Comments on: Get ready, America: Great Depression 2.0

By: russell

russell — Mon, 23 Nov 2009 02:56:17 +0000

Vox! Your book ‘The return of the great depression’, are not available nor listed in any bookstores in Montreal, Qc Canada. I had to order it throu a university bookstore. Check your publisher, for Indigo, Chapter, etc. RB

By: breezer1

breezer1 — Mon, 02 Nov 2009 15:08:58 +0000

bill buckner’s newsletter made a forecast about 6 months or so ago where he predicted the series of events now unfolding. kind of spooky in his accuracy. crack up boom, 3rd stage deflation. nothing will prepare the masses for the devastation to peoples lives. not only the us but the world has fuses burning at both ends. also a time of great opportunity and re-newal. get gold and silver. GLTA

By: Daniel

Daniel — Fri, 30 Oct 2009 13:26:45 +0000

Vox, I’ve also heard the idea of paying your smallest debt first and using the payments you were paying on that one to increase your payments on subsequent debts. Yes, it’s mathematically less ideal, but psychologically more rewarding and therefore more likely to keep people working on paying off their debt.

The rationale behind focusing on psychological factors is that if people typically acted rationally rather than emotionally, they wouldn’t have accumulated the debt in the first place.

By: Daniel

Daniel — Fri, 30 Oct 2009 13:22:21 +0000

I disagree with the statement “Someone with $22000 cash in the bank and $20000 of debt is far better off than someone with $2000 of cash in the bank and no debts. One could survive a layoff, the other could not” for two reasons. First, the person with debt will be losing money due to interest while the other will not and second, the premise the statement is founded on is that the debt is static. In the event of a layoff, debt can be accumulated. In that case, assuming both people have to spend $22,000 to survive, both will have no money, but only one will have been accumulating interest on the whole debt that entire time.

By: voxday

voxday — Thu, 29 Oct 2009 14:31:10 +0000

I didn’t say anything about preferring credit card debt to mortgage debt. Get rid of the highest interest debt first.

By: tz

tz — Thu, 29 Oct 2009 00:45:06 +0000

On your radio interview there is something which I generally don’t disagree with but there are some details which are critical.

You said people should get out of debt. Agreed. And that they should prefer credit card debt over auto or house. Here, it depends. If the house isn’t underwater and the payments are smaller than current rents, leave it. If you have an expensive caddie, swap it for an older car.

And I would just say RAISE CASH. Liquid. Something you could write a check on in 24 hours.

Someone with $22000 cash in the bank and $20000 of debt is far better off than someone with $2000 of cash in the bank and no debts. One could survive a layoff, the other could not. The first thing anyone should have is 6 months of expenses in cash. They really should have 9 months to give an emergency cushion or even 12 months maybe more. If you pay off your car and then have an accident? If the credit card you didn’t pay off changes terms? More liquidity, more options. It isn’t just debt as such – any business will tell you that cash flow is critical in a way profit and loss is not. The crisis a year ago was one affecting liquidity and ready cash. The loss to bankruptcy occurs more slowly. The difference between a heart-attack and cancer. Debt is a cancer, but a low reserve fund is asking for a heart attack. Credit lines are being closed (like the recent Citi letters) so you might not be able to get it (even with a good FICO) when you need it, so it is best to leave things in place.

If you are liquid, you can always choose what to pay down and how much and when. If you aren’t, you won’t have any choice. So I would just modify the advice from getting out of debt to get liquid.