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Deleveraging Private Debt - A Major World Problem Options
Hope123
Posted: Monday, September 26, 2016 11:54:03 AM

Rank: Advanced Member

Joined: 3/23/2015
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Location: Burlington, Ontario, Canada
Private Debt Crisis

This author makes some good points from his research.

A quote from the excerpt -
"One of the key and largely overlooked reasons for this disappointing growth (world's growth rates) is hiding in plain sight: the increasing global burden of private debt—the combination of business debt and household debt. Even though government debt grabs all the headlines, private debt is larger than government debt and has more impact on economic outcomes. In the United States, total nonfinancial private debt is $27 trillion and public debt is $19 trillion. More telling, since 1950, U.S. private debt has almost tripled from 55 percent of GDP to 150 percent of GDP, and most other major economies have shown a similar trend.". End quote.

Deleveraging private debt is hard and the article mentions that Japan is the only example that managed to do it through growth.

The fourth to last paragraph gives an idea as to what more could have been done during the 2008 housing crisis to help the individual mortgage owner.

:::::

The author of the above excerpt, Richard Vague, has written a new book - "The Next Economic Disaster: Why It's Coming and How to Avoid It"

This is what he says - "I conducted my own investigations and found that sharp downturns around the world—including the Great Recession of 2008, the Japan Crisis of 1991, and the Asian Crisis of 1997—were all preceded by a major spike in privately held debt. Furthermore, high levels of private debt in the aftermath of a crisis suppress economic recovery and growth—as is so abundantly the case in the Eurozone now (and as is still the case in Japan 23 years after their crisis.) This book is the result of those investigations." End quote.

::::::

My Dad always said - don't be in debt, and buy land. He was right on both counts.

::::::

For those interested in finances and private debt, any comments about the article and even the premise of the book?


A smile is a curve that sets everything straight. Phyllis Diller
Drag0nspeaker
Posted: Tuesday, September 27, 2016 8:47:35 AM

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Location: Livingston, Scotland, United Kingdom
Hi Hope!
I'm not really being critical, but curious. Why don't you just say "reducing private debt"?

I'm really wondering where the idea of the word 'deleverage' came from.
It's not the opposite of 'leverage' - though 'leverage' can involve loans, it doesn't HAVE to.

Leverage n
A financial system of using a small amount of assets to appear to be worth large investment or loans without having the actual ability to repay.

deleveraging n
Finance [MASS NOUN] The process or practice of reducing the level of one's debt by rapidly selling one's assets.

If one used leverage to get the loan, one doesn't have enough assets to sell to pay off the loan. It doesn't work. It doesn't add up (literally).

**************
However, on the general idea - I agree.
I do use loans, but I know exactly where the money is coming from to pay them.
For example, if I want to spend 1000 (more than I would normally spend) on a month's holiday next year - but I want to book it now, in advance - I would look at my Financial planning (it lists out all known income and all due dates for bills for the next year). I can see that I can easily pay 200 a month - so I get a loan for 1000 over six months. By the time next summer comes around, the holiday is totally paid for.

But the idea of getting into multiple tens of thousands of debt - or more debt than one can easily repay - seems just ridiculous to me.

**************
You are asking for a twenty-page screed from Trivium Discipulus on the debt-based economy. . .
I'll just say that it doesn't work.
The only people it is profitable for are the owners of the Reserve Banks (Private companies - not part of national Department of Treasury, not even QUANGOs - privately owned, profiteering companies).


Wyrd bið ful aræd - bull!
Hope123
Posted: Tuesday, September 27, 2016 9:49:47 AM

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Location: Burlington, Ontario, Canada
Hi Drago,

I just used the same word as in the article to match his definition. I guess it is some kind of 'finance-ese'?

I did find his analysis about China interesting but don't know if he is 'on the money”, pun intended. Whistle

You are absolutely correct about knowing how you are going to pay for something before you buy it or take out a loan. I think that is where a lot of people make mistakes.

And interest on interest compounds very quickly. Young kids should be taught at a very early age about compounding in borrowing, but also about compounding in saving - how much money you can save for education or retirement if you start with your very first pay check and 'pay yourself first'. That's how there is money now for the huge tuition fees these days for both of my grans to go to university, as their parents (both accountants) put the education money away from their first pay cheque and also took advantage of government incentives to do so.

It probably doesn't apply to the younger generation, but women of my age often depended upon their husband to look after the finances, had no credit of their own, and if they ended up divorced or being widowed, didn't have a clue about the state of their finances. I looked after our finances until he retired and took economics courses at uni, plus finance and investment courses later - just enough to know how to look after myself financially, and to know enough to let the experts do the investing.

When you insert or tap a credit card, it does not register to the brain as a 'hurt' the same as handing over cash does. We do use a card for all purchases to get 'points' (how I got my latest iPad) but the bill is paid automatically each month so we never pay interest. It's like borrowing money free every month - and getting paid to do so. My husband was an accountant and likes math and numbers. He does spreadsheets for everything and has a budget figured out like you into the future. But sigh - we could still use a big lottery win.

Bank profits are usually generous here too. Forgot about TD - he hasn't been around for a while.

BTW - a week's holiday on this side of the ocean would be a lot more than $1000 CDN or USD.



A smile is a curve that sets everything straight. Phyllis Diller
Drag0nspeaker
Posted: Tuesday, September 27, 2016 12:11:48 PM

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Location: Livingston, Scotland, United Kingdom
Hi again!

That idea of paying by card and then paying the whole card off at the end of the month is good.

As you say, it is the compounding of the interest which suddenly seems to mount up. If you pay it off monthly, that doesn't happen.

Most people spend huge amounts on holiday, but it's not necessary.

A "Bed & Breakfast" is anywhere from £20 to £40 (£60 in central London). A week at a sort of 'medium' one would be £150-175.
A "Breakfast" - a proper one - is enough food for me till late afternoon. So basically one meal a day to buy (plus snacks) - but then, I'd have to pay that at work anyway.

Wyrd bið ful aræd - bull!
MelissaMe
Posted: Tuesday, September 27, 2016 12:20:57 PM

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Location: Gualala, California, United States
Drag0nspeaker wrote:
For example, if I want to spend 1000 (more than I would normally spend) on a month's holiday next year - but I want to book it now, in advance - I would look at my Financial planning (it lists out all known income and all due dates for bills for the next year). I can see that I can easily pay 200 a month - so I get a loan for 1000 over six months. By the time next summer comes around, the holiday is totally paid for.


Think If you put $200 a month in a sock under your mattress, in six months you'd have $1,200. Why bother with a loan and have to pay interest? Eh?

This is my only now.
Drag0nspeaker
Posted: Wednesday, September 28, 2016 6:46:41 AM

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Location: Livingston, Scotland, United Kingdom
MelissaMe wrote:
Think If you put $200 a month in a sock under your mattress, in six months you'd have $1,200. Why bother with a loan and have to pay interest? Eh?

Because if you pay in advance you can get 20% - 30% cheaper rates - more saving than the interest you pay.
And it isn't all booked up - I get a choice of rooms.


Wyrd bið ful aræd - bull!
Hope123
Posted: Wednesday, September 28, 2016 11:09:40 AM

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Location: Burlington, Ontario, Canada
Always makes sense to look at all the angles.

I checked a few bed and breakfasts in places where I might like to travel in Ontario, and the rates were as expensive as a hotel room and in most cases more - $200 - $300 a night. Cheapest off season was $150. An October Thanksgiving weekend (3 nights) special at a Lodge we used to go to for holidays in Northern Ontario is $495 per person - two meals a day. We've invited family for dinner on Thanksgiving Day here instead. :)

A smile is a curve that sets everything straight. Phyllis Diller
Drag0nspeaker
Posted: Wednesday, September 28, 2016 11:33:28 AM

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Joined: 9/12/2011
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Location: Livingston, Scotland, United Kingdom
WOW! What? You should come and visit:

Romany's neighbourhood:
B&B Brighton - TripAdvisor
https://www.tripadvisor.co.uk/Hotels-g186273-c2-Brighton_East_Sussex_England-H...
Best Brighton B&Bs on TripAdvisor: Find 22784 traveller reviews, 6055 candid photos, and prices for 98 bed and breakfasts in Brighton, England.Brighton B&B & Hotel Deals from £17 + Book Now, Pay Later!

www.lodging-world.com › UK › England › East Sussex › Brighton
69 Bed and Breakfast Deals & Cheap Hotels in Brighton, England from £17-£110

Our Brighton Bed and Breakfast has a choice of stylish rooms to suit different needs and budgets. Prices start from only £35 per person per night.

Edinburgh
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www.lodging-world.com › UK › Scotland › Midlothian › Edinburgh
152 Bed and Breakfast Deals & Cheap Hotels in Edinburgh, Scotland from £17

B&Bs in Edinburgh - Rates from £18
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Wyrd bið ful aræd - bull!
MelissaMe
Posted: Wednesday, September 28, 2016 11:38:52 AM

Rank: Advanced Member

Joined: 8/10/2014
Posts: 5,363
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Location: Gualala, California, United States
Drag0nspeaker wrote:
MelissaMe wrote:
Think If you put $200 a month in a sock under your mattress, in six months you'd have $1,200. Why bother with a loan and have to pay interest? Eh?

Because if you pay in advance you can get 20% - 30% cheaper rates - more saving than the interest you pay.
And it isn't all booked up - I get a choice of rooms.


Aha!



This is my only now.
Hope123
Posted: Wednesday, September 28, 2016 3:51:34 PM

Rank: Advanced Member

Joined: 3/23/2015
Posts: 7,279
Neurons: 42,042
Location: Burlington, Ontario, Canada
Drag0nspeaker wrote:
WOW! What? You should come and visit:

Romany's neighbourhood:
B&B Brighton - TripAdvisor
https://www.tripadvisor.co.uk/Hotels-g186273-c2-Brighton_East_Sussex_England-H...
Best Brighton B&Bs on TripAdvisor: Find 22784 traveller reviews, 6055 candid photos, and prices for 98 bed and breakfasts in Brighton, England.Brighton B&B & Hotel Deals from £17 + Book Now, Pay Later!

www.lodging-world.com › UK › England › East Sussex › Brighton
69 Bed and Breakfast Deals & Cheap Hotels in Brighton, England from £17-£110

Our Brighton Bed and Breakfast has a choice of stylish rooms to suit different needs and budgets. Prices start from only £35 per person per night.

Edinburgh
Edinburgh B&B & Hotel Deals from £17 + Book Now, Pay Later!
www.lodging-world.com › UK › Scotland › Midlothian › Edinburgh
152 Bed and Breakfast Deals & Cheap Hotels in Edinburgh, Scotland from £17

B&Bs in Edinburgh - Rates from £18
77 B&Bs Available‎
Adwww.homestay.com/Edinburgh‎
Find & Book Your Perfect B&Bs Today

Bed & Breakfasts from £13 - Save on 677 Edinburgh Hotels‎
Adwww.trivago.co.uk/B&Bs/Edinburgh‎


We'd love to but it probably won't happen now. Even if you double it for the exchange rate it would still be an excellent price there.



A smile is a curve that sets everything straight. Phyllis Diller
pedro
Posted: Monday, October 03, 2016 10:00:43 AM

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Joined: 5/21/2009
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When you book in advance you don't know that you are going to get a bad dose of botulism from a takeaway in 6 months time.

All good ideas arrive by chance- Max Ernst
progpen
Posted: Tuesday, October 11, 2016 2:37:48 PM

Rank: Advanced Member

Joined: 10/2/2015
Posts: 1,541
Neurons: 208,749
Location: Princeton, Minnesota, United States
Drag0nspeaker wrote:
WOW! What? You should come and visit:

Romany's neighbourhood:
B&B Brighton - TripAdvisor
https://www.tripadvisor.co.uk/Hotels-g186273-c2-Brighton_East_Sussex_England-H...
Best Brighton B&Bs on TripAdvisor: Find 22784 traveller reviews, 6055 candid photos, and prices for 98 bed and breakfasts in Brighton, England.Brighton B&B & Hotel Deals from £17 + Book Now, Pay Later!

www.lodging-world.com › UK › England › East Sussex › Brighton
69 Bed and Breakfast Deals & Cheap Hotels in Brighton, England from £17-£110

Our Brighton Bed and Breakfast has a choice of stylish rooms to suit different needs and budgets. Prices start from only £35 per person per night.

Edinburgh
Edinburgh B&B & Hotel Deals from £17 + Book Now, Pay Later!
www.lodging-world.com › UK › Scotland › Midlothian › Edinburgh
152 Bed and Breakfast Deals & Cheap Hotels in Edinburgh, Scotland from £17

B&Bs in Edinburgh - Rates from £18
77 B&Bs Available‎
Adwww.homestay.com/Edinburgh‎
Find & Book Your Perfect B&Bs Today

Bed & Breakfasts from £13 - Save on 677 Edinburgh Hotels‎
Adwww.trivago.co.uk/B&Bs/Edinburgh‎


My wife and I are looking at a couple weeks in the spring. We'd be flying into Ireland, but spending a majority of our time in Scotland. I wanted to be there for the Highland Games this year, but work got in the way.

Our lives begin to end the day we become silent about things that matter. ― Dr. Martin Luther King Jr.
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