Hi folks! We here at Debtor’s Prison are pleased to introduce Rebecca Smith who has been kind enough to write a guest column.  We are impressed with Rebecca’s work and hope she will write for us again.

REBECCA SMITH

The latest chapter of a painful story that began years ago was the debt fight that continued in the capital of the nation and the ensuing credit downgrade by the Standard & Poor’s.  In the last decade, the banks, consumers and the homeowners became bloated with too much leverage or borrowed a huge amount of money and this resulted in a drastic shrinkage of credit throughout the entire economy, a particular phenomenon that is financially known as ‘deleveraging’. Apart from the big picture, the consumers too were worried about the ways in which they can seek debt relief so as to stay out of the debt cycle.

The present situation of the US is nothing new and the government has been grappling with such issues and has also been throwing billions to dollars to provide a quick cure from such problems. Even after continuous meetings and steps taken to assess and improve the current state of the US economy, there has been no positive result that is noticeable. Though the labor market reports were slightly positive in the month of July and August, 2011, yet there has been no such noticeable increase in the growth of jobs within the market that could alleviate the spurring unemployment level. Gut-wrenching market plunges, accompanied by multiple negative aspects of the economy show that the economy is losing steam. Despite all such nerve-wracking events within the US economy, very few expect the policymakers to reveal some new stimulus plans to rejuvenate the lost shine of the nation.

Fed Runs Out of Bullets – Is the Arsenal Empty?

While the Federal Reserve seems to be running short of bullets, the government is also low on ammunition. With the fractious debt fight demonstrated in Washington, the idea of “deleveraging” has even spread within the government. Both the local governments and the state governments are implementing draconian cutbacks to get back on track. The Congress, in the month of September, 2011 voted for a cutback of $2.5 trillion trim from the federal budget deficit and if this step is taken, this would perhaps be the most remarkable move towards austerity during a time when the economy is hardly growing.

The result of this is being shown in the unemployment rate that is stubbornly hovering around the 9% rate. As the debt ceiling debates followed by the raising of the debt ceiling sidelined the increased government spending, there’s very little cushion for the economy to fall back on, if there are chances of backsliding into yet another financial fiasco.

Credit Busts – Is There a Quick Cure or is This Going to Continue?

The most prominent result of “deleveraging” is the economic quagmire and this is also the reason for the extremely sluggish economic growth. According to a study done in the year 2010, it has been seen that it takes a nation minimum 6-8 years to emerge from the deleveraging process. Deleveraging has self-reinforcing effects! If the consumers have a high debt load and they stop purchasing things, the businesses will automatically stop hiring people and this will have a further impact on consumer spending. When the economy will face a dire financial situation, the US government will typically provide the economy with a shot in the form of spending projects or tax cuts. But the main issue here is that the government is running out of all the stimulus bullets!

The Federal Reserve has posed to be the final backstop for the economy. Though the central bank has tried to do everything possible within its means to spur economic growth, reducing the short term interest rates to nearly 0, purchasing billion worth Treasury Bonds and by putting the delinquent mortgages on the balance sheet, yet something more still needs to be done.

With the US economists and the analysts worrying about the future of the US economy, on a personal level, the consumers should also remain aware of their personal debt ceiling so that they don’t add on to the credit card debt level as this worsens the bigger picture in the long run. Get help from a professional

www.debtconsolidationcare.com

Rebecca is a financial blogger & associated with the online debt community debtconsolidationcare.com. If you want to know more about her & the community, you can get latest updates here on Twitter.com debtcc.

I try and give you folks a lark with some good-old fashioned bro humor. I had a great story about a bro who opened a puppy rental stand who paid this slam piece to jerk off guys she saw walking said puppies and suggest that for paying off high interest private loans. But you people need help. Serious help. So instead I am going to explain to you something you should have learned growing up watching sports.

Now here is how I know there are no sports fans on this site. One if there were ballets among you you’d have gotten scholarships. Two if you could converse about sports with people you’d be less miserable at work, more pleasant to be around, less likely to lose your job and more likely to find a new one if you do.  And before you get started yes I am going to make a sports analogy BUT I am going to explain it so even those who think Jordan was the greatest football player because he scored the most runs in history can understand.

You are playing a game, say basketball, (round ball, bounces, played indoors) and your opponent is debt. Whoever has the most points at the end of the game (aka the amount of time you want/reasonable amount of time to take to pay off your loans is) wins. Debt is winning by the amount you owe, aided by crooked refs we’ll call interest.

Now the first thing you’re thinking is debt’s baskets count more than yours. You feel like you made one decision aka to go to school, and debt racked up a huge lead. Wrong. Every day you stayed in school was a day debt scored points and you scored none, just like every day you go to a high paying job (such as the one I have) is a day you score points and debt doesn’t.

Now in a close game a team can do what it’s used to doing and have a fair chance of winning. For most people this is working in either there chosen field or in an IT/government role in some cramped cubicle, collecting a check and making payments.

But this isn’t a close game. Moreover if you’re like Benito the opposing team might have shutdown your best player (let’s call him job). Either way though you need to find more ways to score. My homeys on the street refer to this as “hustlin’ “. Please note that this term does not denote illegal activity such as prostitution or selling drugs.

So you want to hustle. Great! There is just one problem; injuries to your roster, particularly the player known as “credit score.” Credit score would be the player that would allow you to get a traditional loan from a bank to start the sort of entrepreneurial venture most individuals associate with the American Dream. Next, if you’re underemployed you also have an injury to the player known as “time.” So in other words, it takes money to make money and time is money and you have neither. Hah!

Sorry. I’m an asshole. But seriously, it’s not all bad. Even you who are ignorant of sports are familiar with the term “comeback.” Games that are so famous that even you’ve heard of them are probably comebacks where a team that fell way behind was able to come back and win. And that’s what greatness is.

 happen to be a fan of a certain football team mullying about a 500 record give or take a win midway through the season. Do I want those bums thinking well, at least we’re not at the bottom of the league, and win or lose I’m still a millionaire or do I want them to have tunnel vision on their next opponent and doing what they have to do to make the playoffs? Man, fuck perspective, what you need is FOCUS.

I’m an asshole, I admit. But there is another reason I spend what I want, fuck who I want and take whatever I have the opportunity to take. I deserve it, true, but the fact remains that if I spend my life balancing my budget or trying to define the nature of my relationship with the Princess or deciding if I SHOULD do what I CAN do then I wouldn’t be FOCUSED on getting ahead.

One of the things I always admired about young male doctors was the ability to focus. They get bad reputations for “upgrading” girlfriends/wives when that big check comes, being terrible family men and having a “god” complex. I say more power to them. I saw a young doctor demand a $1 tip back from a valet who scratched his “car” and it was a ‘93 Hyundai Elantra. For you non-car people in ‘93 Hyundai was like Kia…six years ago. I also saw a resident wearing Scrubs in West Philly at 11 pm at McDonalds claim to have forgotten his wallet, and when the employees demanded he pay, he knocked someone else’s food over and stormed out.

So as Thanksgiving approaches and idiot relatives brag about their luxury car’s navigation system one minute and tell you to be thankful things aren’t worse when you are less than chipper keep your eyes on the prize whatever that may be.

It is natural to hate people whom you believe have been given more than they deserve. I will be the first to admit that I take comfort in the fact that my loans at least shield me from the stigma that my achievements must be due to Affirmative Action. I get to join the student loan club, a race neutral organization and it endears me to my own people who associate a large part of their identity with struggle. Lonely indeed are the members of the darker nation who know no indebtedness for they are almost universally despised. And that’s a shame.

Recently I received a number of posted and unposted comments from medical types who are getting their tuition bill footed by the family. One of them, rather than being overly defensive simply wrote that it was done for him so that he could do it for his own kids one day and that there was no sense in paying all of that exorbitant interest. I found that to be an interesting notion.  Are we as Americans an extended family?

Again let me reiterate I am not commiting the same crime as I described earlier. I do not want to be in the shoes of a number 1 or number 2 doctor. I strongly suspect they have loans of their own to pay either in who they marry, what they study or where they live OR struggle with feelings of inadequacy.

But if we as Americans are an extended family…shouldn’t we send each other to college? Finance is the great medical fallback and I seem to recall a financial instrument called a bond. If the Federal Government can sell bonds for war why not for ultra low interest rate student loans? As a politically neutral person I see no reason why private non-profits are any better or worse equiped to do this… It’s just a question of efficiency versus scale.

Ebeneezer Scrooge validated himself by growing up poor and making his own way in the world (or so Scrooge McDuck’s portrayal of him leads me to believe). I don’t want to be guilty of not lowering a rope just because I had to climb the wall free-style. I know Benito is laboring over his third draft of a letter to Brittany Spears asking for debt relief and seed money for a scholarship fund… But maybe there is a more dignified, longterm solution to this problem. I’d end the post with some classic Brittany Spears lyrics but I get those confused with early Christina Aguilera. Point is we don’t need a genie in a bottle we just need to decide if we’re really family.

Hi Kids. People have been commenting that there has been less useful information and more paranoia, idiocy and douche-baggery in recent posts SO yours truly has decided to start at the beginning with this simple principle: You are taxed on what you make, and you pay interest on what you borrow. If this simple truth does not inform your big picture than you are hopelessly at risk of over borrowing.

Now I know what you’re thinking, if you got into a school good enough to merit borrowing to attend, then you should be able to add and subtract right? I am sure each of us has made decisions that are different from what we would have chosen as our answer if our situation had been presented to us as a word problem on the SAT.

Let’s take the following example. Most students, generally speaking would be willing to borrow twice as much money for an education where graduates typically earn twice as much. After all debt is a one time expense and you can enjoy your higher salary for the rest of your life right? Now let’s apply our new Golden Rule.

Turns out the take home of someone who makes 100k isn’t twice that of our buddy making 50k. Uncle Money Bags is taxed at a much higher rate. Now let’s turn to the debt. Turns out Uncle Money Bags had to take out private loans with a much higher interest rate and his monthly payments are well over twice that of our buddy making 50k.

But still things will even out right? Eventually Uncle Money Bags will win out, I mean he wants his money so…badly. Maybe it does and maybe it doesn’t. The heavy borrower is much more likely to pay several times the principle over the course of the loan. Also Uncle Money Bags could get laid off at which point he has no bankruptcy protection. In theory he has the option of forebearance. However a bank or loaning institution is less likely to trade money for a sob story as the tooth fairy is to trade a quarter for eight inches of used floss. Turns out a debt is a lifetime expense while your income is tied to the job security in your field and the economy as a whole.

I realize I am biased. My main source of income has just switched from snow shoveling to washing the undercarriages of cars with my new invention “hose on a stick” and I live at home. My own mom is ashamed of me and rather than recite my sad saga just tells church members I have a drug problem.