Friday, September 28, 2012
Death before dishonor, or bad will things really get?
As I inch ever closer to paying off my last retirement loan, I'm taking stock of what I should tackle next. The most immediate short term goal is easy, since I don't have a choice. My teeth are finally getting fixed, and the repairs should last for 2 decades or so. That's the best I can hope for at the moment, but I'm happy regardless. The total cost will be approximately $5,000, but I can (thankfully) afford it. After that, the apartment needs upgrading, and that will cost approximately the same. Luckily, I know numerous tradesmen from painters to electricians to carpenters.
Neither task will require much in terms of time or money, so I have the luxury (burden?) of ruminating what do next with the time and money this job has left. I will need to salt away money for a newer car, as the Camry 2.5 is getting up there in miles. I'd want to drive it for no more than another 18 months. Car aside, I have two major debts to tackle, assuming I'm still single and/or won't have any kids. The obligations in question are my co-op at $64,000 and my student loans at $78,000. It's a large amount on paper, but the payments are low, so I've been free to either invest my extra capital in other things, take trips (as I've done regularly for the past 10 months), or pay off other debts, which I've also done with gusto.
As mentioned in prior posts, paying down these debts is not an attempt to live right or to claim some sort of victory, just an attempt to right the ship of state so I am free to do more than I could prior. My credit is repaired; my retirement is restored, and I can pay any bills that come my way. Similarly, my teeth and domicile are simply me taking care of myself, and nothing more. Taking care of these smaller debts and responsibilities allowed me to not see the forest for the trees. Getting bogged down in minutia is a generally a pitfall of mine, but in this case I'll take it.
I'd like to blithely dismiss my concerns, but no matter what my circumstances, these fears won't go away. Since I cannot seem to wish them away, and any personal growth I've achieved hasn't removed them either, I've been forced to label these worries as legitimate. As least one facet is an extension of my over-arching fears about where the economy and nation are going. These fears have been put under the magnifying glass due to a book I've just purchased called "Total Money Makeover," by Dave Ramsey. I like the book, but it's old-line fundamentalist Christian vibe will turn off some, coupled with a fairly punishing remedy for rectifying the situation. The moralizing tone of the book did put me off, though that doesn't mean it isn't good advice.
(Author's note: This was written some 5 weeks ago, until registration trashed my ability to write, think, or even control my emotions. Please forgive the change in tone from here on out.)
Unfortunately, not matter how closely I follow the book, I won't be ready for the crash. There in lies the moral quandary I face. As I write this on 9/28/12, Obama looks like he will win a second term. I shudder to think on the damage caused by another 4 years of his woefully inadequate leadership, his total lack of practical business knowledge, or many other deficiencies I could list. Mostly it's his spending that worries me. After some research (i.e. a 4 day / 12 hour discussion with Scott), the time line for things to go pop has been shortened. We're both in agreement that the treasury bubble will pop within 1 - 3 years.
Since the mid 90's, America has one bubble or another supporting the economy: the tech/NASDAQ bubble in from 95-2000; the Dow from 2002 - 2007, and finally the housing bubble, which was technically from 1997 to 2007, though the true lunacy occurred at the very end. Any and all of these speculative manias cause the wealth effect, where people feel richer than they truly are, which in turn causes people to spend more than is prudent.
We are now in a different kind of bubble: a bubble in treasury debt. When the housing bubble finally popped and credit all but disappeared, people were unable to borrow, and were they able to make payments on the debts they already had. In response, the federal government borrowed for you. By borrowing money and delivering services and stimulus to the populace, we were supported in ways we couldn't have afforded otherwise.
The problem with a government enabled bubble (the tax deduction on mortgage interest, reduction in capital gains taxes, allowing one to keep the profits on homes sales more than once, etc.) versus a bubble in government, is that government bubble has nothing to follow it. Once either the government stops borrowing at the present level or the market no longer buys our debt at the present low interest rate, the government's ability to keep other forms of commerce afloat will disappear, and our economy, indeed our society, will crash.
There's plenty of speculation on what will percipient the crash, what form it will take, etc. It's outside the scope of this post, but I invite the reader to return. I'm sure I'll have something to say at some point. While the specifics of the crash vary, the advice is far less random: be free of debt. I thought, as recently as six weeks ago, this was possible. I was overly optimistic.
Ironically, the realization I can't payoff all this debt makes this debate even more important. This leads me to my quandary. There are three separate facets of the problem: 1) I have tons of debt. 2) There is an expiration date to our economy. 3) There is an expiration date on the profession of financial aid counseling. This doesn't mean that there is an expiration date on my working at the college, though depending on the timing, both could occur at the same time. If the public money disappears before financial aid is fully automated, then I'm stuck. The money I award will vanish, and any chance of a safe landing at the college will similarly disappear.
Until then, the gravy train we're all riding chugs merrily towards it's destination: a massive chasm traversed by a collapsed bridge. With this ride comes the pay and benefits I have always received. I also have the knowledge things with get bad in a relatively short time, so this leaves me with the question: what do I do with the resources I have left?
The aforementioned book would have me pay off the debt as quickly as possible, without regard to the larger picture. Those who believe we are in for a Japanese-style economic quagmire would also agree with this approach. Even if I believed the Japanese scenario (and I don't, since we don't have the positive balance sheet Japan did until 2011), it doesn't answer the most pertinent question: why? Why take all the money I'll earn over the next 3 years and dedicate it to paying for something that may not have any value in the near future? Would not it be better to invest that money, either in myself, or some other venture to earn a living?
Morally, the answer is clear: the debts must be paid regardless of the pain; you borrowed the money, and who cares if you can't pay them or that your family won't eat, or whatever. I'm a little more flexible on this point, though never from a legal one; that comes will my job. The long-term answer really depends on one's belief in America the idea versus America the nation-state, and not one's moral or ethical views. If you believe that the USA is best nation on earth and that the best opportunity exists here and will always exist here, then your choice is clear. This is not asked in a demeaning or sarcastic manner; a point I make since tone is sometimes lost on the page.
My answer to the above question is as follows: I'm not sure. The upcoming election won't necessarily change my answer. Regardless of who wins, America is hobbled by her prior bad investments, much in the same way I'm limited by all the student loans I borrowed. Unfortunately, I cannot just print my way out of it. Well, I can try, but the Federal Reserve resents individual citizens from encroaching on it's turf. Also, prison food allegedly sucks. If our economy and nation truly collapses, à la Rome or the Soviet Union or the Ottomans, then using the money I have now to payoff debt would be undeniably stupid and self-destructive. There are other, milder situations where this would also be true, and perhaps I'll expound upon them later, but this post was started August 1st., and I'm sick of looking at it.
The problem of using the above examples as a reason to not attack my debts is that it seems pretty silly, akin to saying you could get hit by a car crossing the street so why not fly to Vegas and gamble the house payment, but there examples are real, and something will happen. This "something" may be limited to me needing a new career, but more likely the nation will either have to drive itself into a ditch on the side of the road, or we try to jump the chasm like the Dukes of Hazard. We just don't know if it's a nasty crash, but America survives, albeit poorer, or the nation is permanently crippled where complex systems fail over an extended period of time, or a combination of this system failing but another surviving, which means that one section of the country will suffer while another will be fine, etc. I've heard arguments for many different scenarios, and in some cases the logic is compelling, and others where I wonder what these idiots are smoking.
To cap this rambling post, my answer is as follows: though the book would say otherwise, the correct answer is not to rush headlong into paying off all my debt. There are certain steps I can take, as well as avoiding new debt at all costs. I need to invest in... something. I'm not sure what yet, but that is the subject of my next post.
PS: Yeesh... 1770 words, the equivalent of a 3 page paper, and it's still an unfocused mess. Oh well, better luck next time.
Neither task will require much in terms of time or money, so I have the luxury (burden?) of ruminating what do next with the time and money this job has left. I will need to salt away money for a newer car, as the Camry 2.5 is getting up there in miles. I'd want to drive it for no more than another 18 months. Car aside, I have two major debts to tackle, assuming I'm still single and/or won't have any kids. The obligations in question are my co-op at $64,000 and my student loans at $78,000. It's a large amount on paper, but the payments are low, so I've been free to either invest my extra capital in other things, take trips (as I've done regularly for the past 10 months), or pay off other debts, which I've also done with gusto.
As mentioned in prior posts, paying down these debts is not an attempt to live right or to claim some sort of victory, just an attempt to right the ship of state so I am free to do more than I could prior. My credit is repaired; my retirement is restored, and I can pay any bills that come my way. Similarly, my teeth and domicile are simply me taking care of myself, and nothing more. Taking care of these smaller debts and responsibilities allowed me to not see the forest for the trees. Getting bogged down in minutia is a generally a pitfall of mine, but in this case I'll take it.
I'd like to blithely dismiss my concerns, but no matter what my circumstances, these fears won't go away. Since I cannot seem to wish them away, and any personal growth I've achieved hasn't removed them either, I've been forced to label these worries as legitimate. As least one facet is an extension of my over-arching fears about where the economy and nation are going. These fears have been put under the magnifying glass due to a book I've just purchased called "Total Money Makeover," by Dave Ramsey. I like the book, but it's old-line fundamentalist Christian vibe will turn off some, coupled with a fairly punishing remedy for rectifying the situation. The moralizing tone of the book did put me off, though that doesn't mean it isn't good advice.
(Author's note: This was written some 5 weeks ago, until registration trashed my ability to write, think, or even control my emotions. Please forgive the change in tone from here on out.)
Unfortunately, not matter how closely I follow the book, I won't be ready for the crash. There in lies the moral quandary I face. As I write this on 9/28/12, Obama looks like he will win a second term. I shudder to think on the damage caused by another 4 years of his woefully inadequate leadership, his total lack of practical business knowledge, or many other deficiencies I could list. Mostly it's his spending that worries me. After some research (i.e. a 4 day / 12 hour discussion with Scott), the time line for things to go pop has been shortened. We're both in agreement that the treasury bubble will pop within 1 - 3 years.
Since the mid 90's, America has one bubble or another supporting the economy: the tech/NASDAQ bubble in from 95-2000; the Dow from 2002 - 2007, and finally the housing bubble, which was technically from 1997 to 2007, though the true lunacy occurred at the very end. Any and all of these speculative manias cause the wealth effect, where people feel richer than they truly are, which in turn causes people to spend more than is prudent.
We are now in a different kind of bubble: a bubble in treasury debt. When the housing bubble finally popped and credit all but disappeared, people were unable to borrow, and were they able to make payments on the debts they already had. In response, the federal government borrowed for you. By borrowing money and delivering services and stimulus to the populace, we were supported in ways we couldn't have afforded otherwise.
The problem with a government enabled bubble (the tax deduction on mortgage interest, reduction in capital gains taxes, allowing one to keep the profits on homes sales more than once, etc.) versus a bubble in government, is that government bubble has nothing to follow it. Once either the government stops borrowing at the present level or the market no longer buys our debt at the present low interest rate, the government's ability to keep other forms of commerce afloat will disappear, and our economy, indeed our society, will crash.
There's plenty of speculation on what will percipient the crash, what form it will take, etc. It's outside the scope of this post, but I invite the reader to return. I'm sure I'll have something to say at some point. While the specifics of the crash vary, the advice is far less random: be free of debt. I thought, as recently as six weeks ago, this was possible. I was overly optimistic.
Ironically, the realization I can't payoff all this debt makes this debate even more important. This leads me to my quandary. There are three separate facets of the problem: 1) I have tons of debt. 2) There is an expiration date to our economy. 3) There is an expiration date on the profession of financial aid counseling. This doesn't mean that there is an expiration date on my working at the college, though depending on the timing, both could occur at the same time. If the public money disappears before financial aid is fully automated, then I'm stuck. The money I award will vanish, and any chance of a safe landing at the college will similarly disappear.
Until then, the gravy train we're all riding chugs merrily towards it's destination: a massive chasm traversed by a collapsed bridge. With this ride comes the pay and benefits I have always received. I also have the knowledge things with get bad in a relatively short time, so this leaves me with the question: what do I do with the resources I have left?
The aforementioned book would have me pay off the debt as quickly as possible, without regard to the larger picture. Those who believe we are in for a Japanese-style economic quagmire would also agree with this approach. Even if I believed the Japanese scenario (and I don't, since we don't have the positive balance sheet Japan did until 2011), it doesn't answer the most pertinent question: why? Why take all the money I'll earn over the next 3 years and dedicate it to paying for something that may not have any value in the near future? Would not it be better to invest that money, either in myself, or some other venture to earn a living?
Morally, the answer is clear: the debts must be paid regardless of the pain; you borrowed the money, and who cares if you can't pay them or that your family won't eat, or whatever. I'm a little more flexible on this point, though never from a legal one; that comes will my job. The long-term answer really depends on one's belief in America the idea versus America the nation-state, and not one's moral or ethical views. If you believe that the USA is best nation on earth and that the best opportunity exists here and will always exist here, then your choice is clear. This is not asked in a demeaning or sarcastic manner; a point I make since tone is sometimes lost on the page.
My answer to the above question is as follows: I'm not sure. The upcoming election won't necessarily change my answer. Regardless of who wins, America is hobbled by her prior bad investments, much in the same way I'm limited by all the student loans I borrowed. Unfortunately, I cannot just print my way out of it. Well, I can try, but the Federal Reserve resents individual citizens from encroaching on it's turf. Also, prison food allegedly sucks. If our economy and nation truly collapses, à la Rome or the Soviet Union or the Ottomans, then using the money I have now to payoff debt would be undeniably stupid and self-destructive. There are other, milder situations where this would also be true, and perhaps I'll expound upon them later, but this post was started August 1st., and I'm sick of looking at it.
The problem of using the above examples as a reason to not attack my debts is that it seems pretty silly, akin to saying you could get hit by a car crossing the street so why not fly to Vegas and gamble the house payment, but there examples are real, and something will happen. This "something" may be limited to me needing a new career, but more likely the nation will either have to drive itself into a ditch on the side of the road, or we try to jump the chasm like the Dukes of Hazard. We just don't know if it's a nasty crash, but America survives, albeit poorer, or the nation is permanently crippled where complex systems fail over an extended period of time, or a combination of this system failing but another surviving, which means that one section of the country will suffer while another will be fine, etc. I've heard arguments for many different scenarios, and in some cases the logic is compelling, and others where I wonder what these idiots are smoking.
To cap this rambling post, my answer is as follows: though the book would say otherwise, the correct answer is not to rush headlong into paying off all my debt. There are certain steps I can take, as well as avoiding new debt at all costs. I need to invest in... something. I'm not sure what yet, but that is the subject of my next post.
PS: Yeesh... 1770 words, the equivalent of a 3 page paper, and it's still an unfocused mess. Oh well, better luck next time.
