Call me old fashioned, but I am a bit of a stickler for dictionary definitions. The definition of an orphan, according to Dictionary.com, is a child who has lost both parents by death. Madonna’s orphans still have some of their parents.
Why don’t those Hollywood dickheads take all of the ‘orphans’ from all of the African nations. There’s enough cash in that city to fund millions of little African mouths. What about all the leftover nibbles from the Oscars??
Stupid Madonna. Mind you, at least she’s not as stupid as Jolle. Madonna’s on the wrong side of 50, and judging by her anorexic frame, probably hit the menopause ages ago. Jolle still has years left on her fertile hips. Why does she need to take children from Africa when she can make her own.
Actually, Brad Pitt’s looking a bit haggard these days. Poor bloke.
I just realised this week I cracked 5000 views – many of those legitimate and not inflated by favouratising on certain blog search engines or StumbleUpon. Well done me.
I’m going to try and blog more often. However, this may mean they are a little bit shorter than usual. And on slightly less gripping subjects than the economy…
For example, we have American Idol in New Zealand. We did used to have a New Zealand Idol but they ran out of potential candidates years ago. We have to make do with what our American cousins can provide. And provide they do!
The only thing is that we are a couple of weeks behind so any comments will be slightly out of date – like this one for example: why the hell did they get rid of Tatiana? She was the most interesting thing to happen to that show since Seacrest and Cowell declared their love for each other (I know they haven’t yet, but it’s written all over the pretty little faces – I’m going to add the word allegedly here, just in case…).
Greetings and good afternoon, morning and/or evening depending on which time zone your are reading these words….
My recent wordings have been focused on the unbelievably lame decision making of various regulatory authorities (particularly US-led Retardlican power base) and the unfettered use of the unregulated environment by those people in charge of various pension funds around the world.
This time I want to talk about debt.
According to a website called Investopedia® (whose words I have no reason to mistrust due to the fact that they have the byline “a Forbes digital company” within their logo and one of those little ‘r’s inside a circle next to it) talk about the Total Debt Service Ratio. You can stop yawning now because I’m not going to bore you with screes of useless economic formulae coupled with hours of unnecessary bleating on and on and on about jobs, housing and government intervention in the market place. It should only take 10 mins. If you want to work out your TDS, then click on the link and there is a lovely little formula to put numbers in to.
Good old Investopedia – they know the score. And why shouldn’t they? They are powered by those highly skilled people who can make lists of billionaires with a simple click on the ‘sort’ button on their excel spreadsheet…
The TDS ratio means that there is an acceptance by the money nerds of an acceptable level of debt for a household. The same goes for companies. Economists, whose grasp on the realities of living in this world is akin to Obama’s grasp on the efforts put in by competing special Olympians, say that every company or household can run up a certain level of debt.
The arguments for a company or household existing with ‘servicable’ debt cows in any economic climate have been delivered to the financial abattoir. If your company/household has levels of debt that are too high and the market has am extremely quick ‘correction’ (this is a wonderful word dreamed up by the nerds. It sounds much better than ‘crash’), you may be unable to service your loan(s). We have seen this in the United States from owners of houses bought with a ‘sub-prime’ mortgage through to that wonderful company GM whose decision to make cars nobody wants to buy might turn out to haunt them at some point in the future.
I guarantee you this. If there was no such thing as an acceptable level of debt, then this current financial crisis would have been a ‘blip’ (another wonderful piece of phrasing – this is actually a short term crash). Long term debt is the issue here. People and companies do need overdrafts – particularly companies. Sometimes we don’t pay our bills on time and there is a need for ‘bridging’ cash to tide people over. Long term debt is completely unnecessary though.
I can here the collective grunts and moans of those financial money spreaders right now. You can’t say that Boon, they will be saying, debt is needed for growth. If a company can’t borrow vast sums of money it can’t grow, and thusly Boon you may have just talked thousands of people out of their jobs. Live with that you communist.
Well, certainly, I can live with that. I live with that because the current model where a company can run up hundreds of millions of dollars of debt so it can purchase competitors or move manufacturing to China or wherever, does actually put MILLIONS of people out of work. Millions of people have lost their jobs around the world in the last year as a direct result of companies having a very high Debt/Equity Ratio and collapsing.
And the economists are moaning again. But Boon! You don’t understand! Those companies were bad. They didn’t run themselves effectively. They made poor business decisions and paid the price. I suppose that’s true to an extent, but when the decision to borrow against assets to expand your company is the accepted norm, you’re going to do it – particularly when you see competitors around you doing the same thing. OK then Boon, where’s your solution? What can you offer the world of economics that Keynes, Smith, Hume, and Friedman haven’t already.
Well, here’s my solution. No long-term debt. Companies and households should not get themselves into any form of debt at all – except maybe for the odd short term carry over debt like an overdraft or, for individuals, a credit card that they pay off the full amount on each month.
If you can’t afford to buy something because you don’t have the available cash, you shouldn’t get it. Ultimately, if you buy something with debt you don’t own it. Somebody else does.
This would be a revolutionary way of thinking. But Boon… economies would never be able to grow. Things would move too slowly. Well, who said they had to move quickly? If you want something, you should save up for it. Surely it’s simple logic. If you borrow the money to buy something you will always pay far more than the original ticket price – be that thing and house or 73% of GM (and isn’t that inflationary??) It would take us years to do that Boon. Yes, you’re right, it would. But then if the world were to collapse overnight (as it did last October – technically it took about a year I suppose…), then you wouldn’t be lumbered with a debt for something that wasn’t worth anything (like GM, AIG, Citigroup, Zimbabwe etc, etc, etc).
So, save up for things and buy them for cash. Who knows, you might even get a discount. After all, who uses cash these days. Money is just numbers on a computer somewhere. Does it even exist??? I have no idea.
Until next time, happy saving.
I’ve said it before and I’ll say it again…
What a bunch of dicks.
As the world financial crisis begins to tighten its grip around the scrotums of even the most sequestered of bankers and financiers, one can’t help thinking – where did it all go wrong…..?
Now, I’m no banker, I’m a teacher. I do, however, have some banking skills. I am able to use a bank successfully. My pay is placed in there by my employer and I then have access to it on pretty much a daily basis. I use my credit card for daily purchases so that I may take advantage of the banks generous rewards system. Rarely, if ever do I have cash floating around in my wallet. I am never in overdraft (well, not any more anyway), so the bank is paying me to hold on to my money. That’s how I roll (at some point Mrs. Boon has a say in all of this as we have a joint account).
If I want to lend money to someone, say a friend, I make sure that friend is – as we say in our circles – good for it. If he or she isn’t, or I know that they may not pay me back, due in part to previous borrowing experience for example, I tend not to lend them the cash. It’s easier on our relationship that way. If friends don’t pay you back it can become awkward. As I have said I am not a banker, I’m a teacher – but even I know that you don’t lend to people whose ability to pay me back might be slightly questionable.
And now let us move, with a financial metaphor, to the cash strapped bowels of the international financial markets. So what’s happened? In short, this is all summed up by greedy, greedy Sir Alan Stamford who ALLEGEDLY has swiped an undisclosed number of billions from various people in the southern US and West Indies. And Bernard Manhoff (see previous blog) who is ACCUSED of ALLEGEDLY doing the same thing… Please do not removed the capitalised words from those sentences, because if you do, the sentences might have the slightest chiming of a bit of truth to them. And, for the sake of any litigious types out there, please ignore the last sentence.
Ultimately these two dickheads are the ones who got caught. I would say that due to the fact the United States of America has some kind of need to let the market provide everything, and then refuse point blank to put any regulations or rules in so that the market is guided in its operations, why are people so surprised that this has all happened.
This most basic of human emotions has affected economies worldwide over the past 18 months / two years. And the point has to, HAS TO be made. If you let greedy people who want to make as much money as they possibly can, that making money is the only thing that makes their lives worthwhile, if you give them a system to operate in that has no rules, regulations or authorities making sure that everything goes OK then you are definitely going to have a case of Collapsae Fantastico.
Bankers thought by lending to people who wouldn’t normally get loans they would be able to make huge amounts of money. Why didn’t they keep lending to people who COULD afford it? Because it wasn’t lucrative enough…
Can we really blame the heads of the banking system? Not really. As the British government found out recently during a select committee hearing, none of the chief execs of the major 4 banks (some of whom are now owned by the UK taxpayer) had any banking qualifications of any note whatsoever. How can we blame them if they weren’t qualified to make the decisions in the first place. Banks are public companies – public companies with shareholders. The shareholders demand returns on their investment. Decisions are made in the boardroom to reflect the demands of the shareholders. If this didn’t happen then nobody would by shares in that company and it would be worthless.
It comes down to the fact that Western Civilisation loves to take – and Eastern Civilisation thinks it’s right and are following our lead. We love me. It’s all about me. I’m the one. I’m the one that matters. It’s me, me, ME! As soon as you stop thinking about me and switch on the altruistic gene that’s somewhere deep in the subconscious, then failed banking decisions will not take place. This is a gross generalisation of course, but generalisations sometimes ring true…
My point is that for too long the human race, led by the capitalist notions of the Reagan and Thatcher, have created a market system that is flawed ultimately unsustainable. It doesn’t work. This has been proven. If the taxpayer is going to own all the banks in the US and the UK now (NZ banks are fine – they only lent to people who could pay loans back), then surely the governments are going to have a much bigger say in what goes on in the financial markets. Hopefully what has happened over the past 30 years is far less likely to happen again.
But what do I know, I’m just a teacher. Bankers know much more about the financial system and which people to lend to than I do.