People and debt

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.
 
Firefly said:
Thanks. Are you saying that you think there is a bond bubble underway?
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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.
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Yes indeed, it will follow the bond market.
 
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.
 
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.
 
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.
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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.
 
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.
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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.
 
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.
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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.
 
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.
 
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.

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.

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.
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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.

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

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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