Sunday, January 25, 2009

Credit

I avoid buying on credit as much as humanly possible. I try to pay cash for a simple reason: I am paranoid about owing money and not being able to pay it back. My current total debt is less than a thousand, and with my current income I don't want it getting any larger.

Let's see. You buy things you really don't need with money you don't have today but hope to have tomorrow. Then all of a sudden, for whatever reason, you not only don't have as much money as you did, you actually have less and you still owe for your previous debts. You can't pay them, so you borrow more money to pay back the debt plus whatever interest it accrued. A bit later the cycle repeats. You keep owing more and more money yet eventually you think you will get out of debt.

Will it work?

If it won't work for you what makes you think it will work for the government?

Our biggest economic problem as individuals and nations is that we depend too much on credit and take foolish risks with tomorrow's (purely hypothetical) income. Speaking through the pen of the Apostle Paul, God told us: Owe nothing to anyone except to love one another (Romans 12:8).

Of course it is impossible to live completely without credit, but like salt in our diet, a little bit is essential and too much can be deadly.

18 Comments:

Blogger dmarks said...

"Of course it is impossible to live completely without credit, but like salt in our diet, a little bit is essential and too much can be deadly."

I think I've been free of it for several years now. Unless you count credit cards which are paid off each month.

8:59 PM  
Blogger Average American said...

I'm like you Shoprat, I have only 1 credit card and it usually has a zero balance.

I know people that owe more than a year's gross pay just in credit cards, not even counting mortgages and vehicles. I would not want to be in their shoes.

11:28 PM  
Blogger Always On Watch said...

Shoprat,
Sorry for my not stopping by here lately. I was busy preparing for the interview with Nonie Darwish.

You've drawn a perfect analogy between personal credit cards and our government's contacting for more and more debt.

Local governments' budgets are floundering right now for precisely the same reason. Here in Northern Virginia we're seeing mass layoffs at the local-government level. And those people laid off are in debt up to their eyebrows, having contracted for more and more debt in their delusion that their salaries and rasies would always offset the debt.

2009 is going to be a helluva year here and all over the country.

Excellent post!

7:52 AM  
Blogger Chuck said...

The debt we have accrued over the last six months and the debt we are going to accrue will kill us. We may recover slightly but be a second rate country for a couple of generations

9:06 AM  
Blogger Gayle said...

I agree with Chuck. We're going downhill fast, Shoprat.

11:26 AM  
Blogger Ducky's here said...

This comment has been removed by the author.

12:41 PM  
Blogger Ducky's here said...

Credit is fine and it isn't a problem UNLESS it gets so high that it impacts growth and as a result the real debt level rises too high.

What is too high? Well, you'll get an argument on whether that figure can be easily calculated but I think Keynes' belief that savings can be too high and adversely impact an economy is correct. Just as clearly if you a leveraged to the eyeballs you are taking maximum risk and likely to dive into a real nasty boom and bust cycle.

Ideally the Fed moderates the two and keeps us fairly level. Alan Greenspan FAILED to do that and he is the primary reason for this mess. He seemed to believe in a perpetual motion machine that would always see a 15% year over year rise in home values.

1:23 PM  
Blogger Beth said...

Politicians are famous for "do as I say and not as I do" ways of doing stuff. Plus they figure they can print more money (which we cannot do). All in all, not the way to go, in my opinion.

4:55 PM  
Blogger christian soldier said...

AH-MI my MI and Detroit my Detroit...look what you have become thanks to the Socialist-welfare-big government mentality---

A house for a $ -did you say?

And to think that Detroit used to be known as the Parlor City...
C-CS

8:00 PM  
Blogger christian soldier said...

PS-shoprat- how is your father today?
C-CS

8:01 PM  
Blogger christian soldier said...

PSS-Just saw Gran Torino ---great movie!!!
It was shot in MI - viewing the scenes-brought back memories...
C-CS

8:04 PM  
Blogger Patrick Joubert Conlon said...

Credit (living on the never-never as my parents called it) is what destroyed our economy - and our civilization.

1:51 AM  
Blogger Pasadena Closet Conservative said...

Who needs credit? Just keep a printing press in your garage and print more money whenever you run out. Hey, if the Obama administration does it, how could it possibly be wrong?

2:19 AM  
Blogger dmarks said...

So, does it look like we will have one or two $1 trillion bailouts every year from now on?

Each one a trojan horse filled with rank pork?

8:24 AM  
Blogger Ducky's here said...

Christian soldier --

Did you find Gran Torino troubling at all?

I've followed Clint's film analysis of vigilantism and watched him become less certain of it.

In his later films like Torino and Million Dollar Baby he also seems to reject the Church as an institution that can get his characters out of their (self imposed?) isolation.

I think he's finally found vigilantism to be a dead end.

9:07 AM  
Blogger Z said...

Shoprat, you're so right.

Since we are having a little financial 'situation' right now, I'm hoping we can go out this afternoon and buy a big new house, just to stimulate us, huh?!!! (LOL!)

11:10 AM  
Blogger Ducky's here said...

z, the way this economy is going just going out to a restaurant would be considered a stimulus.

4:27 PM  
Blogger benning said...

I owe, I owe, it's off to work I go!

My credit has been destroyed by my own stupidity over the years. So I no longer have a credit card, nor even credit, to my name. No car, no credit, and I did it to myself.

But I did learn! I hope.

Good post!

9:08 AM  

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