People and debt


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

A confident "Nope!" would be my answer
 
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.
 

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.
 
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.
 
thedaras said:
@DerKaiser;
What are you saying?
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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.
 
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
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They are probably on national radio blaming all and sundry.
 
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.

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.

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.

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.


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
 
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.
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Chris,

Would you care to expand on this?

Thanks,
F
 
Firefly said:
Chris,

Would you care to expand on this?

Thanks,
F
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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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