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Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum
GLD 457.82+1.3%Jan 23 4:00 PM EST
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To: THE ANT who wrote (45010)1/9/2009 3:45:54 AM
From: Elroy Jetson  Read Replies (1) of 219715
 
Debt is really pernicious. At a minimum it makes companies, consumers, and economies more fragile and less able to cope with shocks.

The advice to past generations to "sit under their own vine and fig tree" while an economic disturbance occurs doesn't work out as well when the land under the vine and fig are heavily mortgaged.

Even without current indebtedness, many people have come to rely upon credit as a savings substitute - as in I don't need six months or more of income in cash equivalents, because I have more than that amount of credit available on my home equity loan. That is until the bank cancels the line of credit just as you need it.

I can easily understand how this has occurred when the majority have a home mortgage. Keeping money in savings makes little sense when the interest rate is so much less than they are paying on their mortgage. Yet it needs to be done for security. The consequences of not having savings is now truly horrible for those who have lost their incomes. I suspect, like the 1930s, this lesson will not be forgotten for the next two generations.

Reagan's grand scheme to lower taxes and pay for the government with debt never created the higher growth his lunatic apostles predicted - which came as no surprise to any economist.
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