Noah Smith decides.........................

 

.................it's time to start panicking about the national debt.

Welcome to the party, although I disagree with some of his analysis.  But still...........

Good debt, bad debt.....................................

 You will never obtain financial freedom while addicted to debt and consumer spending.  Wealth comes from accumulation which is the exact opposite of consumption.

-Jon Hanson, Good Debt, Bad Debt:  Knowing the Difference Can Save You Financial Life

Learning is hard........................................

.........................................................I'm sure this will end well:


Rather than 20%, the reality is that over 70% of first-time buyers are putting down 5% or less for their new homes. But there is more. Due to their exemption from the Qualified Mortgage rule, which limits total debt-to-income ratios to 43%, the five government mortgage agencies (Fannie Mae, Freddie Mac, the Federal Housing Administration, the Department of Veterans Affairs, and Rural Housing Service) have been all too willing to support the purchase of more expensive homes... Expanding debt leverage is a conscious policy choice that is drawing new borrowers into the market by allowing them to take on more debt — and unfortunately greater risk — to “afford” home ownership.


-as excerpted from here

Somebody was feeling a wee bit cranky this morning...............

Well-intentioned but harebrained social engineering is a menace to the poor. Instead of idealistic social schemes, policy elites should go back to the basics: expand vocational education and training programs, limit competition from illegal unskilled immigrants, reduce paperwork and regulatory restrictions that make it hard to start businesses in the cities where so many poor people live, and put an end to the war on low-wage jobs that is forcing employers to replace tellers, checkout clerks and other unskilled and semiskilled jobs with machines.

These are policies that would actually help, but they violate treasured liberal myths, so we earnestly saddle poor kids with debt they can’t afford for degrees they can’t get—after making them waste 12 years in lousy schools that we can’t seem to operate effectively.


-Walter Russell Mead, as culled from here

Spengler ditches his rose-colored glasses.......

If he keeps this up, I may have to stop reading him:


"Americans aren’t spending money, except for fast food, the last affordable luxury left on many household budgets."


Full stagflation post is here.

A big day in the life of a church...............

...........................St. Luke's, with an able assist from my Sweetie, burns its mortgage.  Trust me when I tell you, debt free is good.

Have you tried to get a mortgage lately...........?

Barry Ritholtz has, and found the experience unsettling:

"The solution is obvious: Go back to verifying income, checking credit scores and requiring a down payment. What lenders do now goes beyond absurd. They don't need to see every check written during the past 24 months. An explanation isn't required for every $2,000 deposit into a family checking account. Three years of both personal and professional tax returns seems excessive. Yet that and more is what banks are demanding."

Full post is here.

Everyone Ought To Be Rich.....................

John J. Raskob penned an essay by that title in the summer of 1929.  While his first paragraph (the first excerpt below) may raise some hackles, most of his essay is spot on.  A person with an investment plan and the discipline to follow it over a longish period of time can become, and ought to be, financially independent.  Of course, the historians amongst us will note that two months after Raskob's essay was published the stock market crashed and the Great Depression ensued.  Neither fact erases the importance, or timelessness, of Raskob's message.  Perhaps the only addition I would suggest would be don't follow the herd, think for yourself.   Full essay is here.  Four excerpts here:

"Being rich is, of course, a comparative status. A man with a million dollars used to be considered rich, but so many people have at least that much in these days,or are earning incomes in excess of a normal return from a million dollars, that a millionaire does not cause any comment."

"Suppose a man marries at the age of twenty-three and begins a regular saving of fifteen dollars a month - and almost anyone who is employed can do that if he tries. If he invests in good common stocks and allows the dividends and rights to accumulate, he will at the end of twenty years have at least eighty thousand dollars and an income from investments of around four hundred dollars a month. He will be rich. And because anyone can do that I am firm in my belief that anyone not only can be rich but ought to be rich."

"Debt may be a burden, but it is more likely to be an incentive."

"The personal fortunes of this country have been made not by saving but by producing."

thanks david

Actually, you can...............................

"The outstanding characteristic of America is the refusal of Americans to accept defects in their society as irremediable."
-Lewis Galantiere

On choices and risks........................

A West that prefers debt-subsidized welfarism over economic growth will not offer much in the way of an attractive model for countries in a hurry to modernize. A West that consistently sacrifices efficiency on the altars of regulation, litigation and political consensus will lose the dynamism that makes the risks inherent in free societies seem worthwhile.
-as excepted from this Stuart Schneiderman blog post

cartoon via

Like my first car for instance...........................

Kind of an ironic tweet coming from people who have made vast fortunes packaging and selling debt.

via

Save.............................

These I assume were words so deeply meant
They cut themselves in stone for permanent
Like trouble in the brow above the eye:
TAKE CARE TO SELL YOUR HORSE BEFORE HE DIES
THE ART OF LIFE IS PASSING LOSSES ON.
The city saying it was Ctesiphon,
Which may a little while by war and trade
Have kept from being caught with the decayed,
Infirm, worn-out, and broken on its hands;
But judging from what little stands,
Not even the ingenuities of debt
Could save it from its losses being met.
Sand has been thrusting in the square of door
Across the tessellation of the floor,
And only rests, a serpent on its chin,
Content with contemplating, taking in,
Till it can muster breath inside a hall
To rear against the inscription on the wall.

-Robert Frost

The Tāq-e Kisrā , the only remaining structure at Ctesiphon

Back story can be found here and here

Consequences, intended or otherwise.............

"Today's empty-nesters have more debt and less savings than
previous generations."
-Irvin Schorsch, as quoted in Money

A review of the basics..................

On time...............

"You wake up in the morning, and lo! your purse is magically filled with twenty-four hours of the magic tissue of the universe of your life.  No one can take it from you.  No one receives either more or less than you receive.  Waste your infinitely precious commodity as much as you will, and the supply will never be withheld from you.  Moreover, you cannot draw on the future.  Impossible to get into debt.  You can only waste the passing moment.  You cannot waste tomorrow; it is kept for you."
-Thomas Arnold Bennett

In the queue....................

Due Diligence: An Impertinent Inquiry into Microfinance:
"You’ve heard how microcredit was born. In a nation long shackled by British rule and wracked by famine, a brilliant man was seized with a desire to strike a blow against the poverty all about him. Defying common sense and the skepticism of his colleagues, he began lending tiny sums out of his own pocket to poor people, which they were to invest in tiny businesses. He demanded no collateral, only the vouchsafe of the borrowers’ peers. The borrowers rewarded his faith with punctual repayment. In time, his experiment spawned a national movement that delivered millions of loans to poor men and women and broke the power of money lenders."

'The hero of this story is…Jonathan Swift, author of Gulliver’s Travels."

Thanks Alex

Take all their money......................

and it still won't be enough.   Rick Santelli enjoys his emotions as he discusses what would not happen if you took $1,000,000 in taxes from the wealthiest Americans:

Visit msnbc.com for breaking news, world news, and news about the economy

A tax that's not a tax but is a tax.......

Ah...............The world of high finance.  Newmark's Door opens to an essay by Carmen Reinhart suggesting that debt will be weighing heavily on decision-making processes for a long time to come.  Can't say that is much of a surprise,   Full essay here.  Excerpts here:

Faced with a private and public domestic debt overhang of historic proportions, policy makers will be preoccupied with debt reduction, debt management, and, in general, efforts to keep debt-servicing costs manageable. 


As they have before in the aftermath of financial crises or wars, governments and central banks are increasingly resorting to a form of “taxation” that helps liquidate the huge overhang of public and private debt and eases the burden of servicing that debt.


Such policies, known as financial repression, usually involve a strong connection between the government, the central bank and the financial sector. In the U.S., as in Europe, at present, this means consistent negative real interest rates (yielding less than the rate of inflation) that are equivalent to a tax on bondholders and, more generally, savers.