Having cash on hand as part of an emergency fund for house repairs (if I owned a house, which I don't. though I do have an emergency fund) doesn't have anything to do with not wanting to shell out $400 or $800 cash for a new TV. Additionally and conversely, if I had plunked down the $400 cash and THEN the water heated broke right after, and I used my cash for the TV, I would be pretty mad I hadn't financed it and only had a $20 a month payment to deal with for a year and still have the cash on hand for my true emergency. Sorry, but your argument doesn't work for me. I wouldn't use my cash in my emergency fund for a TV, that's not an emergency. I would finance it at 0%.

 

The lower your payments are, the more you end up paying and setting yourself back in the long run.

 

 

 

Not at 0% interest...

TVs in America right now aren't an accurate measure of wealth. The digital conversion has almost zeroed out the value of non-compliant units. I know, converter boxes... but those aren't free and it doesn't cost that much more to just get a new TV.

 

A converter box is about $20 with a coupon, or $60 without.  I don't think that's almost the cost of a new TV.

The lower your payments are, the more you end up paying and setting yourself back in the long run. That sounds a lot like....

 

 

 

 

Not if it's actually zero interest.  That's a different animal.  That's retailers letting individuals buy like businesses, which I'd like to see more of.  Getting rid of interest equalizes things.

 

When there's any interest at all, that's when lower payments can really hurt-- like at Aaron's or Rent a Center.

Agreed with the others.  0% is 0%.  $400 financed at 0% is the same as $400 paid outright in cash.

Having cash on hand as part of an emergency fund for house repairs (if I owned a house, which I don't. though I do have an emergency fund) doesn't have anything to do with not wanting to shell out $400 or $800 cash for a new TV.  Additionally and conversely, if I had plunked down the $400 cash and THEN the water heated broke right after, and I used my cash for the TV, I would be pretty mad I hadn't financed it and only had a $20 a month payment to deal with for a year and still have the cash on hand for my true emergency.  Sorry, but your argument doesn't work for me. I wouldn't use my cash in my emergency fund for a TV, that's not an emergency.  I would finance it at 0%.

 

Thank you.  My grand parenets told me the emergency fund should be equal to two months mortgage payments!

 

You must be prepared.

why is borrowing money for free lame?  I've intentionally financed things at 0% even though I've had the cash to flat out purchase it simply to earn interest.

 

Oh. Zero percent is fine. I wouldn't put anything big on my credit card unless it's a real emergency. Even if I could pay it off in a month.

why is borrowing money for free lame?  I've intentionally financed things at 0% even though I've had the cash to flat out purchase it simply to earn interest.

 

Oh. Zero percent is fine. I wouldn't put anything big on my credit card unless it's a real emergency. Even if I could pay it off in a month.

 

Really why.  I do it because I'm a points whore and I like the extended warranties, AMEX has.

why is borrowing money for free lame? I've intentionally financed things at 0% even though I've had the cash to flat out purchase it simply to earn interest.

 

Oh. Zero percent is fine. I wouldn't put anything big on my credit card unless it's a real emergency. Even if I could pay it off in a month.

 

Really why. I do it because I'm a points whore and I like the extended warranties, AMEX has.

 

Yes - there is a lot to be made off of rewards programs.  There's a lot of options with many points programs...I just got a $100 gift card to Morton's from National City.  I average about 1 free flight per year on my Continental Mastercard.

 

If you do it right and can manage your money well, there is no downside to using credit.

why is borrowing money for free lame?  I've intentionally financed things at 0% even though I've had the cash to flat out purchase it simply to earn interest.

 

Oh. Zero percent is fine. I wouldn't put anything big on my credit card unless it's a real emergency. Even if I could pay it off in a month.

 

Really why.  I do it because I'm a points whore and I like the extended warranties, AMEX has.

 

Yes - there is a lot to be made off of rewards programs.  There's a lot of options with many points programs...I just got a $100 gift card to Morton's from National City.  I average about 1 free flight per year on my Continental Mastercard.

 

If you do it right and can manage your money well, there is no downside to using credit.

 

I just pay the bill at the end of the month.  I also use the card for record keeping purposes.  I know exactly how much I've spent.

Man, am I ever sorry that I mentioned televisions and sent this thread careening off course!!

 

In a futile attempt to bring this back to the point of the thread's subject, you folks are talking about $400 televisions as cheap. That $400 can feed a family for a year in some countries.

 

Two pages back, my point was that all economic pain is relative. That's still my point.

^To me, $400 is an insane amount of money to be spending on a TV right now. So is $15 for a Blu-Ray disc or $300 for a half-assed decent player. During the depression, many people will quit buying nonessentials, which will in turn make the depression worse, so on and so forth...

 

Retail is screwed and so are a lot of the electronics manufacturers. Circuit City is just the beginning...

 

Even Sony is reporting losses now and layed off 8,000 people globally. The PS3 was a massive failure. Since electronics are such big ticket items in retail, I'd imagine sales declines will cut across the board. I wouldn't be surprised if grocery stores are all that survive the depression. People gotta eat. :|

 

I truly hope you are wrong about the depression. But, there is no hiding that the economy is still plunging down the mountain.

^To me, $400 is an insane amount of money to be spending on a TV right now. So is $15 for a Blu-Ray disc or $300 for a half-assed decent player. During the depression, many people will quit buying nonessentials, which will in turn make the depression worse, so on and so forth...

 

Retail is screwed and so are a lot of the electronics manufacturers. Circuit City is just the beginning...

 

Even Sony is reporting losses now and layed off 8,000 people globally. The PS3 was a massive failure. Since electronics are such big ticket items in retail, I'd imagine sales declines will cut across the board. I wouldn't be surprised if grocery stores are all that survive the depression. People gotta eat. :|

 

$400 is cheap, however, TV today last longer.  So your cost over a period of time is justified.

Alright, enough about TVs.

Price Cuts Spur Home Sales

 

U.S. home sales registered their biggest monthly jump in nearly seven years in December, as cratering prices began to draw out more buyers and several major housing markets showed some signs of stabilizing.

 

The 6.5% rise in sales from November was attributed in part to strong sales of foreclosed homes. Economists say it is too early to suggest that broad improvement is at hand, though, and warned that the spring buying season is likely to be sluggish amid growing economic hardship. Indeed, the employment picture continued to darken Monday as U.S. employers announced at least another 65,000 layoffs...

 

http://online.wsj.com/article/SB123298209359015631.html

It all a big ole domino effect.

Retailers want prices lowered

Consumer-product companies pushed to roll back

By Carol Wolf • Bloomberg News • January 27, 2009

http://news.cincinnati.com/article/20090127/BIZ/901270353/1076/BIZ?GID=8AiaFTr0tv0VyPK2FsJEUABZu2oQJa9OjHVIE29U8XE%3D

 

Procter & Gamble Co. and Kimberly-Clark Corp. may have to roll back price increases they pushed through last year as retailers demand cuts on everyday necessities to lure shoppers.

 

Consumer-products makers raised prices last year after the cost of oil and pulp needed to make Huggies diapers, Charmin toilet paper and Kleenex tissues rose to records. Now that those expenses are tumbling, retailers like Wal-Mart Stores Inc. aim to keep suppliers from expanding their profit margins, said Grace Barnett, an analyst with Fitch Ratings in New York.

 

"There's no way Wal-Mart is going to let their suppliers reap significant benefit from lower costs," she said. "As a retailer, you are not having a great time as it is and you've discounted the heck out of yourself just to get traffic in the door."

 

...

Although I usually despise Walmart because of this practice, I hope they succeed as getting suppliers to lower their prices in this scenario.  Remember that most price-gouging happens not when prices are rising, but when prices are going down yet the benefits are not passed on to consumers.

Keep an eye on drought conditions.  I don't think we would have had such a depression in the 30s without that.  I read an article (which I can't find now) about California farmers being denied routine loans because they can't prove they'll have water access this summer.

Keep an eye on drought conditions.  I don't think we would have had such a depression in the 30s without that.  I read an article (which I can't find now) about California farmers being denied routine loans because they can't prove they'll have water access this summer.

 

Well California is seriously in debt.  I can see a exodus.

Keep an eye on drought conditions. I don't think we would have had such a depression in the 30s without that.   I read an article (which I can't find now) about California farmers being denied routine loans because they can't prove they'll have water access this summer.

 

Well California is seriously in debt. I can see a exodus.

 

Everybody's doing the Toxic Waltz!

 

There's a chance that nobody knows what I'm talking about.

The problem with the Dust Bowl had more to do with over growing during the WWI period than anything else - in addition to a general return to the mean for the Great American Desert - it's significance is mostly symbolic rather than real, as the worst hit places were probably Toledo and a few other places in the industrial midwest.

Looks like the FEDs are taking a page from Citicorp. Just take all the bad assets and put them in a 'new' bank and let it fail or let the taxpayers bail it out. I wonder how all the buyers of this bad paper are going to feel. It pretty much tells them they were suckers. The side effect is the banks no long have bad balance sheets, but I also think it sends a clear message that they don't have to worry about risk. It also sends a clear message to the investment world that extreme caution should be used when dealing with US companies because when the !?!?! hits the fan they will just through you under the bus. Maybe the car industry and others can use this model. Take all of your bad debt and spin if off into a FordGMChrysler company and let it go bankrupt.

 

FINANCIAL STOCKS

Financials soar on talk that 'bad bank' may fly

 

"NEW YORK (MarketWatch) -- Shares of U.S. banks posted strong gains Wednesday on reports that the Obama administration may adopt a plan to buy bad assets in the financial system and create a so-called bad bank to hold them."

http://www.marketwatch.com/news/story/Sector-soars-talk-bad-bank/story.aspx?guid=%7B77D177C6%2DF437%2D4D9B%2DA582%2D6AA3C4818920%7D

^ Is that even legal?

^ Is that even legal?

 

I think the FEDs and Wall Street have clearly shown that the legalities of an issue is irrelevant.

Keep an eye on drought conditions. I don't think we would have had such a depression in the 30s without that. I read an article (which I can't find now) about California farmers being denied routine loans because they can't prove they'll have water access this summer.

 

Well California is seriously in debt. I can see a exodus.

 

Everybody's doing the Toxic Waltz!

 

There's a chance that nobody knows what I'm talking about.

 

Sadly, I saw Exodus in concert....twice. The lead singer seemed to have some OCD fascination with "snake pits" (i.e. the cords from the mic's, guitars, etc. getting tangled together) and kept commenting on it...repeatedly...both concerts.

 

Re: the 'bad bank', I thought the original problem, and why the TARP money wasn't used to purchase those assets originally, was due to valuation. The gov't couldn't buy them at anything but market value. And if the banks sold them at that value, they'd have to realize the losses on their balance sheet, which would be devastating from a capitalization standpoint. Even with TARP money, I don't think bank's would meet the regulatory Tier 1 requirements if they completely wrote down the value of those assets.

 

I'll be curious to see how they work around that little conundrum.

Something tells me the 'government' will overpay for this bad debt. They will not write it down to its true value. The taxpayers will be paying for this in decades to come.

Something tells me the 'government' will overpay for this bad debt. They will not write it down to its true value. The taxpayers will be paying for this in decades to come.

 

Sadly, (even moreso than the sadness induced by seeing Exodus twice) I'm inclined to agree with you. Of course if we do that, then we should demand repayment of the TARP money, as banks won't need the funds to bolster their balance sheet.

Something tells me the 'government' will overpay for this bad debt. They will not write it down to its true value. The taxpayers will be paying for this in decades to come.

 

Sadly, (even moreso than the sadness induced by seeing Exodus twice) I'm inclined to agree with you. Of course if we do that, then we should demand repayment of the TARP money, as banks won't need the funds to bolster their balance sheet.

 

Now that is funny.

^ Is that even legal?

 

 

I think the FEDs and Wall Street have clearly shown that the legalities of an issue is irrelevant.

 

 

LMAO!! Classic. 

 

I have to admit it, but the question was hilarious, and the initial response even more so.

 

Here comes Resolution Trust Cop 2.

 

Personally, I like the idea of creating a new bank to buy up the assets of the existing banks.  However, I would buy only the GOOD assets (at this time, probably only bank accounts, CDs, etc) and then letting the existing banks go under.

 

Let the current execs and stockholders take the hit.

^ Is that even legal?

 

 

I think the FEDs and Wall Street have clearly shown that the legalities of an issue is irrelevant.

 

 

LMAO!! Classic. 

 

I have to admit it, but the question was hilarious, and the initial response even more so.

 

Here comes Resolution Trust Cop 2.

 

Personally, I like the idea of creating a new bank to buy up the assets of the existing banks.  However, I would buy only the GOOD assets (at this time, probably only bank accounts, CDs, etc) and then letting the existing banks go under.

 

Let the current execs and stockholders take the hit.

 

CincyDad,

You just keep the laughs rolling!!!! :wink: Only in our wildest dreams would that be the outcome.

I bolded the section in the article where it states "it was very easy to borrow money". That was the biggest mistake made. Slashing interest rates was only part of it though. Legislation had been passed in the 90's encouraging more lending: capital requirements to back investments was lowered, performance standards were clarified establishing specific metrics to be measured against including "percentage of subprime securities held" (more being better), and the Office of the Comptroller of the Currency allowed lenders to claim community development credits for loans made to sites when it was part of an effort to revitalize a low or moderate income community. Without this, the large volumes of loans dolled out to people who otherwise had no business being loaned money would not have been possible. Additionally, the excess amounts of money being loaned out to people who should have been given a lesser loan amount would not have been possible (b/c they wouldn't have been able to sell their old home and upgrade since there would not have been so many new buyers in the market)

 

http://www.cnn.com/2009/US/01/29/economic.crisis.explainer/index.html

 

 

(CNN) -- The U.S. economy is clearly in terrible shape. What is less clear is how we got here.

 

 

An index of home prices in 20 major metropolitan areas fell at a record annual pace in November of 2008, according to a recent report.

 

Opinions vary on when and where to begin the story, but many experts trace the origins of the current economic situation to the housing bubble that came about earlier this decade.

 

...

>jmecklenborg are you serious?

 

Sorry about the slow response.  Yes, luckily because I spent a ton of time with my grandparents as a kid, I've heard most of the stories.  Unfortunately since so many children never knew their grandparents because they died or because they grew up far away, they don't know ANY old people and that fuels youth-focussed TV popular culture.  Growing up with close to nothing other than an even head on the shoulders was par for the course among those who grew up during the Depression and then were promptly drafted into what was the worst human conflict, ever.  With MTV, etc., fussing constantly over the concept of what's "real", well, growing up in the Depression as a typical American was a million times more "real" than anything the Carson Daley generation can imagine.     

 

 

>These transactions are known as "subprime" mortgage loans. They generally have interest rates that are above "prime" interest rates available to borrowers with good credit.

 

NPR did a story recently on someone whose mortgage went up by $2,000/mo...holy ____!!!!  And residential/commercial mortgages apparently total 13X credit card debt, so I'm not so sure the more conspicuous aspects of the consumerist culture are so much to blame.   

 

 

GDP contracts 3.8% as inventories limit downturn

Fourth quarter marks worst performance for U.S. economy in nearly 29 years

 

"WASHINGTON (MarketWatch) -- The U.S. economy contracted at a 3.8% annualized rate in the fourth quarter, Commerce Department data showed Friday -- a decline that would have been worse except that the government counts an unwanted buildup of goods on store shelves as growth."

http://www.marketwatch.com/news/story/US-GDP-off-38-fourth/story.aspx?guid=%7B913CEBDA%2DAE34%2D48A8%2D84CC%2D80ECCBA1B6E6%7D

 

This will get revised lower in the future. Just like almost all the GDP numbers have been over the last 2 years.

At least if we start at 3.8, it means when the revise down it will be from a higher level. Imagine if they had announced 5.5 which was the expectation and we had to wait for the revision downward. I'm actually becoming less worried than I have been in awhile. I think the winter will be horrible, but we'll float at a low level for the rest of year before really heading back up next spring.

I think my main concern here is the build up of goods on store shelves that kept the GDP from being lower. It almost feels like the reason it was not 5.5 was because of another negative problem being calculated as a positive.

"a decline that would have been worse except that the government counts an unwanted buildup of goods on store shelves as growth."

 

I also read that the govt includes such things in GDP counts as a guy running a red light and crashing his car upon returning from visiting his divorce attorney before checking himself into drug rehab. :wink2:

Business Week had an interesting article about problems with the way the bailout(s) have been implemented (i.e. being all inclusive instead of directing capital to those that can best utilize it).

 

Their thought is to allow the bankruptcy system to pick the winners / losers and then focus the stimulus capital to those winners.

 

On its face it sounds like a plausible plan - short term pain ultimately leading to longer term economic health. The problem is, I don't think we can stomach the short term pain.

 

A New Menace to the Economy: 'Zombie' Debtors

Call them "zombie" companies. Many more has-been companies will be feeding off taxpayers, investors, and workers—sapping the lifeblood of healthier rivals

 

 

http://www.businessweek.com/magazine/content/09_04/b4117024316675.htm

 

 

It may true that there was some build up in inventory, but one of the benefits of on-time manufacturing is that scaling up and down happen much more quickly. This also means that once folks start emptying their own backload of stuff they'll have to head out and buy pretty quickly - I'm thinking P&G and the like. I actually think that the poor quality of a lot of Chinese made goods could help in the medium term, in that if things break quickly folks will replace it. It is worth remembering that some of U.S. manufacturing disappeared because they built stuff too well to maintain a long term market - Williamson heating - at the HQ Jesus church, essentially had that problem. Their stuff never broke down or really needed replacing so it was hard to maintain a long term business model.

 

Arnold Kling at Atlantic Business had an excellent article talking about how it may be corporate profits that lead us out of this rather than opening up credit spigots. This tends to exacerbate monopolistic capitalism for a decade or so, but it is more stable than a credit based economy. The banks though are screwed - there is another round of defaults coming as folks who lost their jobs (and were prime) can't make ends meet.

"a decline that would have been worse except that the government counts an unwanted buildup of goods on store shelves as growth."

 

I also read that the govt includes such things in GDP counts as a guy running a red light and crashing his car upon returning from visiting his divorce attorney before checking himself into drug rehab. :wink2:

 

The real question is, did this make the GDP go up or down. :lol:

The NYT had a piece today discussing what I brought up last week, i.e. the valuation problem associated with the "bad assets" a potential bad bank would purchase.

 

There's two major problems with the valuations : 1) uncertainty with the way the economy will go, and 2) lack of cooperation by banks in providing the necessary info to value these assets. Can't control 1, but you can certainly compel #2. Time to bring out your big stick, Mr. President.

 

February 2, 2009

Big Risks for U.S. in Trying to Value Bad Bank Assets

By VIKAS BAJAJ and STEPHEN LABATON

 

As the Obama administration prepares its strategy to rescue the nation’s banks by buying or guaranteeing troubled assets on their books, it confronts one central problem: How should they be valued?

 

Not just billions, but hundreds of billions of taxpayer dollars are at stake.

 

 

http://www.nytimes.com/2009/02/02/business/economy/02value.html?_r=1&hp=&pagewanted=print

This is more than just a problem, it has become the BIG problem. Most Banks now have more M3 ('stuff they say they can't value') on their books than M1 or M2 (stuff with real value). Wall Street and the FEDs have done everything to keep real value from being placed on all of this M3 paper. That is why they will go to high on pricing it values and the taxpayer gets the shaft. If they put real prices on this the Hedgefunds and most of the big banks will go out of business within 30 days. The fleecing of Main Street has only begun.

Another victory for intellectual property over decency.  Any bank that refuses to divulge why it has trouble can keep it.  If we go to a bank for help, they want to know everything and then some.  The rules they apply to others should apply to them.

Another victory for intellectual property over decency. Any bank that refuses to divulge why it has trouble can keep it. If we go to a bank for help, they want to know everything and then some. The rules they apply to others should apply to them.

 

I would love to see the day the banks had to follow those rules.

When the U.S. sneezes, the world catches a cold.

 

http://youtube.com/watch?v=aLxxes5cuzM

 

I wonder what that Russian economist thinks of this. You know, the one who had all of our new geo-political boundaries all figured out.

We are screwed. I feel bad for the people that's bring a new kid into this world at this time.

We are screwed. I feel bad for the people that's bring a new kid into this world at this time.

 

Thanks.  :(

We are screwed. I feel bad for the people that's bring a new kid into this world at this time.

 

I feel so bad for the Russians. They were just starting to get back on their feet. I'm so surprised that other countries like Russia are taking it out on their own gov't instead of OURS. We caused a global recession. Other countries should be pushing to hold summits and discuss how we need to change the FED in such a way that it doesn't create such large bubbles. People are sick of the roller coaster ride. They don't want to ride the Son of Beast, they want Top Gun.

 

Riots are out of control right now. There are riots in Greece as well. It was over the shooting of a small child by police but that was more of a last straw excuse and has more to do with a broader issue of political corruption and bunk economic policies.

We are not the cause. EVERYONE is the cause.

Everyone loves blaming the US for all the world's problems.  It's so pathetic.

We are not the cause. EVERYONE is the cause.

 

They're hurting because oil prices are down. That's their main export. The demand for oil globally is down right now because of the recession that started in the U.S.

Using their main export to alienate Europe isn't a great move.  Nobody likes a price gouger.