# People and debt



## pinkyBear (7 Oct 2010)

Hi there,

I put this in the LOS section, because from posts on Money Make Over there are more and more people posting about their CC/ non secure loan debt  as opposed to mortgage debt.

Does it not annoy anyone? As I am starting to get a wee bit frustrated about people posting because they have 50K debt, a big mortgage and living expenses.... Did these posters not apply common sence? Did they really think another credid card will solve their problems....

Then there is a suggestion - go to bank and see if the OP can go interest only on the mortgage, if I was the bank manager who the mortgage was with - I would say no.. The mortgage is not your problem it is the fact that you have racked up a debt of 50k in loans!!

I completly understand that people fall on hard times and yes, the CC is used and there can be problems down the line paying this off, my rant  is not about these posters.. Hard times are hard times and my heart goes out to those posters...

P...


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## orka (7 Oct 2010)

I agree.  I get annoyed any time I hear someone suggesting any kind of debt forgiveness or 'NAMA for the people'.  I have yet to read of or hear about a person or couple struggling financially just because of a large mortgage and negative equity - there is ALWAYS a big pile of personal debt and credit card debt.  What were they doing? 20/30/40 years ago, people were delighted to just be able to buy their first house and were happy to just have a mattress and some deckchairs as furniture until they could buy stuff bit by bit. The culture of entitlement went a bit crazy here for a while for some people.


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## The_Banker (7 Oct 2010)

This thread confirms that it wasn't just the banks and government that lost the run of themselves but the whole of society.

That is why the whole of society will have to pay in the coming budget unfortunately :-(


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## truthseeker (7 Oct 2010)

What I personally find scary is that some of the money makeover threads cite large salaries (whether one or two salaries) and then when you read the breakdown LOADS of it is just servicing loans and CC debt - the mortgage repayments and groceries are small by comparison. 

Even if there wasnt a recession they would be paying back these loans - was it just that credit was so easy to get that people forgot theyd have to pay it back later?


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## orka (7 Oct 2010)

The_Banker said:


> This thread confirms that it wasn't just the banks and government that lost the run of themselves but the whole of society.
> 
> That is why the whole of society will have to pay in the coming budget unfortunately :-(


It's absolutely untrue that the whole of society lost the run of themselves.  Lots of people didn't go crazy spending like there was no tomorrow.  Lots of people have no debt other than their mortgage.  Lots of people bought prudently - or prudently didn't buy.


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## pinkyBear (7 Oct 2010)

> but the whole of society


 
Orka, I agree, there are plenty of people out there that did not go wild or did not feel "yes another credit card would be great/useful....".  



> That is why the whole of society will have to pay in the coming budget unfortunately :-(


 Not just this comming budget - generations will be paying!


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## Chris (7 Oct 2010)

orka said:


> I agree.  I get annoyed any time I hear someone suggesting any kind of debt forgiveness or 'NAMA for the people'.  I have yet to read of or hear about a person or couple struggling financially just because of a large mortgage and negative equity - there is ALWAYS a big pile of personal debt and credit card debt.  What were they doing? 20/30/40 years ago, people were delighted to just be able to buy their first house and were happy to just have a mattress and some deckchairs as furniture until they could buy stuff bit by bit. The culture of entitlement went a bit crazy here for a while for some people.



And in the now retired or rtetiring generation you bought a house and that was it. Your plan was to stay in it for the rest of your life. The idea of the "property ladder" always amused me, as it was so obvious that it could not go on ad infinitum. I bought a house with my wife in 2004 based on a location and size that would allows to have a family and not have to move should something happen like not be able to financially afford to move to a bigger place. In late 2007 we decided to sell and rent, which we have doing since.
Around the time we were getting our mortgage, I was at a party talking to some people who were all going on about their property investments and how much money they got from the bank by "playing them out against eachother to get more money". I mentioned that I had saved for a deposit and some appliances and furniture, and was taking out a mortgage for 85% with a plan to reduce it to below 80% as soon as possible, and that I had no loans or cc debt. People looked at me as if I had two heads. I later overheard two of the guys that had been most vocal about their "property portfolio" saying something to the tune of "that Chris guy is some bumba$$". Unfortunately I have not met them since, because I would love to rub their faces in it.
I agree that the majority of people that are in financial trouble with their mortgages now, are in that position because of other debt they racked up during the boom. That's what you get when you buy into the credit based consumption frenzy. I seriously hope that the outcome of the recession, or more veracious "the correction", is that people will wake up to the fact that a consumption driven economy is completely unsustainable in long and short term. Here's to hoping.


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## Firefly (7 Oct 2010)

truthseeker said:


> Even if there wasnt a recession they would be paying back these loans - was it just that credit was so easy to get that people forgot theyd have to pay it back later?


 
That's a very good point. If personal, non-mortgage debt, wasn't so high would we be in as a bad a recession at all?


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## DB74 (7 Oct 2010)

The_Banker said:


> This thread confirms that it wasn't just the banks and government that lost the run of themselves but the whole of society.
> 
> That is why the whole of society will have to pay in the coming budget unfortunately :-(


 
People are stuck with their own debt while also being forced to pay someone else's as well through tax increases etc etc

If someone borrowed excessively and is still paying those loans off, irrespective of how tough it is for them and/or how slowly they do it, then their debt is not a burden on any other citizen of this country.

It's the debts of those who aren't paying anything that are costing everyone more than their fair share.


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## Chris (7 Oct 2010)

orka said:


> It's absolutely untrue that the whole of society lost the run of themselves.  Lots of people didn't go crazy spending like there was no tomorrow.  Lots of people have no debt other than their mortgage.  Lots of people bought prudently - or prudently didn't buy.


Absolutely right, but the mistakes of some are now being paid for by everyone. That is the most unjust and unfair society I can think of. It is not about helping out people that have fallen on hard times. It is about teaching people a hard lesson of life.




pinkyBear said:


> Not just this comming budget - generations will be paying!


This is what sickens me most. My infant daughter will be paying for the mistakes of some, made at a time when she wasn't even born yet. That is if she chooses to stay and pay the taxes.


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## truthseeker (7 Oct 2010)

Chris said:


> I was at a party talking to some people who were all going on about their property investments and how much money they got from the bank by "playing them out against eachother to get more money". I mentioned that I had saved for a deposit and some appliances and furniture, and was taking out a mortgage for 85% with a plan to reduce it to below 80% as soon as possible, and that I had no loans or cc debt. People looked at me as if I had two heads. I later overheard two of the guys that had been most vocal about their "property portfolio" saying something to the tune of "that Chris guy is some bumba$$".


 
Yes, i went to a wedding abroad in 2007 and a group of people at the wedding were of the same ilk. They thought I was some kind of idiot because I only bought a small apartment with a manageable mortgage. Everyone of them had a home and one or two investment properties and was planning the next one. Id love to know how theyve gotten on since.


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## Shawady (7 Oct 2010)

The first time I noticed this type of attitude was during the Eircom floatation. I remember at the time colleagues getting bank loans to buy these shares and I was told they were a 'sure' thing. I never bought any but was told I was crazy at the time.


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## Purple (7 Oct 2010)

I brought up this subject nearly three years ago in this thread about "Stupid Debt".


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## pinkyBear (7 Oct 2010)

Hi purple, I see I agreed with you back then too!!


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## TarfHead (7 Oct 2010)

Shawady said:


> .. the Eircom floatation.


 
I was being all smug reading this thread cos I never indulged in the folly that others did.

Then I read this post and had a flashback to the conversations we (me and the OH) had about how much to borrow to buy eircom shares. I think we went for 20K each. I managed to get out at a premium of €1 per share. she stayed to the (very) bitter end.

The loss outweighed the gain.

A waiting list for a specific handbag in BTs was one early indication, I recall, that things were getting out of hand.


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## micmclo (7 Oct 2010)

edited out


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## burger1979 (7 Oct 2010)

TarfHead said:


> A waiting list for a specific handbag in BTs was one early indication, I recall, that things were getting out of hand.


 
a waiting list for a hand bag???!!!!! i hope the bag was practical? 

Does anyone think that in the boom years that there was a culture of 'mob' mentality? for instance Chris aluded to talking to someone who had a property portfolio and looking to increase it, and others were doing the same basically because it was the done thing? i wonder if people ever stopped and thought just for a moment about the upcoming years and how their assets would effect them and how to dispose of them? It's all a kind of keeping up with the jones' culture. anyways that just my 2 cents.


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## micmclo (7 Oct 2010)

burger1979 said:


> a waiting list for a hand bag???!!!!! i hope the bag was practical?



It was such a good bag it didn't even have a name

It was called the "no name" bag.
A lot of them ended up on the ebay, people looking for a quick profit


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## JP1234 (7 Oct 2010)

Absolutely agree with all the comments.. I don't even go near that forum because it annoys me so much, partly because of  _some _people's greed and stupidity but mainly because of the attitude of _some_ that it wasn't their fault, everyone else is to blame and they should be let off with paying it all back.

The phrase "nama for the people" makes me want to bang my head off the desk.  What, I am also expected to stump up for the girl I used to work with , bought a 260,000 house, then borrowed her "going out money" each month off the credit union, or the 2 sneering idiot ex friends of 15 years who  didn't invite us to their wedding or child's christening because as renters we weren't their type of people....

Another couple - with 4 young children - we know recently moaned they had to cancel their VHI as they could no longer afford it but have their separate and joint nights out each weekend...some people still can't get their priorities right

I actually enjoy repaying the smugness by reminding people we don't owe anyone anything


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## Betsy Og (7 Oct 2010)

lucky enough most people I know are level headed and never got into the whole property portfolio and who had the biggest car etc. etc., I've always enjoyed the craic of being slagged as a cheapstake/never misses a trick/always looking for an angle.

BUT I think those of us who didnt go mad should keep the higher ground and not bait those in trouble. I feel sorry for anyone who feels compelled to pay to upkeep an image, or who is just plain stupid and spends recklessly. Money worries are tough, even tougher if you havent the cop on to try to fix them, or have the realisation that is all your own fault (& worse still if you're in denial/are delusional and think its someone elses fault). Lets avoid schadenfreud (hopelessly misspelled no doubt) but basically means taking pleasure in others misery.

p.s. I thought what most people mean by "NAMA for the people" is not throwing people out of their houses or giving them some help if their house is repossessed and they still owe part of a loan (i.e. were in negative equity) - dont think it was ever about paying off credit cards.


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## PetrolHead (7 Oct 2010)

Do ya know who annoys me the most on this topic.....

That bl**dy Matt Cooper on Today FM.

He seems to think the people of this country were entirely blameless for their situations... that it was all the big bad bankers... that 100% and interest only mortgages were "miss sold" and therefore the holders should be able to walk away from them... that pre-approved credit was an immoral method of ensnaring the poor borrowers into even more debt... that the property developers and bankers are all evil shepherds corrupting the easily lead flock of plebs........

The guy is an idiot.

In the one breath he talks of Ireland being a knowledge economy and a center for educational excellence and in the next he portrays the country as a bunch of mislead naives and innocents....

You can't have it both ways....

Orka is right however, it wasn't everyone who lost the run of themselves. Some borrowed well within their means, weren't swayed by avarice and actually paid heed to the wider economic environment... but we all had it good. This was a low tax nation with widespread employment and low interest rates and we all enjoyed the benefits of that. Even if you only borrowed within your means (I was offered over 100k more than I asked for by a broker who suggested some 'fudged' earnings figures) you still enjoyed those borrowings at a low rate of interest. 

I am fully of the opinion that if you borrowed it, you owe it, and if you can't afford it, tough luck... you shouldn't have been so bloody stupid!!!


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## MrMan (7 Oct 2010)

I've always believed that a mans character is there regardless of his wealth, so if he has no money and is generally regarded as a pig, when he makes his money and becomes wealthy he is still a pig just a rich one.

So there were people who got all uppity about buying investments and releasing equity etc and some did/do look down on those that don't take risks for cash rewards and on those that rent and obviously some posters here took the brunt of that attitude from the type of people they encountered personally and professionally.

Yet the role reversal shows the same character trait from some posters i.e Now they want to portray their ex friends/peers as idiots and 'rub their noses in it'. They want to bask in their superior intellect and the fact that they showed sense and control to stay on a steady path well within their means.

Either way it's not nice to dwell on how others operate and it's just a fact of life that we all take a different slant on things and none of us are always right.


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## missdaisy (7 Oct 2010)

I do agree with a certain attitude being taken against credit card debt and hearing people moaning about debt when they are living a certain lifestyle on credit union loans and credit cards does irritate me.  

I don't fully agree with this attitude though towards people who bought in 2005/2006 and took out big mortgages. I think it's easy to look at the situation in hindsight, and especially as an older person, and say Ann or Barry was a fool to have taken out such a mortgage for whatever property. But as an older person you lived through the eighties recession.

I am in the second half of my twenties and a good number of friends bought property in 2006 and now are in negative equity. They felt it was within their means to do so, property prices were rising, they wanted to get a foot on the ladder, their incomes were good, taxes were low and they could afford the repayments and the banks told them they could afford a repayment of x on a salary of y. They saved for furniture, there was no credit card debt and they weren't trying to live a certain lifestyle. 

They are in negative equite now. I'm not but I see it as, there but for the grace of god I would also be in negative equity. We started looking for a house in 2006, we didn't find somewhere suitable, we then heeded advice to wait. But I, as an educated person, who does not have any other debt and saves every week, could very easily be in a house with huge negative equity now. And I think it's very easy to judge those that did buy in 2006. It is a different story with investment properties, I lose sympathy for those. But I do have sympathy for those people in their 20s and 30s who decided to settle down and buy a home in 05/06, have now lost jobs or are on reduced income and are finding in t hard to meet mortgage repayments.


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## JP1234 (7 Oct 2010)

MrMan said:


> Yet the role reversal shows the same character trait from some posters i.e Now they want to portray their ex friends/peers as idiots and 'rub their noses in it'. They want to bask in their superior intellect and the fact that they showed sense and control to stay on a steady path well within their means.



 Oh I really hope you don't think I spend my time bleating how clever I am in people's faces, that's not it at all The couple I was referring to were particularly nasty, humiliating and laughing at us, and ultimately snubbing us. 

The only time I ever act a little smug ( sorry I know it's not a good trait but I can't help myself!) is when people are moaning about their large debts and how they shouldn't have to pay it back etc...It's lovely to be able to say "oh it's great not having thousands of euro of debt hanging over us"

Interestingly, when we went on holiday to New York last year we had some of the same people making sneery comments at us along the lines of "no recession for you I see"  despite the fact we hadn't been away for 4 years and had saved hard to pay for the trip.

Can't win either way.


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## Betsy Og (7 Oct 2010)

great wisdom in the line, attributed to Warren Buffet if I'm not misstaken:

"When people get greedy be fearful, and when people get fearful be greedy".

So the first part would keep you something wasnt right with the boom, and I've no doubt but that those with wads of spare cash or cojones of steel will make a killing at the moment. 

Also enthralling is to review the academic overview of a bubble - I came across it a few years back studying for QFA's - just as things were turning bad. Basically it so precisely described the property bubble it was uncanny and begged the question who more economic commentators couldnt forsee the crash. Slow start, more participate, herd mentality develops, "hubris" - feeling that its a cert & you cant lose, smart guys exit, the bulk left holding the baby.


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## pixiebean22 (7 Oct 2010)

I agree with most posters but i think the hardest pill for people to swallow is the fact that there are people in this country who owe millions and are not being held accountable.  Why shouldn't everyone have to take responsibility for their mistakes debts or otherwise?  I think this is why people who only have a few thousand worth of debts get bitter and angry about their relatively small debts.

I'm most angry at developers, banks, anglo in particular, i'm not angry at the people of this country who bought and spent to enjoy their lives.  Some did this in more excessive terms than others.


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## pixiebean22 (7 Oct 2010)

Double post, apologies


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## DerKaiser (7 Oct 2010)

pixiebean22 said:


> I agree with most posters but i think the hardest pill for people to swallow is the fact that there are people in this country who owe millions and are not being held accountable.


 
But we can't live our lives according to what certain people are or aren't getting away with, we each have to do what's right with no excuses.

It's disgraceful if people are getting away with murder but we don't solve this by using it as some excuse to weasel out of our own responsibilities.

Every time some measure is taken by government to save €50m some smart ass from the opposition brings up the fact that this was spent on some rubbish like e-voting.  Yeah, we know that we have wasted hunderds of millions in all kinds of half assed ways, but that has zilch to do with how we now save €50m.

We're looking to save €3bn and the best the opposition can do is to dwell up past wastage without a single constructive idea for the here and now.  Same principle for someone struggling with bills, if you used the service expect to pay for it and leave aside unrelated arguments about Seanie Fitz not paying his loans.


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## bogle (7 Oct 2010)

Betsy Og said:


> great wisdom in the line, attributed to Warren Buffet if I'm not misstaken:
> 
> "When people get greedy be fearful, and when people get fearful be greedy".





"I can calculate the motions of heavenly bodies, but not the madness of people" 

attributed to a very famous  English physicist  in or around the period of the South Sea Bubble during the early 18th century.

The more things change, the more they stay the same!


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## RMCF (7 Oct 2010)

I think there are 2 separate arguments here.

1) Those who are in debt due to being aspirational in wanting to own a home. Nothing really wrong with that imho, as long as people didn't fudge their earnings to get silly mortgages

2) Those who went on the lash with multiple credit cards, running up debt which they ignored or felt they would never come back to haunt them. This is just plain stupid and people have to take responsibility for that.


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## missdaisy (8 Oct 2010)

+1 RMCF, you put very succinctly what I was trying to get at in my long winded post!!


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## thedaras (8 Oct 2010)

Yet, I've been hearing a lot of the following on the radio/Tv and reading it newspapers etc;

We need people to get out and spend spend spend...!!

How do we encourage people to spend...!!

People are afraid to spend as they are nervous about the upcoming budget,so we need to ease those fears and get them out spending!!!
Go figure...


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## truthseeker (8 Oct 2010)

thedaras said:


> We need people to get out and spend spend spend...!!


 
There are plenty of people with money on deposit who will not spend it because they are afraid times are about to become harder yet and they will need that money to supplement reduced income.

In theory some people could pay off their negative equity - but they want to keep that cushion.


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## thedaras (8 Oct 2010)

My point is ,The Government are telling us to go out and spend..
However IMHO, those who have money on deposit are probably doing the right thing by holding onto what they have.
I wont be spending,.as its obvious that you have to hold onto any money you have now,due to not knowing when the government will come along and make a decision to bail out joe bloggs.
So although they want us to spend they have done everything to prove we should hold onto anything we have..just in case..


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## thedaras (8 Oct 2010)

Just to add to that, I could and I was thinking of for example;

Buying a sofa in November;
Taking a few days away over the October bank holiday in Ireland with the kids.
But there is no way that I will do any of the above and lots more now,as I don't know how much our income will go down at the next budget,and no matter how much or how little it does go down,we have next years budget to look forward to ..so they can tell us to spend all they want but for most people we have learned that we cannot be sure what this government will come up with next.

This in effect will lead to more job losses,once again the result of the government and its decision to bail out the banks ..and the governments lack of leadership and vision and inability to make the hard calls..


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## truthseeker (8 Oct 2010)

thedaras said:


> My point is ,The Government are telling us to go out and spend...


 
thedaras - I was agreeing with your point - you are absolutely right in what you say - I personally would be afraid to get out and spend given the cuts Ive taken in the past 2 years. I am in negative equity - but I can make my repayments and I do not have any other debt, but my household income is down to 33% of what it was due to my OH out of work and my own salary being subjected to levies and paycuts. Spending for me at this point would be madness - I could easily end up with no savings and less of an income (I could be facing another pay cut this year). The interest rates can only go up so my mortgage repayments are likely to rise leaving me with even less disposable income, add to this how hard the government are going to hit me in the budget - its a no brainer to sit on whatever cash I have - and even that might not be safe.


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## csirl (8 Oct 2010)

A lot of middle income PAYE workers are in "only spend money if you absolutely have to" mode right now. They dont know whats coming in the budget, but you can be almost certain that they'll get the brunt of it and end up paying multiples more that everyone else.


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## Betsy Og (8 Oct 2010)

Uncertainty is more or less the worst thing. Even if we knew, for a fact, how bad it was going to be a few simple calculations would tell us if we could afford the sofa/holiday etc. (and chances are many people will still be able), but its not knowing that puts the brakes on everything.

I think a good few people are in the "famine or a feast" category, basically if you keep your fairly well paid job then all will be grand, particularly if you're not up to the limit on debt and at the mercy of an interest rate hike, but for most of us (well private sector anyway) theres no such job guarantees dished out.

So do you anticipate a job loss, pay down debt and save for that imminent event (generally my default setting) or do you live prudently, but not excessively so, in the expectation of remaining in a job. Hard to know if having saved like crazy will make a huge difference in the event of a job loss (depends on the figures I suppose) but at least your lifestyle will require less correction.


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## Locke (8 Oct 2010)

Slightly off topic, but what got on my nerves was Nicola Byrne from 11890 on Hook last night.

She was going on about people being negative about what is going on. She said nothing has changed for her in the sense that she still does the same things, picks her kids up, goes to work, washes clothes, that effectively nothing major has changed in her life - except now it's under the shadow of an recession.

She said people should take a step back and realise that not much has changed in the greater scheme of things.

Which is all well and good a on a large salary, but what about the people unemployed? What about those that are teetering on the brink of major financial trouble with the upcoming budgets?

Rant Over.


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## truthseeker (8 Oct 2010)

Locke said:


> She said nothing has changed for her in the sense that she still does the same things, picks her kids up, goes to work, washes clothes, that effectively nothing major has changed in her life - except now it's under the shadow of an recession.


 
Well she is the lucky one - try losing one or both household incomes, taking paycuts, needing to move out of a 1 bed apartment because of a child on the way but being stuck in negative equity. 

And none of the above has anything to do with previous mad spending on easy credit.


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## DerKaiser (8 Oct 2010)

truthseeker said:


> Well she is the lucky one - try losing one or both household incomes, taking paycuts, needing to move out of a 1 bed apartment because of a child on the way but being stuck in negative equity.
> 
> And none of the above has anything to do with previous mad spending on easy credit.


 
Didn't see it, but there are a lot of people who have managed to maintain a decent household income with a falling cost of living.  Admittedly no one can be sure that this will continue to be the case, but such people need to stop complaining, get on with their lives and spend as usual or the whole economy will just collapse.


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## thedaras (8 Oct 2010)

@DerKaiser;
What are you saying? 
Are you saying that in a situation where no one is sure of their future financialy that they should stop complaining and go spend!!

Is this not how we ended up where we are?

The title of the thread is "People and debt"!! Isn't it ironic!!


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## dereko1969 (8 Oct 2010)

thedaras said:


> Yet, I've been hearing a lot of the following on the radio/Tv and reading it newspapers etc;
> 
> We need people to get out and spend spend spend...!!
> 
> ...


 
I think this shows how disconnected Cowen is from reality, he came out with that statement at the same time as Lenihan was saying we'd need more than €3bn in cuts, it shows how ignorant he is of economics and everything really.


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## Complainer (8 Oct 2010)

Locke said:


> Slightly off topic, but what got on my nerves was Nicola Byrne from 11890 on Hook last night.
> 
> She was going on about people being negative about what is going on. She said nothing has changed for her in the sense that she still does the same things, picks her kids up, goes to work, washes clothes, that effectively nothing major has changed in her life - except now it's under the shadow of an recession.
> 
> ...


Let them eat cake.


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## thedaras (8 Oct 2010)

dereko1969 said:


> I think this shows how disconnected Cowen is from reality, he came out with that statement at the same time as Lenihan was saying we'd need more than €3bn in cuts, it shows how ignorant he is of economics and everything really.



Absolutely.. most people are trying to cut back ,pay off credit cards ,reduce debt ,put money by just in case,not spend due to uncertainty BECAUSE of government mismanagement and now they have caused this they tell us to spend more! Banana republic..


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## truthseeker (8 Oct 2010)

DerKaiser said:


> Didn't see it, but there are a lot of people who have managed to maintain a decent household income with a falling cost of living.


 
Im sure this is the case for some people. Id love to see some real stats on this - just in my own personal experience (which admittedly is skewed by age profile of my friends) I do not know one family who has not been affected in terms of less income and in some cases this has caused a real struggle.


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## micmclo (8 Oct 2010)

DerKaiser said:


> Didn't see it, but there are a lot of people who have managed to maintain a decent household income with a falling cost of living.



Happens alright.
If you've a permanent job and not a wage cut then realy it's the income levies that hit you and they are not huge. We will see what happens in the next budget.

If you don't drive then fuel costs didn't affect you, though public transport went up.

And if you rent and haven't managed to knock at least one hundred and possibly double that or more from your rent, you need negotiating skills!
Rents have come way down, I see apartments in our estate down 350 euro a month from what they were two years ago. 

For a lot of people, the recession has passed them by, good for them 



DerKaiser said:


> get on with their lives and spend as usual or the whole economy will just collapse.



True.
Buy a 2010 reg car and go a great holiday and you get "oh la di da, no recession in micmclo's house!"


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## Betsy Og (8 Oct 2010)

One point of note is that the Irish economy depends, to a large extent, on citizens spending on local goods and services (its a bit of an obvious statement, considering we are not huge manufacturers exporters). But the rub is that if everyone clams up then the economy falters.

On an individual level you couldnt advise most people to go spend spend spend (unless they are minted), but if collectively we all did that its what would help the economy (which is where Cowen is coming from).

The problem, of course, is that we are after having the bejaysus scared out of us due to government and banking ineptitude, we dont know where the end is, and therefore we're bunkering down and could you blame us. No doubt they'll shortly be on the radio telling us that someone with a maxed out credit card is a patriot  The most I could seem myself stretching to is buying a few of those recovery bonds, though I know they are a bit of a duff product (better returns elsewhere for same risk - An Post/Postbank etc.).


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## shnaek (8 Oct 2010)

micmclo said:


> For a lot of people, the recession has passed them by, good for them


I really doubt that.


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## micmclo (8 Oct 2010)

Well not totally of course

I gave a few examples in my post


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## Firefly (8 Oct 2010)

JP1234 said:


> Interestingly, when we went on holiday to New York last year we had some of the same people making sneery comments at us along the lines of "*no recession for you I see*" despite the fact we hadn't been away for 4 years and had saved hard to pay for the trip.


 
A confident "Nope!" would be my answer


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## UFC (8 Oct 2010)

The problem is most people don't really use their brain, and they blindly believe the opinions of "experts" (who nearly always have a vested interest in the advice they're giving...)

I was in my mid 20's in 2005/2006, but because I try to use my brain and by nature am suspicious of experts I considered it obvious that we were in a massive property bubble. So I tried talking my friends out of buying property but I could see they thought I was an idiot. And then in 2008 when the recession was just beginning I once again tried to talk friends out of buying but again was seen as the idiot.

I take no pleasure in their misfortune but it does greatly annoy me that they are all trying to blame the banks/government for their debt problems when the majority of blame lies in their inability to do any research or think about why property is rising 30% higher than wages year on year and how this is unsustainable.


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## annR (8 Oct 2010)

RMCF said:


> I think there are 2 separate arguments here.
> 
> 1) Those who are in debt due to being aspirational in wanting to own a home. Nothing really wrong with that imho, as long as people didn't fudge their earnings to get silly mortgages
> 
> 2) Those who went on the lash with multiple credit cards, running up debt which they ignored or felt they would never come back to haunt them. This is just plain stupid and people have to take responsibility for that.



Agree with this and it seems there is a combination of these scenarios in the money makeover / debt sections.  It does seem though that most of them have killer non mortgage debt and you never really know what those debts are from, sometimes it was a medical crisis for example sometimes it's because they went on the lash.  Most of the threads are along the lines of 'how do we get out of this mess we have to take responsibility now' and I think that's fair enough.  The ones which really bug me are the ones 'we went on the lash alright and ran up debts but sure you only live once, it was all stuff we needed at the time' , who are still living beyond their means, don't really want to hear any advice, aren't taking responsibility or looking at their spending habits and just want some reassurance that they are not the only ones in the same situation.  Whingers.


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## annR (8 Oct 2010)

I remember being sneered at and told I was crazy for buying an affordable housing apartment - by someone who owned 4 or 5 properties.  Then I was told I was crazy when I put it on the market in Sep 2006, didn't sell till May 2007.  Was very lucky.
I don't know if anyone else remembers the way people with drink on them used to carry on at weddings etc bragging about their houses and boasting about trading up and getting huge sale prices etc to people who were just trying to get on the property ladder to start a family . . .. there is a very petty part of me that hopes they are now landed with a whopper of a mortgage in their wonderful house.  They're probably still bragging away anyway.


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## DerKaiser (8 Oct 2010)

thedaras said:


> @DerKaiser;
> What are you saying?


 
I'm saying there are plenty of people whose jobs are secure and who've very little debt.  

We got into trouble by people borrowing more than they could afford.  We'll be in worse trouble if people in good financial health just stop buying things.

Anyone who is in financial trouble won't be helped by those not in trouble making cut backs.


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## cork (8 Oct 2010)

annR said:


> I don't know if anyone else remembers the way people with drink on them used to carry on at weddings etc bragging about their houses and boasting about trading up and getting huge sale prices etc



They are probably on national radio blaming all and sundry.


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## Chris (8 Oct 2010)

burger1979 said:


> a waiting list for a hand bag???!!!!! i hope the bag was practical?
> 
> Does anyone think that in the boom years that there was a culture of 'mob' mentality? for instance Chris aluded to talking to someone who had a property portfolio and looking to increase it, and others were doing the same basically because it was the done thing? i wonder if people ever stopped and thought just for a moment about the upcoming years and how their assets would effect them and how to dispose of them? It's all a kind of keeping up with the jones' culture. anyways that just my 2 cents.


I believe this is exactly how bubbles develop. Everyone joining in because everyone is doing it. It was the same during the dot com boom and every other real estate boom, and I believe it is now developing in the boom in sovereign debt.



missdaisy said:


> They are in negative equite now. I'm not but I see it as, there but for the grace of god I would also be in negative equity. We started looking for a house in 2006, we didn't find somewhere suitable, we then heeded advice to wait. But I, as an educated person, who does not have any other debt and saves every week, could very easily be in a house with huge negative equity now. And I think it's very easy to judge those that did buy in 2006. It is a different story with investment properties, I lose sympathy for those. But I do have sympathy for those people in their 20s and 30s who decided to settle down and buy a home in 05/06, have now lost jobs or are on reduced income and are finding in t hard to meet mortgage repayments.


But the fact that they did not also plan for a day when their income may be diminished is a mistake made by so many. The fact that they are in negative equity should also be irrelevant if they have manageable debt. They bought a home, the market price of which is of no importance in the short or medium term.



JP1234 said:


> Oh I really hope you don't think I spend my time bleating how clever I am in people's faces, that's not it at all The couple I was referring to were particularly nasty, humiliating and laughing at us, and ultimately snubbing us.
> 
> The only time I ever act a little smug ( sorry I know it's not a good trait but I can't help myself!) is when people are moaning about their large debts and how they shouldn't have to pay it back etc...It's lovely to be able to say "oh it's great not having thousands of euro of debt hanging over us"
> 
> ...


I hear you. But even now I get looked at as if I had two heads when I tell people I saved for an expensive item or holiday. I must remember the "oh it's great not having thousands of euro of debt hanging over us" comment; pointing out the obvious without being smug.



thedaras said:


> My point is ,The Government are telling us to go out and spend..
> However IMHO, those who have money on deposit are probably doing the right thing by holding onto what they have.
> I wont be spending,.as its obvious that you have to hold onto any money you have now,due to not knowing when the government will come along and make a decision to bail out joe bloggs.
> So although they want us to spend they have done everything to prove we should hold onto anything we have..just in case..





DerKaiser said:


> Didn't see it, but there are a lot of people who have managed to maintain a decent household income with a falling cost of living.  Admittedly no one can be sure that this will continue to be the case, but such people need to stop complaining, get on with their lives and spend as usual or the whole economy will just collapse.





DerKaiser said:


> I'm saying there are plenty of people whose jobs are secure and who've very little debt.
> 
> We got into trouble by people borrowing more than they could afford.  We'll be in worse trouble if people in good financial health just stop buying things.
> 
> Anyone who is in financial trouble won't be helped by those not in trouble making cut backs.


Spending does not create wealth, it diminishes wealth. If I spend some of my savings on a consumption item, then I am economically less well off. The same is the case when you look at a country as a whole. What this country needs is more production and less consumption. Those that have debt, need to spend less and pay it off. Those that do not have debt and are saving at the same time, are the ones that are providing the capital that is needed for production. Production comes first, then consumption. And because Ireland is the most indebted nation on earth, this is going to take a very long time to rectify.




annR said:


> I remember being sneered at and told I was crazy for buying an affordable housing apartment - by someone who owned 4 or 5 properties.  Then I was told I was crazy when I put it on the market in Sep 2006, didn't sell till May 2007.  Was very lucky.
> I don't know if anyone else remembers the way people with drink on them used to carry on at weddings etc bragging about their houses and boasting about trading up and getting huge sale prices etc to people who were just trying to get on the property ladder to start a family . . .. there is a very petty part of me that hopes they are now landed with a whopper of a mortgage in their wonderful house.  They're probably still bragging away anyway.


Let me correct you there, you were not lucky, but fortunate. The way I see it, luck is walking down a street and finding €50. Choosing to sell at a time when everyone said there would not be a crash was a good decision that has paid off nicely for you.
We put our house on the market in 2007 and quickly sold by undercutting everyone else selling at the time. We were fortunate that there was someone willing to buy and that was that. What annoys me these days is that people still wonder why I am "wasting money on rent" and I have to explain the obvious to them. Some people will just not learn


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## Firefly (8 Oct 2010)

Chris said:


> I believe this is exactly how bubbles develop. Everyone joining in because everyone is doing it. It was the same during the dot com boom and every other real estate boom, and *I believe it is now developing in the boom in sovereign debt.*



Chris,

Would you care to expand on this? 

Thanks,
F


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## Chris (8 Oct 2010)

Firefly said:


> Chris,
> 
> Would you care to expand on this?
> 
> ...



Don't want to go too far off topic, but here is the short answer. The asset class that has increased by far the most since the crisis and subsequent quantitative easing, i.e. money printing, is sovereign bonds. The idea of giving money to governments and receiving it back at a later time with interest is good, just like IT companies in the 90s and houses in the 00s. But when the yield goes to a level that doesn't make sense (like .com companies with no earnings, or houses that attract less then 2% rental income) and organisations and people pile their money into bonds (like the solidarity bond) then that is a very clear sign of a bubble.
First there was .com, then money supply was inflated through cheap credit, then real estate boomed, then money supply was inflated through cheap credit and money printing, now you have very high bond prices.
I recommend doing some research on Austrian Business Cycle Theory, which can perfectly explain the business cycle of boom and bust.


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## Firefly (8 Oct 2010)

Thanks. Are you saying that you think there is a bond bubble underway?


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## csirl (8 Oct 2010)

There is also a gold bubble developing. People are melting down jewellery because the raw material will get a higher price than the finished product - unsustainable.


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## Chris (8 Oct 2010)

Firefly said:


> Thanks. Are you saying that you think there is a bond bubble underway?


Yes indeed. Also remember that bond prices is covered ad nauseam in the news.



csirl said:


> There is also a gold bubble developing. People are melting down jewellery because the raw material will get a higher price than the finished product - unsustainable.


Yes indeed, it will follow the bond market.


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## bogle (8 Oct 2010)

Tulip Mania, South Sea Bubble, Fools Gold, Railway Bubbles, Property Bubbles...


Devil Take The Hindmost - A History Of Financial Speculation by Edward Chancellor is well worth read.


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## SlurrySlump (9 Oct 2010)

I had a friend that would only ever eat an M & S Oakham chicken. I was watching the "Food" programme on Channell 4 the other night and had a laugh when it was explained that there was no such thing as an Oakham chicken, rather it was simply a brand name that M & S had and that these chickens came from multiple farms.
The same person used to pay hundreds of euro to fly to the south of France with Air France when I would fly with Ryaniar for cents. There was always that feeling that he was looking down his nose at you.
Listening to him was like listening to Mrs. Bucket (Bouquet) in the T.V. programme "Keeping Up Appearances".
If this recession has done one thing for me is that it has shut up this type of person.


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## dockingtrade (9 Oct 2010)

csirl said:


> There is also a gold bubble developing. People are melting down jewellery because the raw material will get a higher price than the finished product - unsustainable.


 
once everyone gets invovled in something it bursts. Theres no substance behind their speculation only that everyone is doing it and its going up.  Average Joe started trading shares in late 90s especially tech and it burst no correlation behind the price of share and the performance of the company. Average joe became property speculators and now gold traders.


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## Yachtie (9 Oct 2010)

SlurrySlump said:


> Listening to him was like listening to Mrs. Bucket (Bouquet) in the T.V. programme "Keeping Up Appearances".
> If this recession has done one thing for me is that it has shut up this type of person.


 
I am not so sure that many people have learnt anything from this recession. Alright, there is no more talk of investment properties and equity at dinner tables, but I have a very strong feeling that those who were so foolish with their (often borrowed) money before, will be doing the same thing as before when things pick up. Then it will be 'we suffered enough, it's time for a treat'.

I know of a person who used his credit card to pay for everything from car insurance, groceries, tickets to TV license yet kept making only a minimum payment. Anyone with a positive IQ would figure out that this is a speedway to perpetual debt and possibly long term poverty. A girl I used to work with, was desperate to buy her first home about 3 years ago. She was putting in a lot of overtime and really trying to save so that she could get a decent house. I took her aside once and told her that the bubble is about to burst and that she'd be better off waiting for a little while and then putting her savings down as a bigger deposit and borrowing less. Her response was 'Sure, why would I do that for? If I buy now, the bank will give me more money.'. Seems like she thought that the bank was giving rather than lending her the money.


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## DerKaiser (9 Oct 2010)

Chris said:


> Spending does not create wealth, it diminishes wealth. If I spend some of my savings on a consumption item, then I am economically less well off.


 
That's a funny way of looking at things. If you want to talk economics then you should go into utility theory.

You are only economically better off accumulating wealth if the utility you get from spending is more than offset by the negative utility you get from earning it in the first place!

I see your point though about advocating spending only as a way to get us out of the mess. If through all our spending we leave no capital for investment then we have a problem. But at the same time we do have plenty of production in this country being met with very little domestic demand.

I don't think you can say produce first and then spend or vice versa. The bigger problem as I see it at the moment is that there are no buyers, ask any retailer.

Also I saw an interesting article before, questioning why we cheer financial improvements in the balance of payments. Right now I think it's only right we export as much as possible because of our level of external debt. But for countries with manageable external debts exporting your resources is not necessarily a good thing.

We need to keep in the back of our minds that the accumulation of wealth is not a means in itself, the only purpose of it is to enable us to have a decent standard of living.


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## liaconn (9 Oct 2010)

Going back to the original topic, I agree with posters who feel there's a big difference between people who felt paniced and pressured into buying their first house on a big mortgage and people who just went mad and got themselves into huge debt because they felt they were worth it and wanted to brag about their big car, new sun room, fifth holiday this year etc.  Fine, if you can afford these things, but buying them on credit and then moaning when you realise you can't actually afford to pay back what you've borrowed... well tough!  I was on a reasonable salary during the tiger years but I still only went on holidays I could afford, bought a car that was within my means etc. I remember a friend asking me to go to a luxury spa with her one winter and when I said I couldn't afford it she said 'what do you think credit unions are for'.   If these people are bailed out now they will have learnt nothing. If the economy ever recovers and we have a bit of money again they will be back like greedy kids in a sweetshop, stuffing their faces until their cheeks bulge, and assuming someone else will pick up the tab.


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## Chris (9 Oct 2010)

dockingtrade said:


> once everyone gets invovled in something it bursts. Theres no substance behind their speculation only that everyone is doing it and its going up.  Average Joe started trading shares in late 90s especially tech and it burst no correlation behind the price of share and the performance of the company. Average joe became property speculators and now gold traders.


Yo are absolutely right, but average Joe has not started buying gold yet. What you see around the place are companies offering to buy people's gold, which is a big difference.



DerKaiser said:


> That's a funny way of looking at things. If you want to talk economics then you should go into utility theory.
> 
> You are only economically better off accumulating wealth if the utility you get from spending is more than offset by the negative utility you get from earning it in the first place!


You're absolutely right, but I think a discussion of this would be way off topic. It might come up in another thread. I was specifically referring to Ireland, and quite a few other western countries, where levels of public and private debt have mushroomed out of control. I believe the utility of paying down this debt is undeniably positive.



DerKaiser said:


> I see your point though about advocating spending only as a way to get us out of the mess. If through all our spending we leave no capital for investment then we have a problem. But at the same time we do have plenty of production in this country being met with very little domestic demand.


Yes indeed Ireland does still export quite a bit, but I think the problem is that production (even excluding construction) is severely on the way down, as even now Ireland is not competitive enough.



DerKaiser said:


> I don't think you can say produce first and then spend or vice versa. The bigger problem as I see it at the moment is that there are no buyers, ask any retailer.


My comment on production comes first then consumption was more in general terms, but I see your point. The problem is that a lot of businesses were created during the phony boom that unfortunately will have to be liquidated. I think it was JB Say that first said "markets clear". Everything will sell for a price; if retailers are struggling to sell, then it is because the price is still too high.



DerKaiser said:


> Also I saw an interesting article before, questioning why we cheer financial improvements in the balance of payments. Right now I think it's only right we export as much as possible because of our level of external debt. But for countries with manageable external debts exporting your resources is not necessarily a good thing.


I fully agree. I can't remember who I heard saying that the ultimate goal of an economy is to not have to produce. If you look at it from the smallest economic entity's point of view, i.e. an individual, most of us work hard and save in order to one day retire and live without having to work. Unfortunately Ireland is so far away from a reasonable debt level that it cannot even see the line anymore.



DerKaiser said:


> We need to keep in the back of our minds that the accumulation of wealth is not a means in itself, the only purpose of it is to enable us to have a decent standard of living.


Only thing I can add to that is " decent standard of living within our means".



liaconn said:


> Going back to the original topic, I agree with posters who feel there's a big difference between people who felt paniced and pressured into buying their first house on a big mortgage and people who just went mad and got themselves into huge debt because they felt they were worth it and wanted to brag about their big car, new sun room, fifth holiday this year etc.  Fine, if you can afford these things, but buying them on credit and then moaning when you realise you can't actually afford to pay back what you've borrowed... well tough!  I was on a reasonable salary during the tiger years but I still only went on holidays I could afford, bought a car that was within my means etc. I remember a friend asking me to go to a luxury spa with her one winter and when I said I couldn't afford it she said 'what do you think credit unions are for'.   If these people are bailed out now they will have learnt nothing. If the economy ever recovers and we have a bit of money again they will be back like greedy kids in a sweetshop, stuffing their faces until their cheeks bulge, and assuming someone else will pick up the tab.


I fully agree with you. If people are bailed out of their debts then they will only make the same mistakes again. Just like banks have never learned from their mistakes because the taxpayer has always covered them.


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