Dealing with debt

[mariasman]

And what can an individual do to fix this "existing financial system"?

Guy

I don't see any individual as capable of fixing the system. Change requires a critical mass of individuals to come to understand how it works and choose to disengage and/or seek alternatives. Personally, I am convinced it will not be fixed but will finally collapse of its own weight. People are generally too adept at rationalizing (the root of all evil), so any chance to game the system at their perceived benefit is a compelling excuse for people to continue to support and even defend the system.

Civilization itself rests on the myth that everyone can gain at the expense of everyone else.

 

[mariasman]

I am not sure where that financial system idea came from. I never ran across it in my Economic or Finance classes. The idea that if you borrow money (a resource) and then engage in productive behavior to pay back that resource plus interest (whixh is actually rent for using that resource), and that makes you a thief, is somewhat bizzarre.

You're not likely to find these ideas in university finance courses - why I changed my major from economics to physics and mathematics. However, the Nobel prize for economics was awarded to Hayek in 1973 for his description of the effects of malinvestment caused by credit expansion. In a nutshell, the problem with popular macroeconomics is the use of aggregates that conceal the problem. It's not aggregate prices that matter, but the distortion of relative prices which cause profits to no longer provide a reliable indication for value creation - hence, scarce capital is squandered.

I'll stop here. If you want details, then I'll provide references. However, there is a saying: be careful about asking engineers how something works - they might tell you.

 

[Every Road Leads Home]

Do you mean there are actually businesses that hire people to count cash?  The only places I know they need cash counters are casinos.  That's probably the only place your rewards cards is worthless, if you are forced to use the ATM machines they will also take their cut.  Have you ever tried to use a card at the tables? 

I wouldn't use a bank that doesn't refund ATM fees.  My bank refunds any ATM fees I pay, usually the same day I incur it.  And it's a totally free checking acct.  I don't get any interest on my money, but no one is getting rich from bank account interest anyways and I don't leave much money in there, just transfer it in as needed.  

I watch my friends spend $2 to $4 to take $20 out of an ATM all the time, blows my mind.  Sometimes even more if you're at a casino or sporting event.

 

[ArtW]

Do you mean there are actually businesses that hire people to count cash?  The only places I know they need cash counters are casinos.  That's probably the only place your rewards cards is worthless, if you are forced to use the ATM machines they will also take their cut.  Have you ever tried to use a card at the tables? 

But on the other hand I don't have a lot of yard sale items that my children will have to handle after my demise, just because I was trying to built up my miles or rewards.  Spending cash gives you a moments hesitation before you make your purchase.   I always look at an item & wonder what I can get for it at a yard sale or on Craigslist in 3 years.

Yes, the grocery store pays the cashier to count the cash you hand them, and make change, then they pay a 'bookkeeper' or 'front end manager' or 'shift leader' to count each cash till at the end of the shift, as well as bringing cashiers more change throughout the day as needed, and taking away excess cash in case of robbery
Then they pay that bookkeeper to make up deposits and change orders, so they will have change to give you when you pay in cash
then they pay someone to take the deposits and change orders to the bank
then they pay the bank for their commercial accounts, because the bank pays commercial tellers to count deposits, and fill change orders
the same holds for the inconvenience store, the gas stations, and every single business you do your cash transactions at
How do you think they have cash on hand to make change for you?
Cash is not self maintaining, it takes work on the part of the retailer to maintain the ability to do cash business

 

[grandpacamper]

But on the other hand no one has a clue it was me, what I bought, garnered information from whatever else is recorded on my card & can't target my mailbox, my browser, or my web searches with ads. This is a forum that is about 'stealth' or off grid living. If I didn't care that everyone wants to know my business then I would be on Facebook, Twitter & all the other social networks. I use Linux, Tails & Tor. I opt out of credit bureaus selling my name to banks or other financial sites. I don't subscribe to any magazines, if i could figure out how to get my Medicare Vantage plan & AARP to quit the weekly mailers then I wouldn't have to visit my PO box but once a month.

When I worked in the corporate world we were always in a downsizing mode. Management looked at the 'non-value added' tasks that were performed by all workers, they consolidated duties, eliminated (fired) where they could save a buck so that the stock holders & upper management were happy. Automation replaced 80-85% of our workforce. We produced more on less because of the changes. I spent 35 years in that position. When I hired on there were 80 people in our department, 35 years later when I retired there was just 4 of us. My position required a warm body to be there for environmental controls & emergencies. When I retired I was replaced with a college degreed (Masters) who was going to be let go. 7 years later he is still manning the tech support line.

It was my choice to go cash only, I care less how you want to conduct your day to day business. I'm not tethered to my cell phone, it usually resides in my remote caddy unused. My kids know that I never answer it anyway. If they need to get in touch we use email, I hate talking on a phone. I drive a 2005 car & my van is a 1995. My TV was purchased before there were cameras installed & Yes! I have my laptop lens covered with a piece of electrical tape just like Zuckerberg. Paranoia works for me.

 

[gcal]

You're not likely to find these ideas in university finance courses - why I changed my major from economics to physics and mathematics. However, the Nobel prize for economics was awarded to Hayek in 1973 for his description of the effects of malinvestment caused by credit expansion. In a nutshell, the problem with popular macroeconomics is the use of aggregates that conceal the problem. It's not aggregate prices that matter, but the distortion of relative prices which cause profits to no longer provide a reliable indication for value creation - hence, scarce capital is squandered.

I'll stop here. If you want details, then I'll provide references. However, there is a saying: be careful about asking engineers how something works - they might tell you.

I used to do taxes. I understood tax codes created by the wizards in the US government. I can understand anything I put my mind to.

BTW, did a little research on Hayek's hypothesis. His problem seemed to be with artificially low interest rates distorting the economy and how money is spent. I don't think you can call even the most attractive cc interest rates these days low.

 

[Gunny]

gcal typed"I used to do taxes. I understood tax codes created by the wizards in the US government. I can understand anything I put my mind to."

Tell me why I am going to be taxed on commodities I bought with tax-free income earned while out of the US. Rhetorical question, better to wait until I croak and let the kids divvy it up.

Rob

 

[gcal]

gcal typed"I used to do taxes. I understood tax codes created by the wizards in the US government. I can understand anything I put my mind to."

Tell me why I am going to be taxed on commodities I bought with tax-free income earned while out of the US. Rhetorical question, better to wait until I croak and let the kids divvy it up.

Rob

Are you talking about stocks and/or bonds?

 

[Gunny]

No... Precious metal. I was sort of being a smarty, my accountant explained where I screwed up. Sorry if you thought I was being rude..Not intended.

 

[gcal]

No... Precious metal. I was sort of being a smarty, my accountant explained where I screwed up. Sorry if you thought I was being rude..Not intended.

I did not think you were being rude. I thought you just had a question. It i is not always possible to communicate tone or inflection in writing.  I have been accused of being rude so many times, myself, when I was actually being mildly ironic or dryly humorous that, unless you actually swear at me or call me vulgar names, rudeness does not occur to me. I just figure that either it is a joke that I don't get or that you are intensely frustrated about some point.

 

[Gunny]

Frustrated would be putting it mildly. I reread it later and thought you may take as rude. Thanks for the reply...Rob

 

[mariasman]

I used to do taxes. I understood tax codes created by the wizards in the US government. I can understand anything I put my mind to.

BTW, did a little research on Hayek's hypothesis. His problem seemed to be with artificially low interest rates distorting the economy and how money is spent. I don't think you can call even the most attractive cc interest rates these days low.

With respect, nobody understands the U.S. tax code. Submit identical information to ten different tax professionals, and you will get ten different results. IMHO, the most salient observation about the U.S. tax code is that it's designed to not be understood.

On "artificially low interest rates" - without an objective standard from which to make an assessment, calling something "low" is subjective. Hence, the term has limited value. However, I argue interest rates today are low by at least two objective metrics. First, one can consider the historical record. Second, under a rigorously sound monetary system, all credit would be derived from savings. This would generate what is called a "natural" interest rate. Hence, expanding credit beyond the stock of savings will suppress interest rates as compared to the natural rate. This process sets up an inefficient capital structure that leads to sub-optimal economic advancement. Worse, the incentives introduce a positive feedback. If not corrected, then the condition worsens. However, the longer it goes uncorrected, then the more disruptive and difficult are the necessary corrections - and hence, that much less likely to be implemented. And so the band plays on.

 

[gcal]

Re tax codes - (sigh) they are what they are, but not necessarily what they were 5 minutes ago

Re interest rates, we actually have more than one base for interedt rates. One is an artifialky low rate that depends on the Fed creating an artificially low rate. That is what is supporting thecreal estate market, high ticket items like cars, and much of the commercial loan market. That creates an artificial money supply that beings the whole wconomy down when it crashes Another is credit card interest, which is artificially inflated. An inflated amount that also includes processing fees in paid by the merchant. Another lesser rate that includes the costs of billing and customer defaults, is paid by the cardholder if the cardholder puts himself into the possible-default category by carrying a balance.

 

[mariasman]

Re tax codes - (sigh) they are what they are, but not necessarily what they were 5 minutes ago

Re interest rates, we actually have more than one base for interedt rates. One is an artifialky low rate that depends on the Fed creating an artificially low rate. That is what is supporting thecreal estate market, high ticket items like cars, and much of the commercial loan market. That creates an artificial money supply that beings the whole wconomy down when it crashes  Another is credit card interest, which is artificially inflated. An inflated amount that also includes processing fees in paid by the merchant. Another lesser rate that includes the costs of billing and customer defaults, is paid by the cardholder if the cardholder puts himself into the possible-default category by carrying a balance.

Yes, the tax code is like the weather. Just wait a while and it changes. However, it's also like the weather in that we can't predict its effects more than a few days out - quite simply because we don't understand it. Knowing is not the same as understanding.

Yes, there are all kinds of "interest rates", and why I introduced the "natural interest rate" concept that clarifies the matter. All else equal, if the only capital available were derived from the existing rate of saving, then interest rates would be far higher. On your concern about "high" interest rates for credit cards today. Well, this is mostly on the demand side - and one effect of malinvestment as so many find it difficult to live within their means today. Of course, if credit were derived from savings, then credit cards would mostly go away. I consider that a good thing. However, it would be highly deflationary. So, the Fed would never allow it. They still believe the Great Depression was caused by their not fighting deflation. However, it was actually caused by the credit expansion they facilitated during the "roaring 20's", then exacerbated by their continually intervening during the early/mid 30's thereby preventing the necessary corrections. A "recession" is a period of time when capital is redirected according to the new incentives presented by a shift in the price structure. Interventions to fight recessions are designed specifically to support the pre-existing capital structure largely by extending "credit" to support the pre-existing price structure. In other words, when properly understood, the Fed is there to prevent a solution to the problem.

 

[mariasman]

However, it was actually caused by the credit expansion they facilitated during the "roaring 20's", then exacerbated by their continually intervening during the early/mid 30's thereby preventing the necessary corrections.

Actually, we can't blame the Fed as the federal government in general deserves special recognition. They came up will all sorts of imaginative interventions a la "New Deal" - which, historically speaking, was largely a carry over from during Hoover's administration. However, the consensus among most economists today is that the Fed should have been aggressive in preventing deflation by essentially encouraging inflation through easy "credit". This would likely have staved off recession only to delay things to be that much more problematic at a later date - not unlike what the Fed did during the most recent recession that, really, never went away (just papered over).

 

[user 13081]

OK here's an update, I can only transfer the amount of what my credit limit is. Which isn't even close to what the balance is. I'm going to look into some sort of consolidation or ask my parents for help which I hate. They helped me the last time I did this.

 

[Canine]

So I'm in the hole with a credit card for a bit of money. I've got a 0% interest rate card that I'll be transferring the balance to. My plan was to be on the road this year but with this debt my mind tells me I need to work at least another year. I get paid pretty well in my current job and the thought of working for less and having a large amount of debt gets me worried. Has or is anyone working on the road have a lot of debt and are there any tips you would wish to share.

Thanks,

Paul

Paul, if you can move into your van and still work F/T then you can pay it back a lot faster. I'd recommend (I didn't read the 7 pages) that you not start your life on the road with a worrisome debt unless you have no intention on making it good. Morality aside, I dont think its a good idea, you might want the credit one day. Most of us dont really need credit anymore, its the "system" that enslaves, yet for some, especially those you use their cc's "against" the man by paying them off monthly (free loan), they have a valid point. It also keeps you from having to carry a lot of cash if you can keep a card.

You have to determine if it is worth screwing up your credit etc if you dont pay, some dont care but its your life, not theirs.

 

[user 13081]

Paul, if you can move into your van and still work F/T then you can pay it back a lot faster. I'd recommend (I didn't read the 7 pages) that you not start your life on the road with a worrisome debt unless you have no intention on making it good. Morality aside, I dont think its a good idea, you might want the credit one day. Most of us dont really need credit anymore, its the "system" that enslaves, yet for some, especially those you use their cc's "against" the man by paying them off monthly (free loan), they have a valid point. It also keeps you from having to carry a lot of cash if you can keep a card.

You have to determine if it is worth screwing up your credit etc if you dont pay, some dont care but its your life, not theirs.

I've been in my van full time for about 2.5 yrs, that's why I got myself in the van to cut out the rent and pay off my debt. My parents helped me out the last time and they weren't too happy with my situation(they still aren't.) I don't want to ask for their help, I didn't want to the first time around. So after 2 yrs I'm back in the hole. Some of what I think I do is see all these videos of people travelling and I get caught up in wanting to get on the road now. Also because I'm not paying rent I'm eating out a lot and the only time I buckle down is when I am low on cash. I'm looking into building a kitchen in the van soon so that I can cook in the van. I was talking to a guy at work and he went through a bankruptcy and said that was better than doing a consolidation of debt. I have two concerns about this whole situation, my debt and my van dying either the engine going or the trans. The trans is already showing a code for slipping, it has a hard shift from 1-2 gear went I work the van real hard. Stop and go traffic going up and down hills but it happens not often. Sorry I'm rambling on and on.

 

[poncho62]

Try a 1/2 bottle of Lucas Trans Fix in your van......It helped with my pickup. A fluid change (not flush) and filter might work wonders too.

 

[speedhighway46]

For me, bankruptcy would be personally embarrassing and proof I was not being responsible for my actions.