tnreefer.com

So much has been said recently about the possibility of a “double-dip recession”….another recession directly on the heels of the recent one.

Will it happen? Almost certainly, imo. And here’s why.

A recession is, at its simplest, a reduction in spending. Quite simply put, people stop buying things. It’s a fairly vicious self-feeding cycle…Bob stops buying his weekly magazine, which puts a bind on the publisher, who lays off Sam. Sam can’t buy his nightly beer, which puts a bind on the bartender and brewer, who lay off Sally and Joe.

Pretty soon, unemployment tops 10%, and everyone’s hoarding cash afraid they’re going to be next. Consumer spending drops like a rock, confidence plummets, and “somebody must do something!”

In this most recent case, the “something” was to spend TRILLIONS of dollars we don’t have to create “fake” spending. What do we mean by fake? Simple…it was spending that wouldn’t have occured except for all the ‘free money” being handed out.

Of course, we all know, money is NEVER free. Money is a STORE OF VALUE…which means, to exist, value MUST be created. But wait…our money ISN’T MONEY…it’s CURRENCY created on a whim out of thin air.

Oh look….debt.

We incurred trillions of dollars of debt, which now we can ONLy pay off with MORE DEBT…valueless currency. And rest assured…we HAVE to pay it.

This, of course, triggers inflation.

But here’s the kicker…and the reason a second recession is on the horizon…

This time, NOT EVEN INFLATION will pay our debt. Because OVER HALF OF IT is INDEXED. Over half of our debt is in entitlements we have created or expanded during the latest recessions….entitlements that INCREASE WITH INFLATION…that is, they are INDEXED to inflation. Meaning, EVEN if we print enough currency to pay the entire debt, the inflation created by that action will RAISE THE DEBT.

So…guess what…there’s only 2 choices.

1) Go further in debt…making our products worth nearly nothing on the international market…reducing the GNP below even recession levels.

or

2) Increase tax revenue to pay down the debt…which, given the current administration, will almost CERTAINLY be attempted by means of tax hikes. Raise taxes, spending decreases…recession.

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Now, more than ever, is the time to attack every debt you can. The BEST way to survive an extended period of reduced income is to NOT OWE ANYONE ANYTHING. When you are debt free, NO amount of unemployment can result in losing your car or your home, and every penny you make will be YOURS to care for your family.

Do not make the mistake of going into panic mode, and building a large emergency fund. Unless your emergency fund is large enough to pay all your secured debt (in which case, why haven’t you paid it??) then it WILL run out…and then, all your planning and saving will have bought you is a few months time.

Instead, eliminate secured debt. NOBODY can take something away from you that you rightfully OWN.

Attack, attack, attack!

One of Dave Ramsey’s more “controversial” catch phrases is that your FICO score is an “I Love Debt” score.

The concept is really quite simple…your “credit score”, “FICO score”, or “credit worthiness” is nothing more than a rating of how willing you are to borrow money, how regularly you pay it back, and how much of it you’ve borrowed, both recently and over time.

In other words…it has pretty much zilch to do with who you are as a person, what your current situation is, or EVEN how likely you are to pay money back if you borrow it.

My own credit score is lower than it’s ever been at any point in my life, despite the fact that I now have more net worth, a MUCH longer record of timely debt payments on the mortgage, a now lengthy history of reliable payments on utility and medical accounts, and the highest income of my life.

So…quite literally…at the point in my life that I am the best possible credit risk I have ever been, I am LEAST likely to actually obtain credit.

Don’t believe it? Take a look at this article from the Star Tribune : “When is credit too good?”

Gander Mountain Co. says in a federal lawsuit made public Thursday in Minneapolis that the bank that issues its “co-branded” cards is threatening to deny new applications from about 25 percent of the sporting goods chain’s customers — those with the highest credit scores.

Of COURSE they will. The ones with the highest scores DON’T CARRY LARGE BALANCES, AND DON’T INCUR LARGE FEES. They pay accounts regularly, on time, and in full.

In other words…they are the people MOST likely to pay back borrowed money…and yet undesirable to loan money to. Their high credit score signifies one thing and one thing only…THEY LIKE TO BORROW MONEY.

Credit worthiness has nothing to do worth at all. It’s nothing more than an indication of how willing you are to borrow money…and pay for the privilege.

So yeah…there’s a reason I started the day posting the article I wrote about below. It was to put some sort of framework around the following…

The other day, our 11 yo daughter wandered in, and announced that she wanted some money this summer, and that her friend who lives across the street also needed money for an aqaurium because see her lizard was going to get big and now her mom liked the lizard so….

AHHHHHHHHHHHHH!

Sorry….11 yr old girls can be a bit long winded. *heh*

The short version wound up being that they’d formed a “company” to wash cars and do odd jobs.

Yes…you read that right…my daughter decided that if she wanted money, she should WORK FOR IT.

When the time came to take the girls to Wal Mart for some car washing supplies, I offered them a loan…as much money as they needed…to buy all the supplies they could want. “Shoot..we can get enough supplies for the whole summer, if you want”, I said.

Her answer. “No. I don’t want to owe you money. We have enough to get started.”

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Here’s the thing, folks. Stories like the one below don’t suddenly “happen” because a recession starts. Your child doesn’t find him or herself in college, in debt up to his eyeballs, unable or unwilling to pay her bills, facing “steep financial hurdles” over night.

Like everything else, it’s a process. A process of learning, over many years, that someone will come bail us out from our poor financial decisions. A process of learning that we are not responsible for our own actions, for making our own way in the world, for taking care of ourselves. It’s a process, in short, of learning that someone else will always take care of us and give us what we want and need simply because we want and need it.

THIS is what Dave means when he talks about changing your family tree. This isn’t just about being fiscally responsible to yourself, or even about amassing large piles of cash. This is about leaving the world young adults who actually make their OWN WAY in the world. People who PRODUCE, rather than take, people who PROVIDE rather than need providing for, people who CONTRIBUTE…

People who don’t wind up embarassing you by whining to a newspaper journalist about their inability to manage their debt.

So apparently The Star Press newspaper of Indiana was having a bit of a slow news day, and decided to publish a lengthy article about “Generation Y”…meaning, essentially, those who are currently teenagers/20-somethings.

It seems these poor folks have never experienced tough financial times before, and the recession is hurting them oh so badly. We are, apparently, meant to feel sorry for them…

Kristen Ammerman, 21, is a senior at Michigan State:

“I work at a part-time job, have incredible debt and get food stamps,” she says. “I’m still short on rent every month..”

So…umm….would someone explain to me what Ms. Ammerman is doing IN COLLEGE, who, precisely, is LOANING HER MONEY, and why WE’RE paying for her food when her sole means of support is a PART TIME JOB that won’t even pay her RENT??

According to the article, they are the “most underemployed” age group in more than 3 decades. A 2010 NFCC survey said only 58% pay their bills on time.

Yet…despite these facts…Fidelity Investments says that ON AVERAGE they carry 3 credit cards, with over $10,000 balances.

So…wait just a minute….

These folks borrow money they have no visible means of paying back, work less than any age group has in the last 30 years, and find ways to fund esucations they can’t afford while living in apartments they don’t need?

Huh…can’t immagine why they’re facing “steep financial hurdles” during a recession.

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Original Article

Earlier today I ran into a particularly nasty debt collector…one who called my home phone in error (we only recently acquired this number, and have received numerous calls for its previous “owner”) but would not accept my statement that I was not the indvidual they were seeking. They insisted I was, indeed, this person,and was lying to them, continuing to yell and curse at me.

Further research into the company shows this isn’t uncommon for them, and they routinely violate federal debt collection laws.

This made me think that it might be time to remind everyone of their rights under the Fair Debt Collection Practices Act.

Some of the more useful things to know:

A collector MUST call you between 8 am and 9 pm. Calls before 8am or after 9 pm are harassment, and illegal.

A collector MUST refrain from calling you at work if you notify them that you are not allowed to receive personal or collections calls at work.

Collectors can’t harass you. The FDCPA has specific guidelines for harassment, which include unreasonable numbers of calls, foul language, or abuseive treatment or threats.

Collectors must provide you with proof of the validity of the debt, and must do so DURING THE INITIAL CALL, or in writing WITHIN FIVE DAYS of the initial call. The verification must include the amount of the debt, who you originally owed it to, and a clear statement of your rights.

You even have the right to ask the collector NOT TO CALL YOU. They may, at that point, ONLY call you to tell you they are stopping action, or taking special remedy against you.

It’s important to know your rights. Yes…you absolutely should make every effort to pay your debts. But there is no reason for you to be harassed, bullied, or coerced.

Here is the FDCPA as a downloadable PDF.