Originally posted by Diseria
I have no frame of reference for what's meant by short-term and long-term -- where's the mid-point between the two?
There is no definition, it's just a question of how big picture you want to get. Short term is often taken to mean a single market movement, up or
down. Long term is a big movement, made up of "sub-cycles" if you will. All a question of perspective.
For a historian of the price of silver, centuries can be "long term" and decades are "short term." For a floor trader at NYMEX, short term can be
5 seconds, and long term is 30 minutes.
-- I've read articles that say for the last 5 years, the real estate market is "about to burst" (which I understand as "crash"); that the USD is
dropping, or under serious threat, because of foreign markets trading their dollars for euros and such; that there's been a few near-crashes of
and/or a general lowering of trade values in the stock market; that paychecks cannot pay the average American's bills, not including debts.
Whether or not those predictions are true, the wording you use, that I'm sure you borrowed directly from those articles, makes me think they are
written by people who want to advise you for a fee, or want you to invest in their "safe haven during the coming crash!"
But I don't know whether or not prices in general are rising... (they certainly seem to be)
With paper money, unbacked by gold or anything other than the "full faith and credit
of the Federal Reserve," Inflation is expected by the
bankers as a given. The only question is the relative speed at which the currency loses value.
...I realize that most of this stuff fluctuates, and I'm not one for slippery slopes that lead to apocryphal ends. But at what point can one rest
assured that the market will go this way or that (inflate or deflate)?
Every one of my economic forecasts is a probability statement. I always include "if x happens, y should follow; if x doesn't happen, then look for
z" statements. Did I ever tell you that handicapping racehorses is one of my hobbies? It's all about probabilities, baby.
My interest was piqued because, well, in short: I've too much debt, no way to pay it back (after paying for the basic necessities), and the house
isn't selling. I'm trying to understand the economics involved so that I'm not caught with my ass in the wind, to be crass; either I put my money
in the bank and strive to pay off the debts, or I re-stuff the mattress, tell Salliemae where to go, and turn the back yard into a farm.
[edit on 29-8-2007 by Diseria]
It would be foolhardy for me to advise, or you to listen, when we are anonymous strangers at the high-tech confessional booth called the internet. I
would advise anyone with high debt to keep in mind "relative dread."
Two guys are in the mountains, hunting. They've killed some game, and got blood on their clothes. They are confronted with a raging grizzly bear.
One guy stops to put on his running shoes. The other guy says, "you'll never outrun a grizzly bear." The first guy replies, "I don't have to
outrun the grizzly; I just have to outrun you."
It's like that when thinking about your debt. If global debt threatens the WHOLE SYSTEM, the bankers will invent a new system real fast
it'll be a system that somehow includes them being paid, if they can manage it at all.
Think about your own dread of your debt, compared to Sallie Mae, or your home-mortgage lender. The student loans are unsecured debt; they cannot
erase your education or repossess your degree. What happens if you don't pay? (I let you answer that one yourself.) But can Sallie Mae honestly
afford to have 30 million well-educated americans in the jails and living on the streets? Not good for business, not at all.
And let's think about the home-lender. Your lender is a corporation, a fictive legal person, who has no real use for an empty house, other than to
sell it to someone else. And 5 million empty houses isn't exactly going to make yours sell quicker. Nor is it going to keep the mortgage payments
coming every month.
Point is, your lenders feel dread, too. They cannot afford for everyone
to walk away from their legal/financial obligations. So when it gets
bad enough, they lower rates, lower payback amounts, do something to make it "all right" for Joe and Judy Sixpack. Notice, they won't fix it until
a lot of people complain. SO just be sure not in the first group of people to go under. You don't have to have perfect credit, just better than
some of the other wage-slaves, and you'll survive, even thrive.
Plus, things stabilize as you get older. Honestly, once you are older than the bank loan officer, or the IRS agent, or whomever, they tend to not
treat you like crap as much as they do a person in their twenties. You get a stable career, get some money on the side, and then you develop a safety
net over time.
When frau dr. and I got married, we were two grad students with no means of support. We would go to grocery store openings to eat the free hors
dourves. We'd go to art openings and have canapes and finger sandwiches for dinner. Now, we throw the parties.
Remember what my grandma told me. She's the one who was living in the boarding house in 1929 when the crash hit, and who ended up owning that same
boarding house seven years later:
"Your property is what you can use. Your debts are only pieces of paper."