
you know what would make a great youtube channel? "Mods Discuss Thread Locks". would love to be a fly on the wall in one of those pow wows. also please publish all 'reports' you get. no need for names, just for a good laugh I'd love to read what people whine about. I would most definitely like and subscribe.
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Someone still sounds salty.
 
Flatiowa said:
In the most polite way possible, I could not disagree with this statement more strongly. That $1,000 should go to accelerated debt service and pay off, NOT “discretionary spending”. The living on the edge were income matches payments while having high net negative wealth and living beyond their means while displaying a “ paper tiger” facade of being well off with expensive depreciating consumer non durable goods bought with credit is at plague levels.
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Disagree. Stick that extra money in an index fund. The money gained will far outpace the money saved on interest.
 
Thing is, even "inflation hedging" misses the actual eventual sticking point behind fiat-currency debasement, which is what leads to real life deleterious effects.
 
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Racerx said:
Disagree. Stick that extra money in an index fund. The money gained will far outpace the money saved on interest.
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This was a very large part of the events leading up to and exasperated the great crash of 1929 and resulting Great Depression. People were using money from mortgages on their properties and homes as equity to invest borrowed money (often leveraged) into the markets think this exact same thing. When the music turned sour all hell broke loose and many were left homeless and destitute. Crashing economy lowered buyer numbers for properties and values tanked, further reducing equity to borrow against/refinance. It is a very repeating cycle.
 
Racerx said:
Disagree. Stick that extra money in an index fund. The money gained will far outpace the money saved on interest.
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Probably, but having no mortgage will really change your life for the better. I was able to retire with confidence a couple years earlier because we had zero debt, so no matter how bad things got we were fine.

I refinanced twice, the last time at sub 3%, and each time paid a little more every month than before - all toward principal. I know the first refi would have saved us $96K in interest even without the extra principal. I didn’t even bother to figure it out for the second. But, you know, a hundred grand here and a hundred there and before long you’re talking about real money.
 
I’m reminded of a scene from a movie where john Goodman explains the concepts of “FU” money. Being 100% debt free, owning a home, car, and having some cash in the bank with easily liquidation investments to back it up does measurably change your perception of life ( atleast it did to me), if I was held at gunpoint and ordered to sign a note of debt I would tell them to just shoot, I’m not doing it. That being said there is appropriate times to use debt for income generation, but through a limited liability company charter or limited liability partnership where the returns are greater than the interest, but personal consumer debt.. hard stop NO!
 
Meh. Too many variables. I would, and probably will, borrow for some things. Sometimes it makes sense. For example, f your investments are earning more than the interest on the loan AND you can pay it off if that situation changes. Or if paying cash would require an IRA distribution that would have negative tax impact. And for a younger couple, a mortgage on a house is certainly defensible, as are loans for reasonable cars. Borrowing money for an $80K SUV you neither need nor can afford is dumb; borrowing for a reliable used car appropriate to your needs isn’t. I can absolutely remember the times when we had to finance things. Easy to say I wouldn’t ever borrow now, but unrealistic then.
 
DaleB said:
Probably, but having no mortgage will really change your life for the better. I was able to retire with confidence a couple years earlier because we had zero debt, so no matter how bad things got we were fine.

I refinanced twice, the last time at sub 3%, and each time paid a little more every month than before - all toward principal. I know the first refi would have saved us $96K in interest even without the extra principal. I didn’t even bother to figure it out for the second. But, you know, a hundred grand here and a hundred there and before long you’re talking about real money.
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I currently have a 2.75% interest mortgage that's less than 1k a month. My property taxes are more per year than my mortgage. Having such a low interest rate probably changes the dynamic for me. The early pay off just doesn't knock off enough for me vs an index fund.

I bought my forever property when I was 23 in 2012. So the mortgage will be paid off before retirement.
 
I think it's a matter of balance.

When I was younger, we carried a mortgage and an occasional car loan (but never credit card debt). We could have scrimped and paid them off quicker, perhaps, but there are some things that are best done while young and some of them cost money. If you want to race sports cars or do technical diving or whatever, that's going to cost money and it's better to do those things in your 20s and 30s than in your 70s. If that means carrying a mortgage for a few extra years, so be it.

OTOH, we always made extra mortgage payments and we did pay off the house early. Sometime in my 50s we became debt free and have been ever since. I also hit the point where my 401k was healthy enough to let me retire any time I liked. That's a remarkable stress reliever and my work became a lot more fun, knowing that my management didn't have much of a lever on me anymore and I could walk whenever I wanted. By age 59 I had maxed out my pension and didn't have any real financial reason to continue working, so I promoted myself from chief engineer to retiree.

A mortgage feels like the sword of Damocles. It's a tremendous relief to get out from under it.
 
All valid points. And I remember when I had no option but to borrow (I also remember the stress of working a job I hated to make the payment on something I no longer wanted that was worth less than I owed on it).
 
Racerx said:
Disagree. Stick that extra money in an index fund. The money gained will far outpace the money saved on interest.
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Depends on the interest rate you are paying. Always do the math....

Tim
 
tspear said:
Depends on the interest rate you are paying. Always do the math....

Tim
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Yeah, this. I've got a few small mortgages I'd like to pay off and could many times over, but with mortgage rates locked at 3% +/- I just can't bring myself to do it. The historically low interest rates we've seen has contributed to the currency debasement we're seeing. Interest rates should be higher. Might as well take advantage of the cheap money in the meantime.
 
tspear said:
Depends on the interest rate you are paying. Always do the math....

Tim
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Yeah. I was stuck in my own world of a sub 3% mortgage completely ignoring that that's far from the norm
 
wondering when GA is really going start feeling the down turn.... disposable income items are the first to feel a down turn and last to recover. A hanger mate had to really lower cost to sell his Aero commander single engine. It's also a good time to buy a twin due to increasing costs- both fuel, maintenance and insurance and hanger rent, and expect them to get cheaper....expect aircraft good for training mission.

AVGAS is over $7/gal at my home field, and several owners say they don't fly much due to cost....moreover, A&Ps are in short supply here and a few planes are down awaiting service or parts.

a buddy owns a Cherokee which cost him about $84/he to fly.....he borrows my experimental c172 cause it cost about $21/hr wet .... he says it difficult to rationalize the $85 and just doesn't fly it much....as most other owners in our hanger building feel. He will likey sell it and join a flying club and fly my exp c172 or buy a used experimental of his own, although he said he would only buy into a partnership to reduce costs.

I'm somewhat immune from the gas costs (my engine is flex fuel so I normally burn cheap car gas which currently cost about $2.85/gal) so I cringe when mogas not available and I have to buy AVGAS..... I randomly fly it on a whim when good wx, but I would also curtail flying at $85/hr and likely sell it.....most of the active private owned planes randomly flying i see are other experimentals with similar lower cost or certified's with the MOGAS STC... Gas cost likely to increase as new AVGAS replacement fuels become more wide spread availability that will likely negatively further affect our GA micro economics.

If it wasn't for the flight training segment, I believe pison GA would be fraction of its current state.

GA has always been expensive but if the economy doesn't get better for those in the upper middle class or those in/close to retirement that traditionally own piston aircraft, I think we will start seeing more GA stuff for sale and cost start lowering....good for those that remain economicly immune but not so much for most others. But if it shrinks too much, smaller airports are closed and redeveloped in to condos, the insurance pool decreases, fuel providers produce less, shops close up. etc... which ultimately raises our cost.

the 2008 crash hit GA hard, early...and didn't recover until most other segments significantly improved. I see GA as a canary in the coal mine for the economy. Indicators of seeing more aircraft for sale and/or more hanger rentals may be something to watch as another economic indicator we here may be more in tune to.

just a pilot's opinion here, but-disclaimer-I only got C in my econ class.
 
I think paying extra on loans makes more sense the earlier into the loan you are. For example, let's say you have a loan with a minimum payment of $100 (picked for easy math, add zeroes as needed), of which $30 goes to principal and $70 goes to interest. An extra $30 saves you $70 in interest. That's not bad. Later into the loan, when more of the payment goes to principal, the ratio gets worse. It is more critical to pay extra on the first few payments.
 
2-Bit Speed said:
I think paying extra on loans makes more sense the earlier into the loan you are. For example, let's say you have a loan with a minimum payment of $100 (picked for easy math, add zeroes as needed), of which $30 goes to principal and $70 goes to interest. An extra $30 saves you $70 in interest. That's not bad. Later into the loan, when more of the payment goes to principal, the ratio gets worse. It is more critical to pay extra on the first few payments.
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2 bit speed has it exactly right. I made double payments on my mortgage every time that I had the cash to spare.

I had a terrible overtime event, 80 hours in one week is not fun, but paid principle for 5 months and the interest saved was much more than twice the extra pay.

Later, I got a low interest home improvement loan from the Credit Union, and paid off the balance. That loan was payroll deduction, and only 2 years, but paid off the last 5 years of the mortgage. Conversion to the Credit union loan ended the existence of the insurance and property tax escrow account that paid no interest, and we just wrote 2 checks a year. That money went into the CU and paid interest. We also paid the insurance 3 years at a time, for a 20% discount.

The money saved from those payments more than paid for my next 2 cars. :) :)
 
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