Living Car Free - Downside to living within your means.

I was listening to someone defending the president's 700 billion purchase of worthless mortgages say that it effects "everyone" so we all have to pay up. The problem is that the guy's definition of "everyone" was everyone in debt. He was saying that people who live beyond their means will no longer be able to do so if credit becomes hard to get. So what I take away from that is those of us who live within our means must pay up for the benefit of those who don't. A recurring theme on this list is that living car free allows some people to live nicely within their means and avoid or get out of debt. It makes me wonder what would happen if everyone lived within their means and avoided debt.

Many believe that the situation can be fixed using free market solutions.

From Congressman Connie Mack of Florida on the Paulson Bailout Plan:


'Instead of pursuing this ill-conceived, heavy-handed action that will trample the free market system, Congress should consider market-based solutions that will strengthen our economy and preserve our free markets. These should include a number of market-based reforms such as instituting a reduction in or a temporary moratorium of the capital gains tax; strengthening the U.S. dollar; ending mark-to-market accounting; accelerating depreciation; and repealing the Securities and Exchange Commission’s ban on short-selling certain stocks and reinstituting the so-called “uptick rule.” '

Maybe we aren't getting the full story from the government and the media who seem intent on ramming the Paulson Bailout Plan down our throats.

I It makes me wonder what would happen if everyone lived within their means and avoided debt.

There wouldn't be any bad mortgages because the mortgage market wouldn't exist if everyone avoided debt. Your employer couldn't borrow against receivables or to expand. Your kids wouldn't be able to go to college... that sort of thing.

Investment banks and mortgage holders alike made risky decisions, and now the consequences are here to bite them. Except the government wants to remove all the consequences. Gee, I wonder if that might result in even more risky behavior?

Many believe that the situation can be fixed using free market solutions.

I thought the current situation was caused by a free market solution... perhaps if the markets were less free we might not be in the current situation.

Your employer couldn't borrow against receivables or to expand. Your kids wouldn't be able to go to college... that sort of thing.

I didn't mean no business loans for inventory or expansion or for farmers to plant their crops. I meant people like me who work for a paycheck.

My kid is working her way through college and got some scholarship money. Its slow but she'll graduate debt free. I did the same- no debt at graduation time.

I thought the current situation was caused by a free market solution... perhaps if the markets were less free we might not be in the current situation.

"We" aren't in any "situation"


I'm doing just fine, because I avoid debt, and save most of my money. Now the federal government wants me to be personally responsible for thousands of dollars of other peoples' irresponsibility.

I love it! I hope this 10 trillio...Sorry 700 billion (yeah right) solution doesnt get passed. There are a lot of politicians who hold stock on these companies and banks and it would serve them right.

If it passed It would be like US paying for THEIR losses. If divided equally, it woud be about $2,000 for every man, woman , child in this country, Including illegals, for the first run. Because they can come back and take more later. And whats more, none of their actions are reviewable, and cannot be persecuted. THERE WILL BE NO CONSEQUENCES if they simply decided to take more of your money.

I say let's do it!


NOT!

"We" aren't in any "situation"

As long as you're a citizen and resident of the United States, this is your problem too.


Many believe that the situation can be fixed using free market solutions.

And these delusions are why the gap between the wealthy and the poor in this country will continue to increase.

I'm doing just fine, because I avoid debt, and save most of my money. Now the federal government wants me to be personally responsible for thousands of dollars of other peoples' irresponsibility.

Yeah, it doesn't seem fair that people who avoid debt have to cough up thousands of dollars for people who don't. But we might be in a minority like people who live car free who still breath the bad air and put up with a wasted environment for the car drivers pleasure. Are debt free people a minority in the US? I know the savings rate is pretty low but a few people heavily in debt can skew a statistic to make it seem like the average person is in debt. I guess half my friends have more debt than savings but I'm not sure.

As long as you're a citizen and resident of the United States, this is your problem too.



No it isn't. My problems end with me and my family.

I was listening to someone defending the president's 700 billion purchase of worthless mortgages say that it effects "everyone" so we all have to pay up.

By 'everyone' I think we are talking about 'everyone' who pays taxes, which is virtually everyone.

No matter what happens with this weekend's discussions and in the future weeks, this mess will probably plague our economy for many years, or possibly even decades. To add insult to injury, we have exported our mess to many countries around the globe.

No it isn't. My problems end with me and my family.

If that were true, you wouldn't pay taxes or use public facilities. Get back to me when you're off the grid and in the woods.

I was hoping to see someone would address the issue of teaching Americans how to be more fiscally responsible. I think some people have gotten their priorities all wrong in this country and need to remember that just because you can find someone to let you have a $40,000 car (just an example), doesn't mean that you should.

There are many government programs I do not agree with, and there are many that upset me because I'm told I don't qualify. I use student loans to pay my education at a private college. I cannot afford the tuition out of pocket, but I feel that the education I receive there is far better than that of the college I could pay out of my pocket for.

There is nothing wrong with using credit, you just have to use it responsible. ;)

-Nate

If it passed It would be like US paying for THEIR losses. If divided equally, it woud be about $2,000 for every man, woman , child in this country, Including illegals, for the first run.
I agree with you on all parts except for this. $2,000 is assuming we actually pay for it upfront. I think it will be put on a loan that should be paid off by the time teleportation will solve high gas prices.

Speaking of not paying off a loan (what got us into this problem to start), here's some info on the national debt. http://www.federalbudget.com/
(http://www.federalbudget.com/)

My kid is working her way through college and got some scholarship money. Its slow but she'll graduate debt free. I did the same- no debt at graduation time.


I am doing the same thing ... yes, it's difficult to work and go to school at the same time, but I'll graduate with a minimal debt which I should be able to pay off in a year or so. And then I'll be completely debt free. :)

I was listening to someone defending the president's 700 billion purchase of worthless mortgages say that it effects "everyone" so we all have to pay up. The problem is that the guy's definition of "everyone" was everyone in debt. He was saying that people who live beyond their means will no longer be able to do so if credit becomes hard to get. So what I take away from that is those of us who live within our means must pay up for the benefit of those who don't. .

This financial mess is going to screw with EVERYBODY - and it is going to hurt most those who HAVE been responsible and lived within their means. If you live within your means, it suggests you might have savings -perhaps in mutual funds and perhaps money in the bank. I also assume that you work and pay taxes - taxes that are being squandered with the bail-out and taxes that will go up and you will pay with greater toil than before.

The values of the stocks in your mutual funds are at risk for massive devaluation.

The money you have in banks is at risk of complete evaporation in the worst case or massive devaluation in the best case.

That is what really sucks about this situation AND the proposed bailout. The hard-working people who live, work, and save responsibly will be hurt the most. The working man will pay the taxes that go to propping up failed businesses of executives who vacuumed off the money and ran with it.

The solution is not to bail out these financial systems and let them fail just like every other poorly managed company. Yes it will hurt, but putting it off and pumping the empty balloons with tax money will cause and even worse problem.

The really sad thing is that the federal, state, and local taxes for many mid-Americans is nearing 50% now. With the added burden of these bail-outs and the Bush wars, the tax burden is almost sure to exceed the 50% mark in the near future. We will reach Socialist Government taxation without public health care or any of the other benefits of Socialism- burden only.

I am doing the same thing ... yes, it's difficult to work and go to school at the same time, but I'll graduate with a minimal debt which I should be able to pay off in a year or so. And then I'll be completely debt free. :)

Same here. Have a friend who graduated in about half the time it's going to take me for the same degree, but he has $160K in debt that he has to answer to and isn't going away anytime soon. I am working full time and taking as many classes as I can afford for each semester. It's slower going, but no complaints here.

"We" aren't in any "situation"

I'm doing just fine, because I avoid debt, and save most of my money. Now the federal government wants me to be personally responsible for thousands of dollars of other peoples' irresponsibility.

Are you retired? Do you realize that Bernanke wrote his dissertation on the causes of the great depression? Do you realize that during the great depression unemployment reached 24.9%?

We (people that work for a living) are in this situation, whether we caused it or not.


The values of the stocks in your mutual funds are at risk for massive devaluation.

The money you have in banks is at risk of complete evaporation in the worst case or massive devaluation in the best case.

1. I welcome the opportunity to purchase cheap stocks to lower by average basis.

2. No one's money is going to disappear from their FDIC insured bank account. In fact, one of the worst case scenarios for the economy right now is DEFLATION. That is, people's money would go up in value. Unfortunately this is a very bad thing for the economy.


I was listening to someone defending the president's 700 billion purchase of worthless mortgages say that it effects "everyone" so we all have to pay up. The problem is that the guy's definition of "everyone" was everyone in debt. He was saying that people who live beyond their means will no longer be able to do so if credit becomes hard to get. So what I take away from that is those of us who live within our means must pay up for the benefit of those who don't. A recurring theme on this list is that living car free allows some people to live nicely within their means and avoid or get out of debt. It makes me wonder what would happen if everyone lived within their means and avoided debt.

You missed the point. A lot of businesses use credit to fund projects that are ultimately profitable. It is not as nice as using cash, but sometimes it is their only choice. This is especially true for the electronics industry. It takes A LOT of money to set up a fab, but it is also ultimately profitable.

NO CREDIT == NO JOBS (for a lot of businesses)

That said, I don't think we should bail out anyone.

I was hoping to see someone would address the issue of teaching Americans how to be more fiscally responsible. I think some people have gotten their priorities all wrong in this country and need to remember that just because you can find someone to let you have a $40,000 car (just an example), doesn't mean that you should.

This ties in to the concept of entitlement. Too many people believe they deserve what they think is the good life. Too many young couples believe they should be able to start out at the same standard of living as their parents built up over 20 to 25 years.

It's possible to live comfortably and happily on a modest income if the expectations are kept in line. It's also possible to feel impoverished on a high income if the lifestyle is too extravagant. Contentment, not an accumulation of things, is key.

No it isn't. My problems end with me and my family.

You're kidding, right? it's even affecting us here in Australia, whether we like it or not. Your problem (USA) is now our problem (the whole world)

I think the subprime lenders knew perfectly well they were writing loans to people that couldn't repay them, so I don't see why they (the lenders) should be bailed out of their own mess. Call me cynical but I'll bet many of those in power have interests in these institutions and stand to make/lose significant personal wealth. That might be why they're so keen to throw taxpayer money at it.

Lending money for home mortgages when there is no chance of repayment is OK if the housing market continues to climb. Heck, banks here in Australia have been lending like crazy to almost anyone -- the old rules of lending only up to a percentage went out the window, and some institutions were financing to 100% of the property value. When the repayment default inevitably comes, the bank repossesses and the property goes to auction on the expectation of recovering the capital plus some.

There also were a lot of people who picked up on using their home equity as collateral to finance other trinkets such as cars, boats, holidays, motorcycles... and the resulting debt became part of the mortgage.

A slight increase in interest rates meant enormous pressure was immediately applied to those families. Now, instead of having, say, a 50% equity in their home, they were faced with OWING the bank money on default, and having a heap of toys that have already devalued by around 50%. Even worse, the market becomes saturated with these trinkets, so the prices go down further.

Affluence -- you could say greed -- does incredibly bad things to the financial, emotional and physical health of a nation.

Anyway, Newspaperguy gets my vote for his insightful and incisive comments on expectations. Mine have dropped considerably since I was in my 20s and 30s -- especially when they didn't eventuate.

I am very contented with my lot right now. It took some hardships to understand it all, though.

It makes me wonder what would happen if everyone lived within their means and avoided debt.

We would be French.

http://news.bbc.co.uk/2/hi/europe/7635327.stm

I thought the current situation was caused by a free market solution... perhaps if the markets were less free we might not be in the current situation.

The current situation was caused, to a large extent, by government intervention into the marketplace. The combination of two government actions palyed a large part in the credit meltdown. The Community Reinvestment Act required lenders to make loans to low income borrowers who clearly could not afford to pay back the loans. Then, artificially low interest rates propagated by the Federal Reserve set the price of borrowing money very low. These two actions distorted the market and set off a frenzy of borrowing, cheap consumer credit and real estate "investing". To lower risk, smart (but greedy) lenders sold these risky loans to investors as packages. This is probably where you think there should be more regulation by the government. But if the original distortions were not there (cheap money and government requirements) and the lenders were able to refuse the risky loans up-front, then more regulation and government intrusion would not be needed because the risky loans (at least not to the extent we have today) would not have been made. For the few who do get cheated in a free market, there are the courts of law.

It was variable interest rate home loans that really got us in this mess mostly. Most people were able to afford their house when they first purchased it. However, they were either to ignorant to realize that variable interest rates aren't a good thing, or they actually really thought that it would never rise. So when it started to climb, all of these people didn't know what to do. Some refinanced for fixed rate home loans, others couldn't come up with the closing costs for the new loan, and still others just sat there like a bump on a log expecting some miracle to happen and rates would go back down. This problem only points out just how stupid some of the people are in this country and how we should maybe focus less on proms in high school and more on how important being financially responsible is.

BTW; my bank just went under and was bought up by Chase...no more Washington Mutual, hello I charge a fee for everything Chase.

-Nate

But if the original distortions were not there (cheap money and government requirements) and the lenders were able to refuse the risky loans up-front, then more regulation and government intrusion would not be needed because the risky loans (at least not to the extent we have today) would not have been made.

Sounds like we should have stuck with conventional loans all along.

-Nate

You're kidding, right? it's even affecting us here in Australia, whether we like it or not. Your problem (USA) is now our problem (the whole world)

I think the subprime lenders knew perfectly well they were writing loans to people that couldn't repay them, so I don't see why they (the lenders) should be bailed out of their own mess. Call me cynical but I'll bet many of those in power have interests in these institutions and stand to make/lose significant personal wealth. That might be why they're so keen to throw taxpayer money at it.

And THIS is why the party is over for the last 20 years of low-interest rates and easy money the USA has enjoyed.

After the crashes of the Asian and Latin America financial markets in 1997, much of the world's money came to the USA like a typhoon of money all within months. Global investors who had been burnt by the Asian and Latin American crashes were looking for a home for their money where at least the principal would be safe, even if the returns weren't so hot.

That allowed the USA to borrow money at ridiculously low interest rates. We went from double digit interest rates in the early 1990's to 4%~5% interest rates by the early 2000's. It was because we had so much of the world's money in the USA to play with.

Now, you can be sure, that global investors are and will continue to rip their investments out of the USA. You will nearly hear the suck of the backdraft - the same as happened across Asia in 1997. I was there. I saw it. It was HORRIBLE. Whole skyscrapers of employees terminated within two weeks. Buildings completely empty. Layed off people literally walking in parks, dazed not knowing what to do with themselves, but too ashamed to go home.

This is very bad and having seen what happens when the global wave of investment money leave shore firsthand, it scares the hell out of me.

By the way, Cyclaholic, I agree that the USA taxpayer should not pay to bail out these private corporations and banks.

We would be French.

http://news.bbc.co.uk/2/hi/europe/7635327.stm

What? You mean health care too? Fast trains? No Iraq invasion? 5 weeks vacation? How un-American.

For balance:
My kid worked for a French woman for a while. The woman paid below minimum wage, no benefits and always bad mouthed America. When I pointed out to my kid that, back in France her boss couldn't get away with any of that, except bad mouthing America, the kid took a job down the block in a shop run by an American.

The values of the stocks in your mutual funds are at risk for massive devaluation.

The solution is not to bail out these financial systems and let them fail just like every other poorly managed company. Yes it will hurt, but putting it off and pumping the empty balloons with tax money will cause and even worse problem.

We will reach Socialist Government taxation without public health care or any of the other benefits of Socialism- burden only.

I think I agree that we should just have a recession and get it over with. But I would add that we need to enforce some laws and re-regulate banks. Your burden only comment makes me wonder how the Republican free-marketeers can justify their actions- or get elected.

I have several problems with the current bailout proposals. As much as I believe in the free market economy, a lack of oversight and entirely too much individual greed has led us to where we are now.

I believe that rescuing these large corporations from their own mistakes sets a tremendously bad precedent. I believe we all know that the American memory is a short one, if we save them now, who's to say they won't get right back here again in 10 years.

If I make bad, well informed, investments, and they lose, there is no rescue for me.

If our leaders truly want to stimulate the economy in a meaningful, long term manner, they need to stem two things, unemployment and foreclosures. The creation of jobs isn't always easy, but I think at a time like the one we're facing, perhaps its best to take an example from FDR and his New Deal programs. His programs like the WPA, TVA, and CCC put people to work. These programs could convert into part of a "mandatory service program" for our youth when the economy gets stronger rather than being discontinued like they were at the beginning of US involvement in WWII.

This in turn puts money in the pockets of people who are going to spend that money. If we educate all Americans to spend that money in their local economies, rather than MallWart or other giants, it will create jobs in their local economies. Instead of a trickle down, and this is going to be a really slow trickle, its a bottom up economy. That's the most successful economy from a long term perspective, and it works.
Finally, offer every American the chance to get out of a variable rate mortgage and into a good fixed rate. I would even suggest that it be done without as much of a focus on credit score. Give them a loan that they can actually repay, by lowering the rate and perhaps stretching the term. With the housing market in decline, people are going to be more likely to stay in their current homes longer. If the monthly payment is affordable, there is a much greater chance of repaying it, even if it does reduce the bank's profits.

Wanna pump $700 billion into the economy? Give it to the people who gave you that money in the first place, the taxpayer.

Your burden only comment makes me wonder how the Republican free-marketeers can justify their actions- or get elected.

It's been the same strategy for the last thirty years: scare poor white people into believing gay people, black people, brown people, and yellow people will come take their jobs, women, and livelihoods away unless they vote Republican one more time. Throw in some feel-good nonsense about self-reliance (which is code for selfishness the way patriotism really means nationalism), and you've got yet another administration with long-running ties to the transportation, energy, health, and war industries. In the meantime, other countries develop their public transportation infrastructure, their universal healthcare and free educations, and provide all sorts of good things for their populations. But we're continually reminded that America is just better than everywhere and everything else, so we get to keep sticking our heads in the sand.

I'm also puzzled by people continuing to posit solutions for what the government "should do" to get out of this mess. A cursory analysis of our economic system (corporatism) would suggest things are working out exactly as they were intended to. The goal of our economy has never been to make things better for everyone, but to make things better for the corporations who bankroll our elected officials. The welfare of the taxpayer has nothing to do with this. All of you continuing to try to "help" the government with solutions miss the crucial fact that the people who got us into this mess know exactly how we got here, exactly how to "fix it", and exactly how they'll continue to steal from an unthinking population who worships the golden calf of the "free market". So relax. It's business as usual, folks. This is why America's the greatest country on earth™.

The only people that are going to "survive" the upcoming mess are those that own real property free and clear. I do have money in the bank and in some various funds. However my largest investment is in my land and home that I own free and clear. We saw this coming a long time ago and have been purchasing durable goods for long term use. We have purchased very little that isn't an immediate consumable like food or medicine. The few products we have purchased have been chose with simplicity, repair and durability in mind.

"Free Market Economy" is an oxymoron.

Aaron:)

But if the original distortions were not there (cheap money and government requirements) and the lenders were able to refuse the risky loans up-front, then more regulation and government intrusion would not be needed because the risky loans (at least not to the extent we have today) would not have been made.

I disagree that the loans are the problem. The problem is that the loans were bundled into complex financial instruments that were so complex and opaque that no one could tell how much they were really worth. Also, they were often rated (fraudulently it would seem) as safe loans when in fact they were not.

Banks use complex models to asses their risk. In these models they plugged in loans they knew to be risky the same way they plugged in stocks they knew to be risky. However, they turn out to not be equivalent. On any given day a risky stock is liquid and has a well defined value. The same is not true for these packages of loans and that is half of the reason we are in this mess. The other half is that investment banks were allowed to leverage themselves 40:1.

It was variable interest rate home loans that really got us in this mess mostly. Most people were able to afford their house when they first purchased it. However, they were either to ignorant to realize that variable interest rates aren't a good thing, or they actually really thought that it would never rise. So when it started to climb, all of these people didn't know what to do. Some refinanced for fixed rate home loans, others couldn't come up with the closing costs for the new loan, and still others just sat there like a bump on a log expecting some miracle to happen and rates would go back down.
I was in a variable rate plan for a while and it worked well for me, but regulations in Canada are not the same as in the U.S.

When I bought, I had to qualify under the three-year or five-year mortgage rate of the day. When it came time to renew, I was able to get into a floating rate with the option to lock in at any time. As I recall, there would not have been a penalty or fee if I had locked in. Without the ability to switch to a fixed rate, I would not have taken the floating rate option.

Each month I watched to see if rates were holding steady, dropping or rising. The interest rates were lower than under my initial agreement, but my payments did not change. This meant I was paying more towards the principal and less towards the interest. I managed to shave several years off the length of the mortgage.

Have a friend who graduated in about half the time it's going to take me for the same degree, but he has $160K in debt that he has to answer to and isn't going away anytime soon. I am working full time and taking as many classes as I can afford for each semester. It's slower going, but no complaints here.

Unless your friend is getting into a career where he's pretty much guaranteed a huge paycheque, he's going to have big trouble. That much debt is enough to bury a single person. It's enough to seriously slow down a couple. Even with a high income, it's going to take many years of frugal living to clear that amount of debt.

Unless your friend is getting into a career where he's pretty much guaranteed a huge paycheque, he's going to have big trouble. That much debt is enough to bury a single person. It's enough to seriously slow down a couple. Even with a high income, it's going to take many years of frugal living to clear that amount of debt.

There is no way that is all government backed. He can probably declare bankruptcy and get rid of most of that debt.

It's been the same strategy for the last thirty years: scare poor white people into believing gay people, black people, brown people, and yellow people will come take their jobs, women, and livelihoods away unless they vote Republican one more time. Throw in some feel-good nonsense about self-reliance (which is code for selfishness the way patriotism really means nationalism), and you've got yet another administration with long-running ties to the transportation, energy, health, and war industries. In the meantime, other countries develop their public transportation infrastructure, their universal healthcare and free educations, and provide all sorts of good things for their populations. But we're continually reminded that America is just better than everywhere and everything else, so we get to keep sticking our heads in the sand.

+1 Absolutely true. This disaster has been building for a long time. The only thing that can be done now is some kind of FDR-esque New Deal War on Greed...and even that may not save us.

It was variable interest rate home loans that really got us in this mess mostly. -Nate

Good point. I got caught up in the excitement and bought 2 properties using this type of loan with interest only payments. I was lucky and sold 1 for a profit before the **** hit the fan. The other loan is good until the end of 2009 but the house has lost about 10-15% of it's value. We'll see what happens.

If it all goes south, I may have no choice but to live car free.

The problem is that the guy's definition of "everyone" was everyone in debt. He was saying that people who live beyond their means will no longer be able to do so if credit becomes hard to get. So what I take away from that is those of us who live within our means must pay up for the benefit of those who don't. A recurring theme on this list is that living car free allows some people to live nicely within their means and avoid or get out of debt. It makes me wonder what would happen if everyone lived within their means and avoided debt.

There is "good" debt and "bad" debt. The good is a mortgage what is fair and honest. Bad debt
is credit card debt and two cars,a motorcycle, and a boat in the garage kinda thing.

A really great rule to live by is this........
"Live below your means and save or invest the difference." PAY YOURSELF FIRST! ( and that
doesn't mean go shopping with what you pay yourself. :notamused:)


There wouldn't be any bad mortgages because the mortgage market wouldn't exist if everyone avoided debt. Your employer couldn't borrow against receivables or to expand. Your kids wouldn't be able to go to college... that sort of thing.

The bad (dishonest) mortgages of today are a manifestation of pure greed with no gov't rules
to stop it.

I know there are a lot of people who are saying we should not bail the banking/credit/mortgage industry out because of their bad business practices. There is one problem with that, a few people make the decisions, and a few people actually pushed the loans. However, a lot of people took those loans, and a lot of people work for these corporations who have no involvement in the actual product being sold and pushed. So the question is if we let the banks, mortgage companies, etc...collapse, then what do we do with all of these employees who no longer have a job? We'll end up supporting them as a society when they start to collect benefits.

Ignorance is not an excuse, however so many people don't want to take the time to educate themselves. Impulse buying is huge in the United States and it has been creeping up on us (society) for a long time. I have a friend who is a car salesman, when he asks his customers what made them come in today to shop, they usually say because so and so got a new car, they saw an ad in the paper, or they simply just decided to go buy a new car today.

People have known that fuel costs were going up (and will continue to rise), yet they continue to purchase vehicles that they cannot afford to fill up because they don't ever think about two, five, or ten years down the road. Going back to the car subject, have you ever noticed that so many ads list a monthly payment now?

Personally, I see this (like someone said above) as a time to buy up some stock at a low-low price, make sure your not in the banking industry, and move over into some safer (slower growing stocks) that you know aren't really going to be hurt as bad. Sit and wait, and when the economy starts to turn bright again, recalculate your game plan.

-Nate

The current situation was caused, to a large extent, by government intervention into the marketplace. The combination of two government actions palyed a large part in the credit meltdown. The Community Reinvestment Act required lenders to make loans to low income borrowers who clearly could not afford to pay back the loans. Then, artificially low interest rates propagated by the Federal Reserve set the price of borrowing money very low. These two actions distorted the market and set off a frenzy of borrowing, cheap consumer credit and real estate "investing". To lower risk, smart (but greedy) lenders sold these risky loans to investors as packages. This is probably where you think there should be more regulation by the government. But if the original distortions were not there (cheap money and government requirements) and the lenders were able to refuse the risky loans up-front, then more regulation and government intrusion would not be needed because the risky loans (at least not to the extent we have today) would not have been made. For the few who do get cheated in a free market, there are the courts of law.

Can you please supply numbers and other evidence that supports your claim?

I was listening to someone defending the president's 700 billion purchase of worthless mortgages say that it effects "everyone" so we all have to pay up. The problem is that the guy's definition of "everyone" was everyone in debt. He was saying that people who live beyond their means will no longer be able to do so if credit becomes hard to get. So what I take away from that is those of us who live within our means must pay up for the benefit of those who don't. A recurring theme on this list is that living car free allows some people to live nicely within their means and avoid or get out of debt. It makes me wonder what would happen if everyone lived within their means and avoided debt.

The nightmare scenario that they are afraid of is a repeat of the Great Depression.

Is this a realistic concern - I think it is.

Will the bailout help prevent it, and if we do nothing what happens? Hard to say..

I am in a no-debt situation. No mortgage, no car loan. No credit card debt that I don't pay off every month. Yet my concern is that if the economy really tanks we could all be out of work, so I can't really argue for the "screw them" option.

The odd thing to me is with this slamming of free market, the U.S. takes another step towards socialism. I'm glad I have dual citizenship.

Why doesn't the U.S. public seem to give a **** American ideals are being pushed under the rug?

Why doesn't the U.S. public seem to give a **** American ideals are being pushed under the rug?

Because a free market is a bad thing and no one alive can actually remember the last time we had a free market. There is a REASON we don't have a lasse fair market. Left to it's own devices a truly free market will do horrible things to people AND have huge swings between booms and busts. We don't want our GDP to look like a sin() wave. We WANT regulatory bodies to slow growth when it is happening too fast and spur growth during recessions. This is all econ 101.

Also, we have learned a lot about economics since the days of truly free markets. Hell, we have learned a lot about economics since 1930.

Hell, we have learned a lot about economics since 1930.

I am not so sure about this one. I think some of the lessons have been forgotten.

There's only one downside in living within your means,you can can't have it NOW,you have to EARN it.

Now, you can be sure, that global investors are and will continue to rip their investments out of the USA. You will nearly hear the suck of the backdraft - the same as happened across Asia in 1997. I was there. I saw it. It was HORRIBLE. Whole skyscrapers of employees terminated within two weeks. Buildings completely empty. Layed off people literally walking in parks, dazed not knowing what to do with themselves, but too ashamed to go home.


Interesting.

I found it funny how we were in the middle of two wars, spending billions of dollars and yet, were somehow experiencing tremendous economic growth in the real estate sector. Now we know the administration did this in order to keep the nation from entering an economic depression! I guess the dot-coms can't save us this time can they? LOL!

There's only one downside in living within your means,you can can't have it NOW,you have to EARN it.

That's one important thing my parents taught me. They were quite young during the depression of the 1930s but they knew what it meant to live frugally.

My version of thrift is a little different than that of my parents and grandparents. They put a lot of emphasis on finding the lowest price while I'll spend a little more to get something that will last longer. In both cases, there would often be a waiting period between wanting and having.

If it passed It would be like US paying for THEIR losses. If divided equally, it woud be about $2,000 for every man, woman , child in this country, Including illegals, for the first run.

If you look at demographics, less than half of Americans contribute to federal taxes applicable to this bailout. Make that roughly $5,000 per taxpayer.

But we're in deeper trouble than that. The recent opportunity for self-regulated corporate financial responsibility has spawned a massive derivatives backup that can no longer be managed. At last count, the total notional value of derivatives worldwide (bearing in mind that derivatives are still unregulated and we don't know the value of unreported derivatives, and even what we do know has a wide margin of error) is 1.4 quadrillion dollars. 1,400 trillion dollars. 2,000 bailout equivalents. Every scrap of currency in the world adds up to almost 65 trillion dollars. Mortgages just happened to be the part of the foundation that unseated that mess. This can't be bailed out, we can only try to hold markets together while 19/20ths of the world's economy is written off the books.

But that's not what the bailout's about. The markets would continue to function if lawmakers decided they would like to proceed with more caution. The more immediate emergency involves the US Federal Reserve; which handed out $370 billion over the last two weeks. The Reserve's balance sheet indicates $200 billion left. And that's why the federal government is panicking. Without immediate action, the Reserve would become illiquid within as little as a week. That's the sucker that could go down.