living in a gilded cage
January 25, 2008 7:09 AM   Subscribe


 

I love the idea of debtor's prison personally.

I picture an entire block of my ex girlfriends finally understanding why I rolled my eyes when they bought the same shirt in four different shades of purple.

They're fucking purple!
posted by Bathtub Bobsled at 7:18 AM on January 25, 2008 [2 favorites]


By the end of 2008, anyone who purchased between 2004 and 2007 will be underwater.

That's patently ridiculous. While many people bought houses on ARMs they couldn't afford, many people also bought with fixed mortgages that they could.
posted by sugarfish at 7:23 AM on January 25, 2008


A return to debtors prisons would help poor people in at least five ways: 1) increasing workforce participation; 2) increasing personal responsibility; 3) making it easier for the poor to climb the economic ladder through entrepreneurship; 4) reintroduction of the virtues which have proven the only reliable way of the poor to leave poverty; 5) making credit more readily available.

You can't be fucking serious. Next you'll be telling me that you think we should inherit debt from our parents. What's next? Fucking peerage?
posted by Afroblanco at 7:24 AM on January 25, 2008 [2 favorites]


Uh ... what does that second link from cfo.com have to do with the others? The only thing I can see in common is the fact that the title of the article is "Debtors Prison?" The byline is "Researchers say too little equity may breed myopia in managers." Er, what? Could you maybe connect the dots for me?
posted by krinklyfig at 7:29 AM on January 25, 2008 [3 favorites]


Where is that quote from, Afroblanco? I get the feeling I'm reading entirely different links in a parallel universe.
posted by krinklyfig at 7:32 AM on January 25, 2008


That quote is from the ' link in the FPP. Hidden between the "America" link and the "s" link, which apparently go to the same places.

Read here.
posted by Afroblanco at 7:37 AM on January 25, 2008


You know "slavery" has really become a loaded term in recent years, but . . .
posted by ND¢ at 7:38 AM on January 25, 2008 [3 favorites]


Afroblanco writes "That quote is from the ' link in the FPP. Hidden between the "America" link and the "s" link, which apparently go to the same places."

Really? What a PITA.
posted by krinklyfig at 7:39 AM on January 25, 2008 [4 favorites]


Also, the site that hosts the piece that I quoted is apparently some lawyer's website. It appears that he takes Visa and Mastercard. ACT NOW!!!!
posted by Afroblanco at 7:39 AM on January 25, 2008


Where is that quote from, Afroblanco? I get the feeling I'm reading entirely different links in a parallel universe.

Um, maybe the second link
posted by delmoi at 7:39 AM on January 25, 2008


If you break down the words in "child labor" you get "child" and "labor". So, if you are against child labor, which of those don't you like? Labor or children? Cause I for one like them both.
posted by ND¢ at 7:42 AM on January 25, 2008 [2 favorites]


Today’s seller refinanced this property in July of 2005 for $787,000 taking out a whopping $350,500 cash.That tells the story. When I refinanced to to a fixed rate, the bank asking my mortgage broker if, since my credit was good, if I was *absolutely sure* I didn't want to take any money out. As if I were eccentric for not using my house as an ATM. No wonder people are in a fix now.
posted by QuietDesperation at 7:42 AM on January 25, 2008


I love how all of the responsibility is on these people who took out their equity in cash and none at all is on the lenders who gave credit without taking a picosecond to find out if these loans could be repaid.

Every time I go to an ATM for my bank, you know what I see? A "get the money out of your house" commercial for a home equity line of credit.
posted by absalom at 7:45 AM on January 25, 2008


A return to debtors prisons would help poor people in at least five ways

No offense intended: This is an interesting subject, but a poor FPP in which it is framed.

Max Weber's Protestant Ethic and the Spirit of Capitalism is probably the best criticism of this Ron Paulist mindset. Weber explains how Protestantism and Calvinism set the values of work, money and worthiness, which later American society rather transparently adopts into its Constitution.

There's so much more to this issue than just foreclosures.
posted by Blazecock Pileon at 7:46 AM on January 25, 2008 [3 favorites]


Today's probate system is costly and inefficient. Wives can inherit property, daughters can inherit property, even second sons can inherit property instead of joining the clergy or going to sea. Now with a simplified system such as primogeniture . . .
posted by ND¢ at 7:48 AM on January 25, 2008 [7 favorites]


Anybody who's against child labor obviously doesn't know the real truth about child labor laws. They're silly and outdated! In the good old days, kids as young as 5 could work as they please, from textile factories to iron smelts!
posted by Afroblanco at 7:50 AM on January 25, 2008 [2 favorites]


"Are there no prisons? And the Union workhouses; are they still in operation?"
posted by XQUZYPHYR at 8:01 AM on January 25, 2008 [6 favorites]


Generally speaking, I'm against the idea of debtor's prisons for society. I just want them available in my personal circle of friends. The next time my girlfriend gets on my case about being the last man in Los Angeles without a car or a cell phone (neither of which I would want, even if they were entirely free), I can narc on her for having $70k in debt that she gained by insisting on pursuing a lifestyle that she can't possibly afford, and that she has no plan for paying.

That'd make for a quick end to that conversation.
posted by Parasite Unseen at 8:10 AM on January 25, 2008 [2 favorites]


Parasite Unseen: If you plan on staying with this girl any length of time, or even marrying her, you might want to check some of that schadenfreude before you end working to clear half of that debt yourself.
posted by absalom at 8:21 AM on January 25, 2008


I'm of several minds on the real estate market trouble and the resulting effect on home buyers.

On one hand, I believe in personal responsibility and that the individual is on the hook for their commitments. Made a second mortgage to remodel? Got the low interest ARM with bubble payment? You assumed the risk, now you suffer the downside. So sorry for you, but it's your own damn fault.

On the other hand, the mortgage & real estate industry creating the environment to ensare unqualified people into debts there was no realistic way for them to handle. The news is full of unscrupulous lenders wrecking peoples lives. The ethics of the lending and real estate people are the problem.

On the gripping hand, as painful as it is to watch and for some to endure, this is natural way of things. No one is really to blame and as has happened countless times before, society learns from mistakes, adjusts, and moves forward, slightly improved. New mistakes will occur, it will seem traumatic and world-shaking, but in the end, this will pass as a footnote in a history book.

I can't decide which I'd argue at a cocktail party though...
posted by Argyle at 8:27 AM on January 25, 2008


...society learns from mistakes, adjusts, and moves forward, slightly improved.

Care to lay a bet on that? I feel pretty confident that the only lesson the lending industry will take from this is to come up with even more onerous and opaque financial products to throw at people.
posted by Thorzdad at 8:38 AM on January 25, 2008 [2 favorites]


Generally speaking, I'm against the idea of debtor's prisons for society. I just want them available in my personal circle of friends. The next time my girlfriend gets on my case about being the last man in Los Angeles without a car or a cell phone (neither of which I would want, even if they were entirely free), I can narc on her for having $70k in debt that she gained by insisting on pursuing a lifestyle that she can't possibly afford, and that she has no plan for paying.

First of all, 'narc'? You're not using that word properly. Secondly, you can't ring up $70k in debt using a cellphone. Plus, are you paying your girlfriend for chauffeuring you around as I'm sure she's doing? Perhaps if you did, she'd be able to get out of debt quicker.
posted by delmoi at 8:43 AM on January 25, 2008 [1 favorite]


I'm glad there aren't anymore debtor's prisons. I probably would have ended up in one in my twenties, and would never have been able to pull myself into the blissful debt-free state I live in now.

Debt: never again.
posted by malaprohibita at 8:45 AM on January 25, 2008 [2 favorites]


ND¢ : You know "slavery" has really become a loaded term in recent years, but . . .

Well I'm putting my foot down! I say 'no' to modern slavery! It's an abhorrent practice that degrades everyone involved.

Now, I must go. I have to pull one of my indentured servants from the fields to draw me a bath.
posted by quin at 8:46 AM on January 25, 2008


Here is the thing about personal responsibility. You wouldn't say to a four year old "Sorry, you signed that piece of paper, now you have to be responsible for what it said." But you think that you can do it for some of these people who signed these mortgages? There is this fallacy that we base a lot of our philosophy as a nation on (like this whole democracy thing) that everyone is equal. Guess what? Big shocker coming. Spoiler alert. We're not. 60% of this country are sub-literate morons who should not be allowed to vote, handle their own finances or reproduce. They come in all shapes, all sizes, all races, all religions, all IQ levels and all classes. Slightly more intelligent sub-literate morons then take advantage of those that are dumber than them, and are in turn taken advantage of by those slightly smarter, until you get to people with a level of what I will call "intelligence" for lack of a better word, that allows them to be capable of making decisions in their own interests and being responsible for their mistakes. The failure is not on the part of those that signed those mortgages, because they didn't understand them. They can barely understand the weekly TV section of the newspaper enough to be able to be sure to be there when Dancing With the Stars comes on. To say to those people "Well, you made your bed, now you have to lie in it." makes about as much sense as dangling a shiny set of keys in front of a baby and then once the baby takes them expecting it to take some personal responsibility and take over the car payments. Make these people suffer or not, it makes little difference in the end, but don't try to justify it by saying that they have to "take personal responsibility" because it is absurd. The sooner we get over this ridiculous notion that "all men are created equal" and you allow myself and my brethren to start ruling over you in a benevolent dictatorship, the better.
posted by ND¢ at 8:47 AM on January 25, 2008 [11 favorites]


"We have now learned, that rashness and imprudence will not be deterred from taking credit; let us try whether fraud and avarice may be more easily restrained from giving it."


The time has come, in other words, for creditors' prisons.

There are many fewer of them, so fewer and smaller prisons will suffice, and can easily be paid for from the confiscated assets of the imprisoned. And why be constrained by the quaint 18th century niceties of the Constitution from making the penalties retroactive, as they so clearly need to be at the present moment? Bush's prosecutions of contributors to Islamic charities have shown how easily those may be dispensed with.
posted by jamjam at 8:53 AM on January 25, 2008 [8 favorites]


On one hand, I believe in personal responsibility and that the individual is on the hook for their commitments. Made a second mortgage to remodel? Got the low interest ARM with bubble payment? You assumed the risk, now you suffer the downside. So sorry for you, but it's your own damn fault.

Sure, but only if the same standard is applied to corporations as well. Issued a bunch of risky ninja loans and now more of them are defaulting than your model indicated? Tough, go insolvent. Purchased a bunch of collateralized loans without doing sufficient dilligence on their quality, and now they're suddenly worthless? Tough, go insolvent. Issued AAA ratings for a bunch of bonds made from subprime loans, and now you have no customers because noone trusts your ratings? Tough, go insolvent.

The only problem I see with so many purchasers going underwater is that a proportional number of issuers aren't eating the loss.
posted by ceribus peribus at 8:54 AM on January 25, 2008 [4 favorites]


@ND¢:
I'm not sure if that was a troll or not, but AMEN, brother!
posted by ArgentCorvid at 9:03 AM on January 25, 2008


I was musing recently on how asset bubbles have become the norm now in the US. If you look at the time frame of the overall bubble - first in tech stocks, which magically morphed into a real-estate bubble, it becomes clear that there are many people who have spent their entire professional lives in a bubble economy. Since bubbles are now the norm, about the only important financial question becomes "where will the next bubble be?" I'm guessing gold, but I'm usually dead wrong in all my financial predictions, so that should be your signal to sell gold if you have any.
posted by telstar at 9:13 AM on January 25, 2008


60% of this country are sub-literate morons who should not be allowed to vote, handle their own finances or reproduce.

which 60%?
posted by pyramid termite at 9:16 AM on January 25, 2008 [1 favorite]


Secondly, you can't ring up $70k in debt using a cellphone. Plus, are you paying your girlfriend for chauffeuring you around as I'm sure she's doing? Perhaps if you did, she'd be able to get out of debt quicker.

You can't ring up $70k in debt using a cellphone, but you can ring up $70k in debt by making numerous purchases that you don't need, and a cell phone is certainly one of them in my case. I'd say that in the course of a month, she drives the two of us maybe three places, which is more than offset financially by the fact that she hasn't paid for anything that we've done as a couple in a very long time.

I'm a walker, or (on days like today, when the weather is wet) a bus rider. Living near a transportation hub helps. On an average day, I spend between one and three hours walking and from work. When I first moved to Los Angeles, and I worked farther away, I spent six hours a day walking to and from work, starting at 3 AM five days a week. This is worth it to me, because I believe in living below my means (although I'm not as good about this in some areas as I am in others; I can't bring myself to go cheap on food, for example). I have a fear of debt that I'll admit borders on phobia (it's worth noting that the times in my life where medical emergencies forced me into even minor debt corresponded with periods of depression), so the notion of spending the money necessary to buy and maintain a car while living in a city that has as advanced a network of public transportation options as Los Angeles doesn't seem like a good choice for me.

I earn a salary slightly above the national average, and with what I end up having to spend on bare necessities every month, I'm amazed and impressed that people on the poor end of the Bell Curve can get by at all. Looking towards the other end of the spectrum, I'm one of the lowest earners in my social circle, but I have friends who earn three times what I do who have negative financial net worth. This suggests to me that spending has gotten way, way out of control, and the idea that someone is either crazy or not really trying to be a responsible adult because they refuse to spend themselves into a hole buying things that they don't really need is precisely the sort of thing that helped foster this current financial crisis.
posted by Parasite Unseen at 9:17 AM on January 25, 2008


"I profess, in the sincerity of my heart, that I have not the least personal interest in endeavouring to promote this necessary work, having no other motive than the publick good of my country, by advancing our trade, providing for infants, relieving the poor, and giving some pleasure to the rich."
posted by blucevalo at 9:19 AM on January 25, 2008


which 60%?

I think that the other 40% (as well as the 10% of us that should rule over the rest of you) can be identified through some sort of imperial examination system.
posted by ND¢ at 9:24 AM on January 25, 2008


myself and my brethren

That sounds so inbred!
posted by telstar at 9:40 AM on January 25, 2008


the point of the second link is that U.S. business are highly leveraged in many of the same ways as some individuals in terms of equity/debt ratio: every merger and aquisition that was trumpeted in business pages over the last 12 years has floated on an ocean of debt in part issued on the basis of surely inflated future "profits." sub-prime mortgages and the like are really just symptomatic of a much deeper problem.

and now those companies are stuck in their own 'debtors prisons' unable to invest because they are making huge payments on the loans taken to create the corporation. this is why chrysler is going to die (or turn into a nameplate on a korean or chinese vehicle.)
posted by geos at 9:44 AM on January 25, 2008


This is an appropriate post to appear on the anniversary of Shay's Rebellion, in 1787, ever since, according to Howard Zinn, the country has gone down the crapper.
posted by kozad at 9:48 AM on January 25, 2008 [1 favorite]


Bad at finances != Idiocy

I hate when people judge someone's worth based solely on their ability to handle finances responsibly. Certainly, that is an important skill to have in life, but let us not forget all of those great men and women of history who were amazingly talented in areas outside of finances. You can just insert your favorite historical personality here - I'll go with Disraeli who never bought anything he could afford. And of course Jefferson couldn't stay solvent even with slaves. I mean, what were his overheads?
posted by boubelium at 9:49 AM on January 25, 2008 [2 favorites]


I earn a salary slightly above the national average, and with what I end up having to spend on bare necessities every month, I'm amazed and impressed that people on the poor end of the Bell Curve can get by at all.

Me too. And although my wife and I deplore credit card debt, we've still been forced to pile up nearly two thousand dollars in credit debt due to emergency medical expenses.

For all the heart-warming talk of how the mouth-breathers of the world are just too plain stupid to be held responsible for their own financial decisions, the reality is bad stuff just happens to people sometimes: Serious medical problems afflict people who can't afford health care, lying assholes conspire with corrupt judges to steal their business partners' assets, hot water heaters go kaput and have to be replaced, elderly family members need someone to care for them, and on and on.

It's not just about intelligence. Fundamentally, it's just as much about opportunity. I've known privileged people with the common sense, moral judgment and intellectual capacity of five year olds (although you'll seldom find them doubting their own capacities in these areas) who will, like it or not, never have to worry about the financial consequences of their actions because of the circumstances they found themselves in by virtue of birth.

Oftentimes, the privileged honestly seem to think it's their innate acumen that makes it possible for them to succeed while the less fortunate fall behind, but just as often, it's because they start the race at the finish line, while the rest of us haven't even been allowed to set foot on the race track yet.

And a little more on point: Our system is rigged to require everyone to go into debt, because market prices in America are set assuming the availability of easy credit (this wasn't true in my grandparents' day, when most homeowners bought their property outright, nor is it true in most developing countries), and in order to have a decent credit score, you have to establish credit history. Basically, the costs of goods and services have been inflated well beyond what any rational market would bear for the average consumer, due to the availability of easy credit. That's the core problem. Not irresponsible borrowing.
posted by saulgoodman at 9:53 AM on January 25, 2008 [23 favorites]


Every time I go to an ATM for my bank, you know what I see? A "get the money out of your house" commercial for a home equity line of credit.

I worked for a medium-sized software company a couple of decades ago where we had an all-hands meeting because the co. president's golf-buddy neighbor, a regional manager for a bank, wanted to send a couple of his flunkies to try to sell us those. 30 minutes for their presentation multiplied by, I dunno, eighty or so people in attendance...I still shake my head remembering it.
posted by pax digita at 9:54 AM on January 25, 2008


I think that the other 40% (as well as the 10% of us that should rule over the rest of you) can be identified through some sort of imperial examination system.

silly me - i thought we'd decide it with guns and lots of explosives
posted by pyramid termite at 10:00 AM on January 25, 2008


I feel pretty confident that the only lesson the lending industry will take from this is to come up with even more onerous and opaque financial products to throw at people.

No way -- unless, of course, the government bails out all of those bad mortgages and basically validates their whole business model. But if we just let the whole damn thing burn, i.e. let the foreclosures happen, all those lenders will be taking a bath, too. The banks and mortgage companies who wrote all those subprimes are going to get stuck with a ton of houses that they're going to have to unload for a lot less than the payments they were expecting to get. They're the ones who essentially paid $350,000 for a $100,000 house, in some cases.

It's only if you start bailing out all the people who got into loans they didn't (but should have!) read the fine print of, that you signal to the banks that more of this lunacy would be a good idea.

In general, I have no sympathy for anyone who signed up for an ARM and took a fat wad of cash (or a bigger home) that they couldn't afford. Hope you enjoyed it; now get the hell out so someone who wasn't a moron can buy it. Life is full of situations where you have to weigh an immediate gain versus a long-term risk -- we throw people in jail for making bad calls in other circumstances all the time. Anyone who says they were "taken advantage of" by mortgage advertisements is obviously too stupid to be allowed to participate fully in society.

Since I kind of like the concept of egalitarianism, or rather because I think the alternatives are far worse ("I'm really awfully glad I'm a Beta..."), I don't have a problem telling people to sleep in the bed they've made.
posted by Kadin2048 at 10:00 AM on January 25, 2008


I hate when people judge someone's worth based solely on their ability to handle finances responsibly.

How hard is it to live within your means?

People who find themselves in debt because of medical problems get my sympathy.

People who are in debt because of overreaching and overspending? Not so much.

It's called a checkbook. Learn to balance it.
posted by Afroblanco at 10:00 AM on January 25, 2008


People who are in debt because of overreaching and overspending? Not so much.

It's an interesting paradox on which America is based: The economy is built atop mechanisms that push consumers into spending, while simultaneously punishing citizens who cannot keep up with unrealistic expectations for a standard of living, and ostracizing the rest who choose not to play the game.
posted by Blazecock Pileon at 10:04 AM on January 25, 2008 [13 favorites]


I think we need a bit more info on the house refi before we go condemning anyone. We know they pulled 350k out of their equity, but not what they did with it. If they sank it back into the current house, they did a mighty bad job of it. If they invested in a their own company or the market, they might be sitting on plenty of cash to pay off the remaining 200k after they sell the place. Or maybe they used it for a new house, and will make up the 200k by refinancing that one. Or maybe they spent it on hookers and blow. My point is, unless we know exactly what happened to the equity, it makes no sense to hold this up as an example of all that is wrong with the world today.
posted by Crash at 10:08 AM on January 25, 2008


i'm not sure what the societal benefits of debtor's prisons would be, anyway - if history is any guide, they would not prevent financial crashes, bubbles or panics

i suspect it's simply an excuse for some people to feel morally superior over others

i don't have a great deal of sympathy for those who borrow beyond their means - nor do i have sympathy for those who make those loans

they go broke and life goes on

and if the country as a whole goes broke, maybe that will teach us what our real priorities ought to be - i think we've forgotten
posted by pyramid termite at 10:11 AM on January 25, 2008 [1 favorite]


Kadin2048, I don't think you fully grasp what's going on. The banks packaged the loans into securities, which were then sold to investment banks, who repackaged them as CDOs and sold them far and wide. That's clearly an oversimplification, but my point is the bank that issued the loan is no longer holding it. Your retirement fund might be, your mutual fund might be, but I don't think those are the people you want to punish.
posted by Crash at 10:21 AM on January 25, 2008


could we put the current administration in prison? we had no deficit till Bush took over. Now it is immense.

Not to worry. We can not even house ourcriminals so certainly we are noting to house those in debt.

I am totally opposed to debters' prisons. The only good thing that ever came of them are some fine novels byu Charles Dickens
posted by Postroad at 10:33 AM on January 25, 2008


saulgoodman: For all the heart-warming talk of how the mouth-breathers of the world are just too plain stupid to be held responsible for their own financial decisions, the reality is bad stuff just happens to people sometimes: Serious medical problems afflict people who can't afford health care, lying assholes conspire with corrupt judges to steal their business partners' assets, hot water heaters go kaput and have to be replaced, elderly family members need someone to care for them, and on and on.

Afroblanco: How hard is it to live within your means?

People who find themselves in debt because of medical problems get my sympathy.

People who are in debt because of overreaching and overspending? Not so much.

It's called a checkbook. Learn to balance it.


I'm with saulgoodman on this one, who explains very eloquently why debt isn't an accurate measure of someone's worth to society. I would add, in fact, that it's not only the clear-cut cases of illegal judicial corruption, unexpected health emergencies, or strange occurences that lead people ineluctably into debt. It's easy to tell people to balance their checkbook, but come on, checks aren't even accepted most places anymore, and who actually puts debit or credit card purchases in a ledger? In addition to the payments that this society mandates, from apartments to phones on downwards, and that one has to keep in mind and keep up with carefully to avoid mistakes.

I'm no good at this stuff. My wife, thankfully, does most of the money management.

Look, it's patently obvious if we take a little perspective on the issue that living in the world as it is at this moment requires more organizational, administrative, and clerical skill than it's ever required in any society that's ever existed before on the face of the earth. Even getting through a single day in the civilized world now requires the ability to navigate phone systems, public transit or large machinery systems (like cars), careful planning, management of multiple monetary streams in order to keep one's necessities flowing, and a dozen other little skills that are a load on our thought processes. Yes, these things all seem like small things to us, mainly because we concentrate so much effort on making them seem routine, but they're not small, simple things; they're the things we spend 95% of our time doing. Anyone who doesn't manage to become an expert in all of them is at risk of losing a job, missing a payment, hurting their credit. Heck, it's hard enough to get a good job in the first place. But it's not enough to just maintain: there are tiny ways that your credit can get hit, tiny ways that you can end up owing money, tiny ways that you can end up harming yourself in some way.

I have about $80,000 in student loan debt. My credit has been hurt by a dozen lost-book fines from libraries that I was too disorganized to take care of, by a few lost movies from movie-rental places, by charges for electric and gas and water services at apartments because I moved into them and promptly forgot to call the electric company about setting up service. Five years ago, when I moved to Boston and set up my land-line for my apartment, Verizon inexplicably mailed me a box with two modems and two hundred feet of cable in it. I called them and asked why; they told me to mail it back, or I'd be charged. Of course I forgot; it ended up costing me a few hundred dollars years later.

I'm lucky. I've had the chance to take care of a lot of these things, and I have a good partner. Moreover, I'm from a middle-class family, I went to school, I'm relatively adept at certain mechanical tasks and at talking to people. I pity the people who don't have these things to fall back on, who happen to live in the wrong neighborhood and won't be able to buy a house because of it, who happen to have started off with less than I did. For me, I took some wrong steps, and it wasn't tough for me to correct them with time. For them, for people who are in a situation where a hit on their credit or a late fee or a missed mortgage payment or rent payment or phone payment or whatever is deadly?

They're not always to blame. The world is set up in a funky way. I think a big part of it is the fact that the United States economy is so largely composed of secondary markets.
posted by koeselitz at 10:38 AM on January 25, 2008 [10 favorites]


...now get the hell out so someone who wasn't a moron can buy it.

Yes, a fundamental misunderstanding about foreclosures. You see, the property gets distressed as the finances of the owner deteriorate. It takes time to get them out, and once out, the sale may be delayed as other houses in the neighborhood are also deteriorating (these things cluster geographically). Now, there are no morons who want to buy and the whole neighborhood has deteriorated to a blight, and you, dear taxpayer, get to pick up part of the cost of this in ways so numerous that I won't bother to list them (decreased taxbase for one, though). And I guarantee it will be greater than the cost of bailing out the struggling owners. But, please, let you ideology stand in the way of a rational solution.
posted by Mental Wimp at 10:43 AM on January 25, 2008


It's easy to tell people to balance their checkbook, but come on, checks aren't even accepted most places anymore, and who actually puts debit or credit card purchases in a ledger?

By checkbook, I meant your personal budget. And you don't need to enter your receipts into a ledger. It isn't that hard to estimate how much money you can spend.

I have 1 checking account, 1 savings account, and one credit card. For all 3 of these, I can check my balance online at any time. The website for my CC is accurate to within a few days. The website for my bank is accurate to the minute. Keeping a balanced budget is actually easier than ever, since these websites do all the hard work for you.

As far as budgeting goes, you don't even have to try very hard. Figure out what your recurring expenses are. Figure out what days they come due, and thus what pay periods they fall into. Take a guess as to what your average expenditures are for day-to-day crap. Overestimate if need be. If you have any left over, save it. If you fall short, then it's time to cut back - eat out less, use fewer cabs, that sort of thing. Before you make a large purchase, log on to the websites for your bank and credit card, and make sure you can afford it.

Follow this formula and you will never go wrong. You may even start saving some money.
posted by Afroblanco at 10:56 AM on January 25, 2008 [1 favorite]


we had no deficit till Bush took over. Now it is immense.

posted by Postroad


You're either very stupid, or very young. Clinton had some surplus at the end of his administration, but Bush is hardly the first to deficit spend. He just happens to be a lot better at it.
posted by Eekacat at 10:56 AM on January 25, 2008


By the way, sometimes I think it's odd that we simply assume that everyone can do these things, and then punish them when they fail. Everyone, for example, is expected to be able to drive a car, and there's a simple enough test to pass to get to do so, but anyone who's a sane and functional human being is expected to be able to do so. We give no thought to the fact that it takes so very many small motor skills to manipulate such a large and powerful vehicle, that it's so very dangerous, and we assume from the beginning that anybody who can walk and talk and form a sentence ought to be able to manipulate a two-ton machine that can kill in an instant and requires precise care to avoid fatality or harm; and if it turns out that they can't, well, we have the police pull them over and ticket them (huge fines, by the way; $400 in court and other fees the last time I went to court for doing 7 mph over the limit in a construction zone) until they get their licenses taken away. There's a reason I ride the bus-- even if I can drive just fine, I don't know that anybody else can, and I don't blame them for it-- it's not exactly an essentially human skill.
posted by koeselitz at 10:57 AM on January 25, 2008 [3 favorites]


No way -- unless, of course, the government bails out all of those bad mortgages and basically validates their whole business model.

The government is validating it for others, with money, that is. Why help the poor?
posted by juiceCake at 11:00 AM on January 25, 2008


Afroblanco: As far as budgeting goes, you don't even have to try very hard.

It may not seem so to you. It's a skill that comes naturally to you, and that you've been fortunate enough to have had the opportunity to develop and work on. Not all of us are like that. Yes, I've been lucky too, and I've learned a lot of that stuff myself, but it wasn't before muddling through it and learning it the hard way. I was lucky; I learned these things in a way that didn't leave me destitute. But that's only because I was lucky, not because I was smart.

The people that are neither are punished.
posted by koeselitz at 11:01 AM on January 25, 2008 [2 favorites]


Today’s seller refinanced this property in July of 2005 for $787,000 taking out a whopping $350,500 cash

So being in their home is exactly like being in prison. Except for, you know, being a private house. And having $350,500 cash to spend where they wanted.
posted by Nelson at 11:08 AM on January 25, 2008


Afroblanco - few people are ever taught that formula.

I've often wondered why there are no REAL life skills classes taught in high school - there should be a graduation requirement about credit cards, interest rates, balancing checkbooks, etc.
posted by agregoli at 11:11 AM on January 25, 2008 [2 favorites]


Yeah, I suppose that some skills come easier to some than others. I've never had a problem living within my means, but that's only because I live with an almost abnormal fear of debt. My parents never knew how to manage their money, and it really fucked up our home life. So I guess I learned from negative example.
posted by Afroblanco at 11:13 AM on January 25, 2008


Wait, what? Dating for Debtors?
posted by Brocktoon at 11:17 AM on January 25, 2008


Your retirement fund might be, your mutual fund might be, but I don't think those are the people you want to punish.

Well, actually I do think we need to punish them (in the sense of not saving them from themselves) -- at least the ones who bought securities backed by crappy mortgages, and were only AAA-rated because somebody had taken out an insurance policy on them. While there's certainly a lot of blame to go around, the fund managers and traders who bought all that mortgage-backed paper should get a lot of heat from the people whose retirements get dinged. There seems to have been an obvious failure of due diligence on the fund managers' part, if they were actually tasked to produce low-risk investments.

Long term, it's probably not a terrible idea to put a stop to the ratings inflation via insurance scam (making dog-turd paper into AAA by taking out a policy on it, which protects you if a small percentage of the loans go bad, but not against a major market correction), or at least clarify that such ratings do not make it "low risk." And I wouldn't be totally opposed to just eliminating the mortgage securitization business altogether, since it seems to lead to a disconnect between the actual loan-writing and those holding the bag.

But I still don't think it justifies a bailout. If you were close to retirement and had lots of money in funds that were exposed to the subprime collapse, either you misallocated (a synonym for 'got greedy'), or the person you were trusting to do the job for you didn't do it. In either case I don't think it's the government's job to fix the problem, except insofar as it provides a venue (the court system) for trying to recover the losses from those responsible for the actual mismanagement.

You see, the property gets distressed as the finances of the owner deteriorate. It takes time to get them out, and once out, the sale may be delayed as other houses in the neighborhood are also deteriorating (these things cluster geographically). Now, there are no morons who want to buy and the whole neighborhood has deteriorated to a blight, and you, dear taxpayer, get to pick up part of the cost of this in ways so numerous that I won't bother to list them (decreased taxbase for one, though). And I guarantee it will be greater than the cost of bailing out the struggling owners.

While this isn't a bad point, I think it mistakes the short term versus the long term. By stopping foreclosures you're both rewarding financial irresponsibility and keeping the housing prices artificially inflated. Both of those strike me as incredibly bad ideas, particularly the former. I'm not even sure how you'd begin to quantify the cost of it, and to be frank I'm not sure I'm even interested. I could think of lots of things that are fiscally expedient and would raise lots of revenue, but are also inherently unjust because they reward irresponsible behaviors. This strikes me as being one of those situations. The "rational solution" in the long run seems quite obvious: reward responsible, socially constructive behavior, and punish (or at least don't reward) irresponsibility and greed.

We need to stop propping up the status quo simply in order to avoid pain. The real estate market, and the economy generally, is pretty rotten, and slathering a few more layers of gilt on the outside isn't going to fix anything. We're going to have to let quite a few people who've been irresponsible lose their shirts, and learn as a nation -- both on an individual level, and a governmental one in terms of revenue -- to either do more with less, or live with less.
posted by Kadin2048 at 11:37 AM on January 25, 2008


Modern finance theory posits that, all things being equal, debt is superior to equity as a source of capital.

Heh. That's not what modern finance theory says. At least not unequivocally.
posted by Kwantsar at 12:57 PM on January 25, 2008


Referring to NDc and pyramid termite's little tradeoff up there....

The problem with such tests is that there's many ways to bias them, and even if acceptable at first, there's no way to guarentee they wouldn't become biased in the future.

And still, even if they did find a way to create a perfect measure of intelligence -- or really, of a minimum level of knowledge required to function as a citizen -- even then, it would only be a matter of time before it became an organized system of disenfranchisement. If your opponents children are denied effective education, then they won't know enough to pass the test when they reach the age of majority, and so over time the loop feeds back on itself.
posted by JHarris at 1:49 PM on January 25, 2008


But what we have now is an organized system of disenfranchisement. If your parents are rich then you have good medical care, good nutrition, good eduction, and are therefore intelligent and able to successfully compete in society, making you rich, which means your children . . .

If your parents are poor then you are fucked from day one. Poor medical care, poor nutrition, and you spend (maybe) twelve years in a failing public school where you may learn basic reading skills, but often not. Guess what that leads to? An idiot. This hypothetical person is then unable to function in modern society which, as pointed out earlier, really does require quite a lot of different and pretty high level skill sets to successfully navigate. So our child of poor parents is now poor himself. Class structure then solidifies and we lose generation after generation of would-be Edisons and Einsteins to moronicity.

A better solution would be for a ruling class to run our poor parent's lives for them. Instead of issuing them a paycheck for their labor which they then spend on NASCAR tickets or spinning rims, their labor would purchase them a life created by the ruling class. This ruling class would then make sure that their child is provided with adequate nutrition, health care and education. Then their child has a chance to be tested and it can be determined whether or not he or she can adequately care for him or herself, or if he or she is qualified to be part of the ruling class.

When Andrew Carnegie was asked "You can afford to raise our wages, so why don't you?" he said, I'll tell you why. If I raised your wages, where would they go? They would go to better cuts of meat, to drink, to clothing, to things of the flesh, to things of the body. That's not what the working people need. That's not what this community, Pittsburgh, needs. What it needs are things of the spirit: libraries, concert halls, schools. And you wouldn't pay for that yourselves, so you need me to take it out of your paychecks and give it back to you.

We have taken half-measures with welfare, food stamps, medicare and public education. More has to be done. People complain about a nanny-state, but I want more control and less freedom. The society of 1984 was a pretty damn good one. Freedom is overrated.
posted by ND¢ at 2:10 PM on January 25, 2008


I've often wondered why there are no REAL life skills classes taught in high school - there should be a graduation requirement about credit cards, interest rates, balancing checkbooks, etc.

I'd wager it's because the focus of high schools is to get students into the best college possible, and any student who was taught basic financial skills would know that taking out a student loan that they'll be paying off into their late twenties (or beyond) is really poor financial planning.

One of my friends went to Occidental, and then to Harvard for grad school. He's brilliant, but he did not come from a particularly wealthy family, so enter Sallie Mae. Now he's in his mid-twenties and $100k in the red. That's absurd. No 17 year old is ready to make a financial decision that can put him that deeply in debt, especially not when dealing with pressure from his teachers and family to get into the school with the most academic prestige. The luxury pricing of a college education (accompanied by the myth that such an education is absolutely necessary to be competitive in American society) is one of the greatest scams ever perpetrated on the general public.
posted by Parasite Unseen at 2:35 PM on January 25, 2008 [5 favorites]


If your parents are poor then you are fucked from day one.

This is pretty much true. Even aside from all of your excellent points, if one manages to gain some skills and some rational faculties, to claw out of the abyss of poverty, guess what! Your family is still poor. And that means you will be bailing them out for the rest of your life. Which, in many cases, means you will still be poor no matter what. This is what's happening to me right now, although I was by no means impoverished, just lower-middle class. In other words, fucked for life.
posted by synaesthetichaze at 2:45 PM on January 25, 2008


The key is not to tell them that you have any money.
posted by ND¢ at 2:49 PM on January 25, 2008


I realize we're being sort of tongue-in-cheek with this whole thing, but to be serious for a minute... what are you really supposed to do? You can't get ahead.

My mother has very little income, no higher education, a teenage daughter (my sister), and a 9 year-old boy with Down Syndrome. She's 46 years old, which means in a couple of years she is going to be in the prime healthcare crisis phase of her life. My sister has to go to college, or she'll end up like my mother... which means more dollars. My brother-- I have no idea what will happen to him. Can't even think about it.

Going back a generation, I have 4 grandparents that are all nearing the point at which they will no longer be able to care for themselves. Only one of them has enough money to support herself in some kind of managed-care facility. The whole family is fucked because no one will die. Isn't that the worst thing in the world to think? What do people do in other first world countries? How do they survive? I am the only one who *makes money*; i.e., doesn't blow it all, or use all of my income to service debt.

Metafilter probably isn't the place for this kind of rant, but I'll go ahead and hit "Post Comment" before I think too hard about this.
posted by synaesthetichaze at 3:35 PM on January 25, 2008


The whole family is fucked because no one will die.

Remember that Fear song in the 80's: "Let's have a war so YOU can go die!"

What do people do in other first world countries?

They are communist god-haters who have universal health care.
posted by telstar at 3:56 PM on January 25, 2008


I've often wondered why there are no REAL life skills classes taught in high school - there should be a graduation requirement about credit cards, interest rates, balancing checkbooks, etc.

I see this sort of thing way too often and think, was my High School the *only* one that had these classes? Seriously like my freshman year it was a required class. How to write a check, how to develop a personal budget, understanding compound interest, what's a savings account, a COD, a loan, etc..
That is depressing to think that they might not teach that in a normal highschool class these days.
posted by MrBobaFett at 4:00 PM on January 25, 2008


What I don't get are how many people must be very wealthy. I drive around and think "I do OK, but I cannot afford to live in any of these houses" (waves hand). There are square miles of Seattle that are unaffordable, and my wife and I make closer to six figures than to four by a very healthy margin.

What do all of these people do? The median income in Seattle is $52,000 or some such for a family. The average house price is something stupid, $400,000 or so. To afford that you need to be making $100K a year, assuming you can come up with the $80,000 down.

There are neighborhood upon neighborhood stuffed with $800,000 homes. Are there really that many families making $200K a year (again, assuming that they have $160K to plunk down)? According to recent stats, less than 2% of families make $200K a year.

Politicians, if they were savvy, would do whatever they could to deflate or prevent housing price bubbles. A population that owns its housing is a population with an investment in their communities, who care about local issues.

The desire to own a home is a strong one. It's sad that many people commit financial suicide to sate that desire.
posted by maxwelton at 5:32 PM on January 25, 2008 [1 favorite]


heavy debt load can hurt corporate growth by leading companies to focus too relentlessly on short-term cash flow, thereby losing strategic focus. -second link

i'm woefully terrible and economics and such. really just no mind for it. but i've always believed this to be the obvious shortcoming of capitalism as its practiced,and the root of most of the global economy's unfairness, cruelty, and wastefulness.

that is to say, "duh?"
posted by es_de_bah at 6:05 PM on January 25, 2008


its =it's.
long day, folks.
posted by es_de_bah at 6:06 PM on January 25, 2008


The luxury pricing of a college education (accompanied by the myth that such an education is absolutely necessary to be competitive in American society) is one of the greatest scams ever perpetrated on the general public.

It's not a myth if enough people buy into it.

You get enough people up to their eyeballs in debt to get that college degree, and they end up working for corporations and making hiring rules that require B.A.'s or M.A.'s to get in the front door. In a way, it's not unlike the self-perpetuating hazing rituals many college Greek organizations maintain. "Well, if I had to shave my ass with a butter knife and eat the butt-hairs of my fellow pledges, you better believe you're going to have to do it, too!"
posted by Civil_Disobedient at 6:11 PM on January 25, 2008 [2 favorites]


If your parents are poor then you are fucked from day one. Poor medical care, poor nutrition, and you spend (maybe) twelve years in a failing public school where you may learn basic reading skills, but often not. Guess what that leads to? An idiot.

except that i've known people who never graduated from high school who were intelligent, wise and very much in control of their own lives

i've also known college graduates who couldn't pour piss out of a boot with instructions on the heel - in fact, the much recommended college education people are getting these days seem to make people dumber, not smarter - they come out into the real world with the ability to speak and "relate" well and wade through bureaucratic bullshit (mostly by parroting it) - as far as actual intelligence or problem solving goes, i would sooner ask advice from the fern in the office planter - (and don't get me started on their godawful composition and spelling skills - even when using a computer with a spell checker!)

it's clear to me that all your worship and wonder at the abilities of the "elite" shows a basic ignorance of history - the romans had an elite and yet a close inspection of the decades after augustus reveals that they were as willing to swallow bullshit and wallow in intelligence-slaying denial as anyone - their lives being at stake if they did not do so is hardly any justification of the results and no negation of the fact that they were decadent and utterly unable to come to terms with the problems of their times

the truth is that elites are just as prone to stupidity and error as the "stupid poor" - and unlike systems like ours, where there are many different factions to fight one another to a standstill that keeps them from going into full fledged idiocy, a system based upon the voice of a few elite has little to stop it from going over the deep end if the elite are so minded - it's happened many times

so this magic little plato's republicland never has and never will existed - so sorry to burst your bubble
posted by pyramid termite at 9:30 PM on January 25, 2008


exist ... time to go to bed before the elite make me
posted by pyramid termite at 9:32 PM on January 25, 2008


And a little more on point: Our system is rigged to require everyone to go into debt, because market prices in America are set assuming the availability of easy credit (this wasn't true in my grandparents' day, when most homeowners bought their property outright, nor is it true in most developing countries), and in order to have a decent credit score, you have to establish credit history. Basically, the costs of goods and services have been inflated well beyond what any rational market would bear for the average consumer, due to the availability of easy credit. That's the core problem.

Yep, and this kind of institutionalized debt-slavery is just a small part of the big picture of the ways North American society steals any kind of real choices from its citizens and replaces them with illusory choice based on consumer goods, that encourages passivity and disenfranchisement.

It's not the reason I left Canada originally, but it is one of the biggest reasons that, 20 years later, I haven't gone back.

what are you really supposed to do? You can't get ahead.

I left the country, created a life of my own choosing rather than one chosen for me by others, as much as I was able. It's not a choice that most can reasonably make, though.
posted by stavrosthewonderchicken at 1:26 AM on January 26, 2008


What I don't get are how many people must be very wealthy. I drive around and think "I do OK, but I cannot afford to live in any of these houses" (waves hand).

I've changed my outlook. Flash car? Fancy house? In America these are not signs of wealth, they are signs of debt. Probably massive debt. Families with double-incomes barely-paying-the-interest kind of debt.

Or at least, that outlook is my comfort blanket. Don't take it away from me :-)
posted by -harlequin- at 6:03 PM on January 26, 2008


Plus, are you paying your girlfriend for chauffeuring you around as I'm sure she's doing? Perhaps if you did, she'd be able to get out of debt quicker.

My experience is that Americans (outside of NY) are generally unable to fathom that someone living in a US city without a car can be independent and productive, and not a sponge on others. I am sure that this prejudice is well grounded in life experience of myriad Americans without a car being dependant sponges, "scrubs", whatever, but the stubborn unthinking persistence of the belief and its application to everyone, no exceptions, gets kind of annoying. Everyone needs a car [unquestioned cultural axiom], therefore anyone without one is clearly defective in some way. Some kind of loser. Stay away.
Of course, the axiom is false, and pretty stupid too. But pretty much everyone - smart and dumb alike, subscribes to it. Even a lot of people who think they don't.
posted by -harlequin- at 6:17 PM on January 26, 2008


any student who was taught basic financial skills would know that taking out a student loan that they'll be paying off into their late twenties (or beyond) is really poor financial planning.

You are so very, very wrong that it physically hurts. Student loan debt is the only debt I've ever had, and I haven't regretted it for an instant. My parents sure-as-shit weren't going to pay my way through school. And had I not gone to college, I'd probably still be sad, broke, and living in Missouri.
posted by Afroblanco at 10:22 PM on January 26, 2008


Of course, I did go to a state school in a part of the country where the cost of living is very, very low. Perhaps if I owed $100K+ instead of $30K I'd feel differently.
posted by Afroblanco at 10:50 PM on January 26, 2008


I generally agree, Afroblanco. Student loan debt is "cheap" (low interest), plenty of repayment options, and actually creates the opportunity for you to gain more wealth later.

The real key to getting the most out of education is choosing something that lets you pay off the debt in the first place. I used to do student loan debt collection, and I can't tell you how many people I would talk to who had 75K, or 100K, or 200K of debt for... English? Look, I have nothing against the liberal arts as a discipline, but the way I see it, why am I paying someone 100K when I could go to the library? I get education for things I can't do myself.

Anyway, I am not real big on saddling kids with tons of debt as soon as they enter adulthood, but student loan debt is amazingly manageable. You get 6 years of deferment and 3 years of forbearance for your loan, based on certain criteria. Then you can consolidate, and you *get it back* even if you've used all of your deferment/forbearance up. Most people who actually finish their degrees can handle student loan debt. The recidivist cases were usually the aforementioned astronomical principle types, or folks who never finished.
posted by synaesthetichaze at 8:18 AM on January 27, 2008


The real key to getting the most out of education is choosing something that lets you pay off the debt in the first place.

And I will admit that the prospect of repayment played a part of my career choice. I had wanted to study Anthropology to begin with. Nowadays, I'm glad that I switched to Computer Science.

Since I graduated, I've made it a goal to read all the books that I would have read, had I chosen a less-technical discipline. Five years on, and I'm still going strong.

I don't regret a damn thing.
posted by Afroblanco at 9:17 AM on January 27, 2008


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