Debt ceiling

blame wallstreet for a culture of debt borrowing?

No, i'm sorry, i'm more cynical than you. That cultural heritage belongs to everyone.

Look at how our monetary system works and who is on control of it. It is not the government - it is the fed which is owned by the big Wall St. banks. The politicians are just useful idiots that do the bidding of the banks in an effort to get re-elected.

You can stay on your big Wallstreet bank kick if you want.

The point is, Wallstreet wouldn't have anything to do if our government, our businesses, and our popular culture wasn't one that deals in heavy debt burdens.

Dollars are debt. They are effectively loaned into existance. The levels of consumer and business debt do not change the facts of our monetary system.

You guys see the market today…my loss is into five digit territory.

The first new car I bought was an 86 Mazda B2000 which all up with TL&R was in the garage for $8,700.

Simpler times, simpler times

RX Reven' wrote: You guys see the market today…my loss is into five digit territory.

There's a reason I converted my 401k to the 3% fixed return option a few weeks ago.

S&P Downgraded us from AAA to AA+. The sad part is that they are being generous.

DILYSI Dave wrote: There's a reason I converted my 401k to the 3% fixed return option a few weeks ago.

I did about half of mine. Going to ride out next week. If we're not back to 12k by Friday, I'll move the other half. I'm not sliding under 10k again.

I've been seriously considering cashing out and putting the money in under my mattress.

If we have a dip anything close to last time, I figure the value lost in the market would equal the taxes/penalties I'd get from laeving it in.

In the last two weeks, my rate of return has gone from 9% to 0.

DILYSI Dave wrote: S&P Downgraded us from AAA to AA+. The sad part is that they are being generous.

I really trust S&P, they are the ones that miss-rated the subprime moneys as A or AA when they should have been C. Does that mean the US ought to be C or are they just gettin' even?

oh, so you're buying the Whitehouse accusing them of having accounting problems?

I get a kick out of the body with a 15 trillion dollar standing debt accusing a financial institution that it doesn't know math.

Quoted from page 5 3 weeks ago:

SVreX wrote: Americans are very good at sticking our head in the sand. The truth is that by any logic whatsoever, our credit rating SHOULD be downgraded. My personal credit rating was down graded, and it forced me to stop building projects on spec. Hurts like heck. But the banks' lending practices were screwbally and getting their lending practices in line meant downgrading my credit rating and most everyone else's. Americans are not as capable of paying back money as we once were. Like it or not, as a nation it is appropriate that our credit rating be downgraded. Having an inappropriately high credit rating only leads to excessive spending that we can't handle. It is EXACTLY what got us into the housing crises on a personal level, and the debt ceiling will create the same problem on a national level. Just a matter of time. Downgrade it. Let the chips fall where they may. Then we will finally have the opportunity to make some tough decisions and move forward. It's not the end of the world.

Oh wait, that was me!

z31maniac wrote: I've been seriously considering cashing out and putting the money in under my mattress.

You should have a bond fund available. Almost certainly a better option than pulling it out early. You give most of it away if you do that. There are always capital preservation options in any plan I've seen.

On this downgrade, meh? Dunno. It sucks, but it's only one agency and it's AA+. Should it be downgraded more? Don't see why. We didn't default on anything. If you read what they said about it, they only downgraded it because of the brinkmanship BS. One of these days someone will refuse to make any reasonable compromise and the manufactured crisis will turn into an actual crisis. Other than that, there's plenty of money in America. We can pay the bills. We just have to chose to do so.

Not saying we shouldn't cut spending, in fact, I think we should. But this is pretty crappy timing. We'll see, but this may go down in history as the recession extension act of 2011. Government checks spend the same as any other, and no matter how you slice it, we're pulling money out of the economy. Maybe should have done this when we were so flush with cash Bush had to give everyone a tax cut.

Ok, I've got a question for you stick-it-in-the-mattress guys...

First off, let me say that my first instinct is to do the same. But I'm thinking that may be faulty thinking.

It's gonna be a while before I need the money- its for retirement, if such a thing ever exists again.

So, I could cash it in and not take the short term losses, but here's the problem. The downgrading of the credit worthiness is indicative of something important, and the Treasury started printing money a long time ago, most of which is not yet in circulation (it's been used to underwrite stimulus bailouts, and therefore is really still in the vaults of big banks). But, it WILL be in circulation SOON.

This means inflation and devaluation of the dollar are coming. It also means dollars are gonna be worth less.

Perhaps a LOT less.

We measure a stock's worth by comparing it to dollars, but ownership of stocks is not money. It is ownership of tiny pieces of companies. These companies are going to be fighting hard to survive, and some of them will. Some of them will thrive. If your money is in mutual funds spread out over many companies, there could be little pieces of hundreds of companies.

I know. Some of you will say buy ammo, seeds, whatever. But I can barter and work for seeds, and the reality is I am not going to shoot someone for some beans and rice.

So, the choice (it appears to me) is to trade ownership of lots of companies (with ENORMOUS incentive to survive) for dollars which might not be worth too much, and are COMPLETELY dependent on the successful leadership of a bunch of politicians who I don't trust as far as I can throw them.

The false thinking in cashing out is that the cash would be worth more than the ownership in the companies. That might not be the case (over the long term).

fast_eddie_72 wrote: On this downgrade, meh? Dunno. It sucks, but it's only one agency and it's AA+. Should it be downgraded more? Don't see why. We didn't default on anything.

Credit worthiness does not necessarily have anything to do with defaulting. It has to do with a judgement of whether you are capable of handling more debt.

My credit score was downgraded a few years ago, and I've NEVER defaulted on anything. I have never abused credit. It pissed me off. But now that I can look back on it, they were right. My ability to handle more credit had decreased, and it was appropriate to downgrade my score.

S&P pointed to the indecisiveness of the political leaders, and concern that the partisan divide may NEVER be overcome. This implies that leaders can't decide, which ABSOLUTELY impacts the capability to handle more debt.

It took 3 months of arguing to come up with a non-solution, and they then recessed for a month's vacation. Note that this was just to decide whether or not to raise the debt ceiling- they haven't even STARTED talking about HOW to spend the money. They'll NEVER come to terms. That's ridiculous.

Standard & Poor's was right, and perhaps kind.

It's simpler than that. None of this is going to happen overnight. Inflation? Maybe. But we'll have the joy of watching that unfold over months and years. Plenty of time to make decisions.

That's why you move it into a bond fund. It's still dollars, but you get some small return, usually at least almost as good as inflation. Sometimes a little better. Only risk is you miss a big equity bounce. I don't see a huge one coming in the near future. But who knows, we may be up 1000 points on Monday. That's why I left half of my money in- mostly in and S&P 500 index fund.

I agree with you that funds are the way to go if you aren't going to watch it several times a day every day. But markets go down. Yeah, they have a lot of incentive to survive, but some of them fail all the same. I kicked around the idea of shorting B of A. But I'm not really savvy enough to pull it off. You'd want to do something for protection and I don't really know enough to play that game.

SVreX wrote: Credit worthiness does not necessarily have anything to do with defaulting. It has to do with a judgment of whether you are capable of handling more debt.

Yeah, I understand that. The U.S. economy, even in tough times like this, is still somewhere in the neighborhood of a quarter of the entire world economy. We have too much debt for a thriving economic forecast, but more debt than we can handle? Not even close.

Our debt to GDP ratio is getting ugly. We need to raise revenue and curb spending. But there's nothing going on that would challenge the credit worthiness of the U.S. other than political games. And, again, if you look at what S&P said, that's exactly why they downgraded our debt. Nothing to do with our ability to pay it back.

The catch-22 is, increased taxes hurt employment. We need to lower our debt, and especially our accumulation of additional debt, and if we want to do it without adding to the already horrible unemployment situation, the only thing left is spending cuts.

Once unemployment is back under control, I'm with you - raise taxes. It's got to be a part of paying off debt. But doing so right now is irresponsible IMO.

FWIW, I also think that it would be more palatable for the "No Taxes EvAR!" people if a good faith effort had already been made on getting spending under control. Given how wasteful the government is with the money they have, it is very easy to conclude that giving them more just means more to waste. If instead the backdrop was "Look - we have cut the size of government by 5% annually for each of the past 3 years, and the deficit situation is looking much better, but if we really want to get the debt under control, we need to raise taxes....", I think that would read as a reasonable approach to most.

fast_eddie_72 wrote: It's simpler than that. None of this is going to happen overnight. Inflation? Maybe. But we'll have the joy of watching that unfold over months and years. Plenty of time to make decisions.

But there will be an immediate psychologic effect monday on the market

Because we will have all weekend for anxiety to build, there is going to be a shorterm sudden move into commodities monday morning into things like oil, gasoline & petroleum, precious metals, and non US currency.

If you haven't maxed out your 401k yet, after this week it will be a really good time to get in on this low.

DILYSI Dave wrote: The catch-22 is, increased taxes hurt employment. We need to lower our debt, and especially our accumulation of additional debt, and if we want to do it without adding to the already horrible unemployment situation, the only thing left is spending cuts.

The other catch 22 is that spending cuts hurt, well, spending. When they're talking about cutting this or that (since they haven't actually talked about cutting entitlement benefits) they're talking about cutting government jobs. Should those be cut? I'm sure a lot of them should be. But doing it right now is going to hurt. Stimulus spending is coming to an end as well. For all the "failed stimulus" talk, the construction workers who have been getting paid with that money will no longer have that income.

madmallard wrote: But there will be an immediate psychologic effect monday on the market Because we will have all weekend for anxiety to build, there is going to be a shorterm sudden move into commodities monday morning into things like oil, gasoline & petroleum, precious metals, and non US currency. If you haven't maxed out your 401k yet, after this week it will be a really good time to get in on this low.

Just want to follow what you're saying. You think equity markets will be off big this week? I think I tend to agree. That's why I hedged my bet on my 401k. If I had any commodity options in my plan I'd figure out a way to get some money there. But bonds will do for now.

But you think it will only last a week? Hum. I hope you're right. It could be that there will be a big sell of that will over-shoot reason (doesn't the damn stock market always over-shoot reason?) and people will come in looking for deals. So in the next several weeks, it may bob up a little. Shoot, that could happen by Tuesday or Wednesday. But I don't see any reason to think it's going to make a steady climb up over the next several months. We'll need some economic reports that have some good news, I think, before that will happen. And not just one or two. For the reasons I talked about above, I don't see it happening really soon. Government is taking action the opposite direction. Cutting spending and jobs. That's not going to help in the short term. So it will take that much longer to get things moving forward again.

If I was in my 20s or 30s I might pile all I can into this market. I'm in my mid 40s and hope to be looking at an early retirement in 10 or 12 years. But it's really going to depend on what I can wring out of my 401k over the next decade. One way or another we will get out of this hole, but man, it sure has been going on for a while already. When I think about the optimistic projections those on line 401k calculators were giving me and look at where I actually am it's depressing. I didn't think I'd be a millionaire just yet, but sure hoped I'd be closer than I am.

And may I say, I like how this thread is progressing. What say we all work together and try to figure out how to keep what money we've managed to accumulate and maybe even find a few opportunities moving forward. Maybe should start a new thread for that. What do you think? I'm not rich by any stretch of the imagination, but unlike good old Uncle Sam, I am in the back and I'd like to stay that way.

fast_eddie_72 wrote: For all the "failed stimulus" talk, the construction workers who have been getting paid with that money will no longer have that income.

There are a few construction workers who have been working off the stimulus funds. But the overall effect has been enormously negative, especially on construction. In-depth knowledge of the construction industry says that "all the construction jobs created by the stimulus funds" is nothing more than smoke and mirrors.

It's a VERY LARGE net loss in the long run when you consider the lost jobs to the decreases in lending and funding construction projects (while banks "sured up" their balance sheets and lending practices), ACTUAL job losses (including under-employed, self-employed who can't collect unemployment, and off-book workers like transients and undocumented, and the long term impact of businesses who have become dependent on the few government projects there are while failing to develop and maintain their primary business relationships (I know LOTS of construction businesses who no longer have ANY commercial or repeat customers, they are only living short term on a couple of government jobs while making no fundamental changes in the manner in which they do business).

REAL unemployment and underemployment rates are MUCH higher than any figures are showing. More like 70-80% in some areas.

It a huge game of kick-the-can, with a bad ending.

The ONLY construction companies that will survive are those that are making fundamental changes in how they do business. Expanding markets, buying competitors, re-tooling, slimming the workforce, downsizing their expenses, adding new product lines, beginning manufacturing shippable products, traveling further and covering larger regions, developing online components of the business. VERY FEW are actually doing any of this.

This is a tangentially-related vid clip because the debt ceiling "resolution" resulted in the downgrade:

A CEO speaks-out:

http://www.youtube.com/watch?feature=player_embedded&v=GaL5Uf_fd6M

The President is scheduled to deliver an address this afternoon. It's doubtful that he'll heed the advice offered by an accomplished entrepeneur.