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My little piece of peace

Discussion in 'Marketplace' started by masalai, Feb 5, 2009.

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  1. BPL
    Joined: Dec 2011
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    Location: Home base USA

    BPL Senior Member

    Who said anything about forgetting about it?
    Why not use low interest rates and greater buying power to advantage?
     
  2. Frosty

    Frosty Previous Member

    The guy in the article I read as I said I did in the first 4 words of my post.

    Using low interest rates is a good idea and not what we were talking about.
     
  3. Manie B
    Joined: Sep 2006
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    Location: Cape Town South Africa

    Manie B Senior Member

    Mas I am with you on this one
    our situation here is a joke BUT when I saw Romney I knew where the circus is. Scary too think that millions voted for something that is so crazy. The world is indeed a dark hole.
     
  4. Frosty

    Frosty Previous Member

    Whats progeny mean?
     
  5. BPL
    Joined: Dec 2011
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    Location: Home base USA

    BPL Senior Member

    means descendant

    The question was "why do you advocate paying down debts? Though I haven't read the whole thread, you seem to be aware that inflation punishes creditors and rewards debtors, while deflation does the opposite"

    I agree. Why spend money you have paying down low-interest debts when money is inflating and interest rates can't get much lower? They're not printing any more land.
     
  6. masalai
    Joined: Oct 2007
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    Location: cruising, Australia

    masalai masalai

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  7. Frosty

    Frosty Previous Member


    Interest charges kind of gets rid of that Idea, along with late payment charges and other charges. There is no inflation of 17%.

    All this talk of debt without a blush or a squirm . Ah the new America debt and credit cards.

    When I was younger no one would admit to having things on Hire purchase not even a washing machine. Personally I never did and If I had I would be too embarrassed to say so --not like today apparantly where I am deemed to be less savy because I actually believe in paying for things.

    I think we are at the point where some one claiming they owned the car and house it would not be believed.

    Here in Thailand cars motobikes etc have signs on them showing price and payments. If you want to know the cash price some girl has to go to the office and ask,-- then a guy comes out confused and asks what you want,---the price,--the cash pay price.

    Some one said credit and money is joined at the hip --today it is but at one time money was paid before reciept and in those days there was noting wrong --banks were strong and would give you your money back so before you stand on a soap box saying credit is normal It is not, it is a cancer that spreads and you dont need me to see that.
    .
     
  8. charlyIII
    Joined: Oct 2012
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    Location: st simons island ga

    charlyIII Junior Member

    Credit is a promise to pay. If you pay for something first then you are extending credit. Time is a variable. Credit and money always coexisted because one cannot pay for something and take delivery at the same instant. There is an element of trust involved, along with other terms such as length of time to pay. But never mind.......

    My original post was meant to point out that ina world of floating currency in which the purchasing power of money is largely determined by the whim of central banks, there is no other choice than to use credit as a tool against a system of government monetary fiat, as a hedge against inflation, which seems to be the default result of floating currency regimes.
     
  9. groper
    Joined: Jun 2011
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    Location: australia

    groper Senior Member

    I agree charlyIII, credit on non-depreciating assets is a good idea in the current climate - for the reason youve already given - as a hedge against inflation.

    There is little doubt, that many countries budgets are running huge deficits - so whats their solution? Print more money and inflate their way out of debt... Its much easier to pay back money 10 years from now when its worth half as much... Why? its the only policy that doesnt assure political suicide, and thus is the "normal" way out of these problems...

    So how does that effect us?
    We are living in a world of inflation... with all the money printing happening at the moment, we are sure to experience a period in the not too distant future, of very high inflation... so borrow as much money as you can, to buy land, houses and boats (boats will inflate also due to materials and labour price increases), and maintain your wealth. If you miss this inflation spike, you may never again, for the rest of your life, be able to afford that peice of land or yacht or whatever it may be, everything is about to get a lot more expensive, because bet your *** wages/earnings will not keep up with this true rate of inflation ...
     
  10. masalai
    Joined: Oct 2007
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    Location: cruising, Australia

    masalai masalai

    Hi groper,
    You make some valid points, which seem to meet your life objectives and likewise I feel that my choices ably meet my needs and objectives... Differences in age, needs and aspirations but a strong prospect that both our desires will be achieved...

    Hi charlyIII, & BPL,
    As I understand it, USA has a system where "the keys to a house are handed back to the bank (mortgage holder) and that debt is "forgiven" - such DOES NOT APPLY in Australia, a debt is a debt and must be repaid in full or suffer the consequences of being an "un-discharged bankrupt" and associated constraints on your legal activities...

    On that premise, and assuming a desire to continue to live in your presently mortgaged premises, and considering the layoffs that Australia is experiencing, with more to follow, - paying off debts, (the household mortgage), has merit...

    Elsewhere I advocated buying productive land (mine, agriculture water and so on) - Lifes' demands are multi-faceted and cannot be expressed effectively in a single topic, so to expect a narrative to be restricted to boats is difficult, to put it plainly/simply? - - I sort of miss the open-ness of "Frosty's drivel thread" of 4 years ago? and the free flowing discourse that was then allowed... and the discussion "live", would be conducted over 3 or more threads, leaving the late follower totally confused and unable to follow the flow of the conversation... - I am getting too old (lazy? hazy?) for that I think...
    I do not use credit for fiscal advantage, and am not in debt... and I do not have much money, living on the Veterans pension is almost a "hand to mouth existence" but I live quite well in a careful and comfortable lifestyle...
    176809
     
  11. Frosty

    Frosty Previous Member

    First thing Suzie Orman says to people in debt is pay it off. If you have cash earning zero even a child can see that paying off a debt even if it is as low as 2.5 is better.

    Its some weird outlook on life expecting inflation for means of wealth. It maybe what governments use but YOU are not allowed to get 16 trillion in debt.

    This is some example in a book suggesting what would happen if---it is not a real financial tractic as a way for a common familly.
     
  12. groper
    Joined: Jun 2011
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    groper Senior Member

    Ok frosty consider this, ill try to be as typical of an australian family as possible.

    Lets say a working family has $4000 per month after tax income (about average here).

    They have a mortgage to the bank on their home for $300k (again, quite average)

    At current interest rates here (higher than the most of the rest of the world), the interest only component of their loan is $1500 per month. To pay principal and interest means about $2000 per month, and they will own their home outright in about 25years from now, but they are out of pocket $500 per month in *todays* money to accomplish this, and will not have any disposable income to do anything else because they are paying as much as they can afford with their income and living expenses etc.

    Now if the same family, instead of paying down their loan, simply paid the interest only component of the loan $ 1500 per month. Then they borrowed some MORE money and bought a second home as investment property, and combined with rental income, used the $500 left over in their budget to pay the second mortgage including insurances and what not. Now the family has roughly twice the debt, but owns 2 properties instead of 1, and is costing them roughly the same amount per month.

    Now we go through a period of massive inflation... their homes have doubled in value in 7 -10 years (has happened here in the past) and rental prices have increased along with everything else because of all the damn money printing...

    so in the first instance, the first family has paid down their principal by about 20% so they now owe the bank $240k and own a property worth around $700k, thus they have a net worth of around $460k.

    In the second instance, the second family didnt pay down any of their mortgages, so they still owe the bank $300k on each property, thus are $600k in debt. But they own 2 properties, so they have property now worth $1,400,000 and thus a net worth of $800k.

    So why pay down debt, in a time where there is massive money printing, and thus an impending high inflation period... which family do you think made the right choice, the one who chose to pay down debt, or the *childish* family who used debt as a hedge against inflation?
     
  13. Frosty

    Frosty Previous Member

    http://www.dailymail.co.uk/news/art...es-How-million-Britons-sitting-time-bomb.html


    Only a fool would take an interest only mortgage when thats all they could afford when interest is on the floor . The outcome it is inevitable and by law you can not just increase rent. Been there done this

    There is only one way for interest now and it isn't down.

    Proving my point you can only afford it when you have enough money.

    Gambling that house prices will go up from here when no one can afford one let alone 2? ----your a brave man.
     
  14. Manie B
    Joined: Sep 2006
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    Location: Cape Town South Africa

    Manie B Senior Member

    sorry but you are very very wrong
    for the first 10 years virtually 98% of you repayment is INTEREST
    so they do not have the $500 "extra" to start with

    My local customers built anywhere from 10 to 100 houses at the same time before 2008. We constantly watch the property market worldwide, my BIG customers built half of Dubai, so please belive me funding ANYTHING with credit will get you into trouble and that is where the world is now. The credit bubble has not reached the end of its implosion yet, the worst is still to come.

    Worldwide now, old folks cant afford to live in the houses that they paid off years ago, simply because of general rising costs. They spent their life "servicing" loans and bending over backwards to the banks, now they have a house that they cant afford and cant sell.
     

  15. michael pierzga
    Joined: Dec 2008
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    Location: spain

    michael pierzga Senior Member

    Gee...credit for your home purchase is common sense. Who has 300 grand laying around and everyone needs a place to live. The present crisis has nothing to do with this. In modern times credit is used for quality of life, consumerism, purchases.
    Average Joe needs a new fishing skiff and budgets 15 grand cash . He visits the dealer and falls in love with a 100 grand fishing skiff, then buys on credit. Are you telling me that he took on this fishing skiff debt as a hedge against inflationary monetary policy ?
     
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