DO YOU BELEIVE IN PAYING A DEBT WITH A DEBT

[adrianh]

The banks kill you with fees when you are in the dwang, they are quite happy to shove you deeper and deeper into the dwang hence my unwillingness to use their services. If it was up to me I would put all my money (the little I've got) under my mattress, at least I don't get to pay somebody fees for stashing it or withdrawing it or saving or just looking at it.

[murdock]

i am with you on this adrian...by the time you are finished paying deposit fees withdrawl fees and all the fees in between....you are better of just keeping the money stashed away...the other bonus is you know when you have lots to spend and when to ease off the spending when the pile goes down....the less sars knows about your financial affairs the better off you are...the difference between you and i getting nailed for fraud and some goverment official...they dont have to pay it back...you get a fine...penalties and interest.

[Citizen X]

I have several things to say about the issue of debt in general and the paying of a debt with debt in particular. Here goes:
1.The first ideas for this explanation were conceived by John Hagee. It’s his idea and reasoning. I endorse such reasoning.
2. If I run your business in the capacity of manager and I loose R100 000 per month for 12 months, will you classify me as a good manager or a bad manager?
3. Okay, let’s take it further, if I loose R100 000 per day, will yyou classify me as a good manager or a bad manager?
4.Right, let’s say that you went into business 2012 years ago when Jesus was born and you lost R1000 0000 per month, every single month from the year 0 to now 2012 you still would not have lost one trillion Rands!!!!
5. The USA had to borrow 1.7 trillion dollars in 2010 just to run itself!!!
6. “ If you spent $1 million a day since Jesus was born, you would have not spent $1 trillion by now...but ~$700 billion- same amount the banks got during bailout.”
7. A trillion dollars = $1,000,000,000,000.That's 12 zeroes to the left of the decimal point. A trillion is a million million dollars.




So to answer the question directly: Is it good to pay debt with debt? No, it isn’t but some people don’t have the choice, they have to sometimes borrow money to pay existing debts i.e pay their cars and houses

This concept of reckless borrowing is what led to the global economical meltdown.

[Jacechop]

Nope, i dont see the sense.

[Citizen X]

Let me then resolve as follows:
1. The management of the USA which is the Government are currently in a situation where they are in 14 Trillion Dollars debt! Had they been good custodians from the outset, this debt deficit would not have occurred. The point I'm earnestly trying to drive home is simply this, if I ran your business and lost 3o million per month for many years, would you still want me in your employ??
2. Being in debt can never be a good thing, that said, there are people who take out personal loans and credits cards for the sole purpose of paying off other loans, credit cards and debt that they have. It's avicious circle....

[adrianh]

What do you do if due to unforeseen circumstance you can no longer afford the repayment on short term debt but if you were to consolidate that debt into a second bond on your house you would be able to survive comfortably. This is making debt to pay debt yet it will resolve your predicament - isn't this a perfectly valid reason for making debt to pay for debt, all other things being equal.

[adrianh]

Please explain how the global economic meltdown occured?

[Citizen X]

Firstly, there are as many opinions for the causes of the global economic meltdown as there are individuals to formulate such opinions;
1. Most people agree that the global economic meltdown started in late 2007;
2. I’ll tender my opinion upfront: the global economic meltdown is inextricably linked to reckless lending of money, personal loan, bond , car and credit card. This chain reaction started in the USA(the father of capitalism, so I submit Communism failed BUT, the real question is: Is capitalism working????). Financial institutions in the USA were recklessly lending money to whomsoever would apply for a bond or loan. This is where this chain reaction started, at about the same times hundreds of thousands of people who loan money from banks were at the same time unable to make their monthly payments and this persisted until banks and other companies collapsed.
3. Recession in and of itself has two meanings: 1: a period of months or years where there is generally a reduction in productive economic activity2: Any first year BCOM, NDIP or economics 1 student would be able to answer as follows: a down swing or a contraction of the actual business cycle with several periods of negative GDP growth;
4. “According to the U.S. National Bureau of Economic Research (the official arbiter of U.S. recessions) the recession began in December 2007. US mortgage-backed securities, which had risks that were hard to assess, were marketed around the world. A more broad based credit boom fed a global speculative bubble in real estate and equities, which served to reinforce the risky lending practices.^[ The precarious financial situation was made more difficult by a sharp increase in oil and food prices. The emergence of sub-prime loan losses in 2007 began the crisis and exposed other risky loans and over-inflated asset prices. With loan losses mounting and the fall of Lehman Brothers on September 15, 2008, a major panic broke out on the inter-bank loan market. As share and housing prices declined, many large and well established investment and commercial banks in the United States and Europe suffered huge losses and even faced bankruptcy, resulting in massive public financial assistance.”
5. Tim Castello explained as follows:"The immediate cause of the global financial crisis was the massive growth and then collapse of a new asset class –securitised subprime mortgages. On one level, subprime mortgages have a positive social role – helping people with relatively poor credit ratings to own their own homes. However, the scale of the lending, the way these mortgages were sold, and how they were developed into hugely complex financial instruments that many people – even people in the financial markets – did not understand, led to a shock to confidence in the global financial system not seen since the Depression of the 1930s."


So to summarise what is otherwise an exhaustive discussion, in my opinion, the global economic meltdown was caused by reckless lending in the form of home bonds, personal finance, vehicle finance and credit cards…

[Blurock]

Recless lending? Yes! ...and stupid!

A bank will give you R20k or R30k on a credit card without blinking. Ask the same bank for an overdraft of same amount, they will turn you down.

Try it, I dare you...

Ask for finance on a new car - no problem. Now ask for a loan to buy a machine or equipment for your business. Something that will generate an income. No chance without a huge deposit, bond on your house or other security.

[adrianh]

I suppose the banks consider risk vs reward. A credit card has huge interest rates to compensate for their risk. I suppose loans on cars and houses are easier because they can grab the asset. I think the problem with machines is that small business fail so easily and that the asset only has value in a very narrow market.