Tag Archives: debt

Brevity

Hello and salutatious welcomings to you all…

Life is all a little bit too serious these days. It’s like someone has removed the funny bone from our society and replaced it with a jelly-like substance that smells of fear and stress. The fearstress jelly seems to run western life with the ruthless efficiency made famous by many a leiderhosen wearing Bavarian factory owner.

Starting off with a slight tickle of racism certainly wasn’t my intention. In fact, and I’m not sure if the boonparents still possess photos of me dressed as such, but there was a point in my life when I did own a pair of  leather trousers that were handed down to me by a neighbour’s mother. I am uncertain if they were the fabled breeches of our Germanic cousins, but I can tell you this: they contained two adjacent zipper flies, when both were in the ‘descended’ position, opened a large flap in the front of the shorts. I can only assume this was to allow the wearer free range over any toilet encountered. Being only seven at the time of the trouser inheritance had me thinking that the previous owner might indeed be endowed with adjacent bi-genitalia – although age and common sense has since dented this belief slightly.

Back to my original point – life is too serious. Our culture (and by our I mean NZ, Australia, UK, USA and other such countries) is obsessed with ownership. It seems the model of our life is such: we go to school, we get a job, we go to work, we earn money to pay for things, and then we retire with little to show for it except some grey hairs, a kid or two, a late model car and maybe a house.

Our total focus on home ownership seems to have set us up incredibly well to deal with this current recession, hasn’t it?? What I’m trying to say, in a slightly sarcastic tone it must be admitted, is what I have said many times in this blog: you should never pay for something if you don’t have the money for it. People are going to say, “but I would never have the money for a home if the banks didn’t provide a mortgage facility.” Yeah, but that’s what the banks WANT you to think. You know you can save up for a house and buy it with cash – it will take years and years and years but it can be done. You can save up for a car and buy it for cash. And a stereo. An I-pod. A new pair of leiderhosen. You don’t have to get into huge amounts of debt because your parents did, or because society says it’s important to own a home. Sure you need somewhere to live, but I’ve seen people in housing provided by the taxpayer far happier than anyone else I know. Technically, I suppose Barack Obama and Queen Elizabeth fall into this category, but I now find myself ridiculously off point yet again and we must be brought back to my original point.

Life is all too serious.

Who says you have to buy stuff, own stuff, be something? Was it your mum? The government? If we weren’t so focused on this life model of capital purchasing or borrowing to fund our wants, then I doubt very much that the current recession would be happening. Banks would not have lent to people because there would have been no demand. Housing prices would be affordable – if people even wanted to own in the first place.

What would it be like if you didn’t want all the things you wanted? Admittedly some of those things, like quilted toilet tissue, make life a lot easier than in the days when we used bark and stones for the job, but really are you any happier?

How many people reading this have had to change jobs in the last year? How many have had to change down? That is, are you now a worker when you used to be a manager? You’ve had to take a pay cut because that was the only option. Has this affected your ability to service your liabilities? And has this, in turn, affected your brevity levels?

Of course, all this is immensely easy for me to say because I don’t have kids or a mortgage. If you have kids you do need that stability of home ownership a little more I suppose because if you were renting there’d always be the chance the landlord would ask you to move on.

The chances of my wife and I having this dream (home, kids, car etc.) are greatly reduced at the present moment and we are about to head into the world of IVF in order to attain at least part of it. This should have me tearing my hair out. Sometimes it does, but mostly it doesn’t. I am a happy and incredibly lucky person. I have a wonderful wife who I love and who loves me back. I have great friends and family who make me laugh. My wife and I get around in a 1991 Toyota Corolla with a bit of rust in the door and 200,000kms on the clock. I don’t feel the ‘need’ to own a house – I would quite like one sure – but I don’t need one. Even if we do get the chance to be parents I’m not sure if I want the stress of home ownership adding to the rest of it…

So, to conclude… go and buy yourself a pair of leiderhosen. Wear them proudly to work. Wear them to the bank when you’re breaking your fixed mortgage contract and being charged $16,000 for the privilege. I guarantee you the rub of leather against your moist skin will make that charge ever so slightly more bearable.

Until next time, auf wiedersehen.

Boon x

The Budget

Greetings and hello again from New Zealand!!

As a quick aside for all the international readers before I even start, if you’re wondering where “Old Zealand” is click here. The discoverer of our country, Dutchy Abel Tasman decided on a moniker that was dear to his heart.

So I’ve been dribbling the football of thought around my brain stadium for days now wondering what I might speak about. Generally I like to dip my toes into the pool of international political intrigue. However this time I thought I would keep things a little closer to home here in little old NZ.

This week the brand new National government delivered their very first budget since winning over the hearts of the middle ground of undecideds in the general election late last year. They effectively won on a promise of tax cuts, thinking more money in our pockets will somehow make us feel better. Just to let you all know, in the first round of tax cuts on April Fool’s Day earlier this year I got less than $10 a week. Most of the money went to those people richer than I (just a humble teacher of children).

Anyhoo, since National made all their wonderful promises of money back in our pockets, thousands of people have lost their jobs as companies – led by their idiot boards – who borrowed to expand, fell into receivership as income streams dried up. As these people have stopped paying taxes, the income streams of the government have also dried up. This means the next couple of rounds of tax cuts have been ‘put on hold indefinitely’ which, in layman’s speak means (perhaps I’m barking up the wrong tree here) cancelled forever.

So, one major bribe is gone, how are National going to win our hearts back? By offering a $1300 to any homeowner to insulate their house. You might be thinking that this seems like a very novel and forward thinking idea, and it is. However they have to proved this offer without means testing. I think it’s mainly because most landlords in New Zealand are cheap, and most notably the largest landlord of them all, leading the way for everybody, is the government through the wonderfully resourced Housing New Zealand. Landlords, led by the state, refusing to spend money insulating houses against the cold of NZ winters means lots of sick tenants – last week I was one of them.

Our cold, damp, uninsulated house has begun to sprout the annual black mould around windows and other unventilated areas. For 10 months of the year this place rocks. We have two deck areas, one out the back, one out the front. Both of these get loads of sun. Unfortunately, the lack of insulation in our house means that it is currently colder inside our house than outside. If we had insulation in our roof and floor then we might still be cosy from yesterday afternoon’s sun.

The other thing that was notable in the budget was the scrapping of pay talks between the government and support workers in New Zealand schools. In it’s infinite wisdom the government has decided that all those untrained teachers – and that’s what they are, people who teach our young in a variety of different settings, but are yet to have the degree that allows everyone to call them teachers – are not worthy of a pay rise this time. Once again, the poor old recession is getting the blame – what did it ever do??

So support staff, who teach reading recovery, numeracy programmes, English language support for new immigrants, and other such wonderfully supporting educatory dalliances, lose out. Not only are they not going to get a pay rise, they aren’t even getting the chance to negotiate one with the government. I guarantee a strike would normally be on the cards but these people are paid so piss-poorly that many don’t even belong to the union, so are unlikely to take industrial action. The lack of pay will also mean many can’t afford to make their political point heard.

If you think that teachers are the only educators in our schools, then you are very much mistaken. If we had no support staff then we wouldn’t have any teachers. Nobody would stay in the job with the amount of work required.

I’ll be glad when this damn recession is over sometime in the middle of 2015 if you believe the National government. Maybe then we’ll be able to get back to our old ways of spending money that we don’t have on things we don’t need.

Until next time, word.

Boon x

Money Makes the World Go Round and Stop Completely As it Turns Out

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.

Boon x