Hereby I will prove how the realty boomers arguments are false.

What are the boomers arguments?

1.) Buy today, houses always increase in value in the long run.
WRONG. House prices cannot increase more than incomes in the long run. This is obvious if you think about it. If house prices go up more than people can afford to pay, buying stops, like it has stopped now.
Even Warren Buffett have pointed out that houses don't increase in intrinsic value. Unless there's a bubble or a crash, house prices simply reflect current salaries and interest rates. If a house is 100 years old, it's value in sheltering you is exactly the same as it was 100 years ago. Then came the maintenance as the house didn't renovate itself. It also has taxes, and insurance - costs that always increase and never go away. The price of the house went up about as much as salaries went up.
To put this is simple perspective, vegetable were costing Rs.5-6/kg when 5 digit salary was a rarity.
Today, the prices have gone up by about 4 times but so have the salaries. So, sounds very much like the reasoning people use now when they talk about how much their father's house appreciated "in the long run" without considering that salaries rose a proportional amount.

2.) Renting is just wastage of money.
WRONG. As said before renting is now much cheaper per month than owning. If you don't rent, you either:

* Have a mortgage, in which case you are throwing away money on interest, tax, insurance, maintenance, costs that increase forever.
* Own outright, in which case you are throwing away the extra income you could get by converting your house to cash, investing in bonds, and renting a similar place to live for much less money. This extra income is sufficient for emergency expenses,retirement etc.

Either way, owners lose much more money every month than renters and that's assuming prices don't correct to very high level & everything is smooth in the economy.

3.) As a renter, you won't have any money left as you will spend them on vacations,cars & hence won't have equity/savings etc.
WRONG. Equity is just money. Renters are actually in a better position to build equity/savings through investing in anything but housing. Renters can get rich much faster than owners, just by investing in conservative stocks & bonds.

* Owners are losing every month by paying much more for interest than they would pay for rent. The tax deduction does not come close to making owing competitive with renting.
* Owners must pay taxes simply to own a house. That is not true of stocks, bonds, or any other asset that can build equity/savings. Only houses are such a guaranteed drain on cash.
* Owners must insure a house, but not most other investments.
* Owners must pay to repair a house, but not a stock or a bond.
* Owners lose their money as house prices reduce. The EMI's remain constant in spite of reduction in rates. At the end of loan tenure, they would have paid almost twice than that of current renters who will buy at logical rates. Keep interest rates in mind. Most of the EMI is not principal amount but interest.

4.) There are great tax advantages to owning a house.
WRONG. Many people believe you can just reduce your income tax by the amount you pay in interest, but they are wrong. Buyers may not deduct interest from income tax; they deduct interest from taxable income. And even then, the tax advantage is not significant compared to the large monthly loss from owning.

If you don't own a house but want to live in one, your choice is to rent a house or rent money to buy a house. To rent money is to take out a loan. A mortgage is a money-rental agreement. House renters take no risk at all, but money-renting owners take on the huge risk of falling house prices, as well as all the costs of repairs, insurance, property taxes, etc.

5.) RE is based on local factors, it's not a national phenomenon. RE of Delhi-NCR,Bangalore & rest of the cities has nothing to do with Pune RE.
WRONG. Lending rates remain the same throughout the country. ALL loans are harder to get. This will drive prices down everywhere.

6.) A rental house provides good income. So, you can rent if you have purchased as investment.
WRONG. Rental houses provide very poor income in hyped areas and certainly cannot cover mortgage payments. Remember there is almost 300% difference between EMIs & rent for the same house.

It's pointless to do the work of being a landlord if you can make more money with no risk, no work, and no state income tax by investing in assured good returns bond.

7.) If owning is a loss in monthly cash flow, but appreciation will make up for it.
WRONG. Appreciation is negative. Prices are going down. It only adds to the injury of already high EMI's.

8.) As soon as prices drop a little, the number of buyers on the sidelines willing to jump back in increases.
WRONG. There are very few buyers left, and those who do want to buy will be limited by increasing difficulty of borrowing now that many house owners are near bankrupt as they don't save anything at the end of the month due to high EMI's.
No one has to buy, but there will be more and more people who have no choice but to sell as their payments rise. That will keep driving prices downward for a long time.

9.) House prices never fall atleast in Pune.
WRONG. If you see the RE scenario of 1996, prices crashed by 50% & took a whole 7+ years to recover.
Exact 1996 scenario may not be there today but strong correction is inevitable across the city.

10.) House prices don't fall to zero like stock prices, so it's safer to invest in real estate.
WRONG. House prices won't be zero, but the equity or the principal amount you paid can be zero or even negative. What you will pay as EMIs later in actual terms is not for the principal amount but only the interest as house prices dip. So, you will be only serving the bank.

11.) Prices will soften gradually, won't crash immediately.
WRONG. Prices are falling off a cliff. No one knows exactly what will happen, but it looks like prices will continue to fall for long time. These are just more manipulation of buyer emotions, to get them to buy even while prices are falling.

12.) The bubble prices were driven by supply and demand alone.
WRONG. Prices were driven by low interest rates and risky loans & good returns for investors in initial phases of boom in 2004-05.
Prices went up, interest rates went up & buyers savings went down. So prices are violating the most basic assumptions about supply and demand.

13.) There is lack of land.
WRONG. Ample of land is available & continue to be even in future in Pune. Sales volume are down. Even in Japan (small country with less land), prices went down. Current prices here are the same as that of 23 years ago. If we really had a housing shortage, there would not be so many vacant rentals.

14.) If you don't own, you'll live in a cheap neighborhood later.
WRONG. For the any given monthly payment, you can rent a much better house than you can buy. Renters live better, not worse. There are downsides to renting, such as being told to move at the end of your lease, or having your rent raised, but since there are thousands of vacant rentals, you can take your pick and be quite happy renting during the crash. There are similar but worse problems for owners anyway, such as being fired and losing your house, or having your interest rate and property taxes adjust upward. Remember, property taxes are forever.

15.) There's always someone predicting a real estate crash.
TRUE, yet irrelevant. There are very real crashes every decade or so. Even a broken clock is right twice a day.

16.) Local incomes justify the high prices.
WRONG. The mortgage should be more than your 3 years earning. It is much higher today. Most are already in danger/red zone.

17.) You have to live somewhere.
CORRECT. But that doesn't mean you should waste your life savings on a bad investment. You can live in a better house for much less money by renting during the down slide in RE.

18.) It's not a house, it's a home.
WRONG. Wherever one lives in it is home, be it apartment, condo, bungalow , mansion or house. Calling a house a "home" is a manipulation of your emotions for profit.

19.) If you don't buy now, you'll never get another chance.
WRONG. History proves otherwise.
Here's a beautiful quote from a analyst:-
"The real issue isn't whether you will be stuck being a renter all your life, she says. Its whether you'll get so scared about being shut out that you'll buy at the market's peak and be stuck in a property you can't afford or sell."

20.) It would take major economic recession or a major earthquake that wipes out this area in order for the price to fall by over 50%.
WRONG. Even today, if the prices fall by 50%, there will still be very few people who can buy at this levels due to uncertainty in jobs & most importantly high EMIs. Also, look at the rental rates for equivalent houses. Which loss per month is larger? EMI or rent?

contd....
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  • Originally Posted by dougnet
    just want to sayif you are in the UK please go and get your money while you can , if there is an IT glitch for 2 to 3 days

    a) heads should roll b) it is unexceptionable to have 2 to 3 days of down time for a "Developed country " and even though you may be right that this is just a technical glitch , timing is everything and a real bad one


    Well I dont have a account in RBS or Natwest so saved :) would have borrowed money from friends.

    Analyst are saying the cost of this glitch will be 100 million pounds + abviously the brand value will go down (whatever is remaning).

    If you want to see how the lefist media in UK is blaming offshoring of Jobs to India for this glitch then I suggest you go to the website of the guardian newspaper and read the articles and comments. Some of them are entertaining and show how narrow minded people are.
    CommentQuote
  • It seems some other internet bloggers are coming to the same conclusions as I have --

    RBS/ULSTER ‘GLITCH’: Slog survey of users plus analysis of the numbers raise further doubts. | A diary of deception and distortion

    "A broad spectrum of NatWest/Ulster Bank customers and suppliers have raised new doubts about how and why last week’s RBS ‘glitch’ occurred. Also RBS’s current financial position doesn’t inspire confidence: and the ‘glitch’ gave the Group what might have been a vital windfall of £73bn in liquidity."

    "Further, according to Reuters daily statements last week, RBS cash assets stood at £82bn, whereas net loans were recorded as £476bn.

    "But this might be the clincher: total deposits came in at £476bn…exactly the same as loans. However, the difference between total assets and total liabilities was around £60bn in the bank’s favour. Given the amount of potential toxic write-off in the RBS group – and any ‘rush’ following a downgrade – it wouldn’t require much to change that positive into a disturbing negative. With total fluid assets standing at around £930bn, zero outgoings over five days of a ‘computer glitch’ would give the bank a £73bn windfall. More than enough to stave off a crisis, and at least temporarily restore creditor confidence, if such was needed. At the same time, of course, it physically barred the way to a run on the bank.

    CommentQuote
  • This thread pertains to a different topic than the ones some of us have been discussing for the past few pages. Not to hijack this thread, but my whole point is that there is a lot going on below the surface that is completely and purposefully blacked out by the mainstream media. Its happening at an alarming speed and none of it is good.

    After Moodys downgraded Spanish banks, the liquidity probs have escalated and client harassment has begun.

    Whether this contagion can affect India, I do not know. But one should be prepared for the unexpected in these uncertain times. Just a couple of things that come to mind:

    1] Cash at home equivalent to 4 / 6 months expenses.

    2] Stocking up on non-perishable necessities

    Since inflation is guaranteed, the latter will not be a losing proposition. As an aside, this year the rains might be deficient, so food inflation looks to worsen.

    If some form of worldwide economic collapse does happen, those living in pigeon-holes in ghettos will be worst affected. will be worst affected. will be worst affected. will be worst affected.
    CommentQuote
  • Originally Posted by herohiralal


    Analyst are saying the cost of this glitch will be 100 million pounds + abviously the brand value will go down (whatever is remaning).

    If you want to see how the lefist media in UK is blaming offshoring of Jobs to India for this glitch then I suggest you go to the website of the guardian newspaper and read the articles and comments. Some of them are entertaining and show how narrow minded people are.


    Well if this is because of an offshore company, RBS surely would have pressed liquidated damages and no company in India will be ok to accept a 100 mil pound fine without a large hue and cry in media... Top IT companies in India are public companies.

    I think if this is an offshored work, the offshore company is already ready with all the evidence that this is not an IT glitch and hence they are safe from any financial fine.

    Basically this is a huge amt to be considered as a loss... So wait to see who gets the blame. And if RBS does not blame it on anyone else, it is sure that they are the one responsible. I agree to what Sanjana and some more folks saying here... The timing of this is very suspicious.
    CommentQuote
  • Originally Posted by SanjanaSingh
    This thread pertains to a different topic than the ones some of us have been discussing for the past few pages. Not to hijack this thread, but my whole point is that there is a lot going on below the surface that is completely and purposefully blacked out by the mainstream media. Its happening at an alarming speed and none of it is good.

    After Moodys downgraded Spanish banks, the liquidity probs have escalated and client harassment has begun.

    Whether this contagion can affect India, I do not know. But one should be prepared for the unexpected in these uncertain times. Just a couple of things that come to mind:

    1] Cash at home equivalent to 4 / 6 months expenses.

    2] Stocking up on non-perishable necessities

    Since inflation is guaranteed, the latter will not be a losing proposition. As an aside, this year the rains might be deficient, so food inflation looks to worsen.

    If some form of worldwide economic collapse does happen, those living in pigeon-holes in ghettos will be worst affected.

    2008 was a worse period than this but things turned out to be OK after aa litttle pain... so why are u so -ve?

    do u also believe the world in end in 2012 :) did u see the movie 2012? i would also keep some money for a plane to china where they are building the boat..... :) :)

    2008 was a worse period than this but things turned out to be OK after aa litttle pain... so why are u so -ve?

    do u also believe the world in end in 2012 :) did u see the movie 2012? i would also keep some money for a plane to china where they are building the boat..... :) :)

    2008 was a worse period than this but things turned out to be OK after aa litttle pain... so why are u so -ve?

    do u also believe the world in end in 2012 :) did u see the movie 2012? i would also keep some money for a plane to china where they are building the boat..... :) :)

    2008 was a worse period than this but things turned out to be OK after aa litttle pain... so why are u so -ve?

    do u also believe the world in end in 2012 :) did u see the movie 2012? i would also keep some money for a plane to china where they are building the boat..... :) :)

    2008 was a worse period than this but things turned out to be OK after aa litttle pain... so why are u so -ve?

    do u also believe the world in end in 2012 :) did u see the movie 2012? i would also keep some money for a plane to china where they are building the boat..... :) :)

    2008 was a worse period than this but things turned out to be OK after aa litttle pain... so why are u so -ve?

    do u also believe the world in end in 2012 :) did u see the movie 2012? i would also keep some money for a plane to china where they are building the boat..... :) :)
    CommentQuote
  • Originally Posted by SanjanaSingh
    It seems some other internet bloggers are coming to the same conclusions as I have --

    RBS/ULSTER ‘GLITCH’: Slog survey of users plus analysis of the numbers raise further doubts. | A diary of deception and distortion

    "A broad spectrum of NatWest/Ulster Bank customers and suppliers have raised new doubts about how and why last week’s RBS ‘glitch’ occurred. Also RBS’s current financial position doesn’t inspire confidence: and the ‘glitch’ gave the Group what might have been a vital windfall of £73bn in liquidity."

    "Further, according to Reuters daily statements last week, RBS cash assets stood at £82bn, whereas net loans were recorded as £476bn.

    "But this might be the clincher: total deposits came in at £476bn…exactly the same as loans. However, the difference between total assets and total liabilities was around £60bn in the bank’s favour. Given the amount of potential toxic write-off in the RBS group – and any ‘rush’ following a downgrade – it wouldn’t require much to change that positive into a disturbing negative. With total fluid assets standing at around £930bn, zero outgoings over five days of a ‘computer glitch’ would give the bank a £73bn windfall. More than enough to stave off a crisis, and at least temporarily restore creditor confidence, if such was needed. At the same time, of course, it physically barred the way to a run on the bank.



    ohhh dear.. conspiracy theory.... now we know why prices never fall in India.... all the predictions are made based on false data :) :)

    so RBS is a goner... who else is next? Seems you believe that goldman sachs really does rule the world..

    from where i am placed (US) can only see growth ahead...

    ohhh dear.. conspiracy theory.... now we know why prices never fall in India.... all the predictions are made based on false data :) :)

    so RBS is a goner... who else is next? Seems you believe that goldman sachs really does rule the world..

    from where i am placed (US) can only see growth ahead...

    ohhh dear.. conspiracy theory.... now we know why prices never fall in India.... all the predictions are made based on false data :) :)

    so RBS is a goner... who else is next? Seems you believe that goldman sachs really does rule the world..

    from where i am placed (US) can only see growth ahead...

    ohhh dear.. conspiracy theory.... now we know why prices never fall in India.... all the predictions are made based on false data :) :)

    so RBS is a goner... who else is next? Seems you believe that goldman sachs really does rule the world..

    from where i am placed (US) can only see growth ahead...
    CommentQuote
  • RBS cancels Wimbledon hospitality!

    Royal Bank of Scotland has cancelled its corporate hospitality at Wimbledon in the wake of the IT meltdown which left thousands of customers without access to cash.
    The bank, which says it is finally getting on top of the crisis, said it would be "inappropriate" to continue providing the hospitality.
    The beleaguered bank has already hosted clients for the first two days of the championships and had planned to do so for the rest of the fortnight.
    The move came as Bank of England governor Sir Mervyn King said that bank bosses should be subject to a "detailed investigation" over the affair.
    RBS successfully updated all but 1% of NatWest and RBS account balances overnight.
    RBS Group has had less success sorting out the delays experienced by Ulster Bank customers, but it hopes to restore a full service for the start of next week.
    The bank said in a statement: "Technical issues have caused considerable disruption to many of our retail and business customers, as well as customers of other banks. We have made significant progress in resolving the issues and are working around the clock to put things right for our customers.
    "Under the circumstances, we felt it would be inappropriate to provide client hospitality at Wimbledon. Our people are focused on resuming normal service for our customers as soon as possible."
    The bank declined to divulge how much money it had planned to spend on hospitality.
    Sir Mervyn told MPs there would need to be a "detailed investigation" into what went wrong and why it has taken so long to sort the issues out.
    CommentQuote
  • boss thoda menhat karo ..

    boss thoda menhat karo .. atleast OP is posting from some blog ... unlike you who joined this month .. atleast ek link cut and paste karne ka .. 2012 movie to vcd mein dek kar time hua ...
    Originally Posted by normalguy1
    2008 was a worse period than this but things turned out to be OK after aa litttle pain... so why are u so -ve?

    do u also believe the world in end in 2012 :) did u see the movie 2012? i would also keep some money for a plane to china where they are building the boat..... :) :)
    CommentQuote
  • You may need to catch up

    Originally Posted by normalguy1
    2008 was a worse period than this but things turned out to be OK after aa litttle pain... so why are u so -ve?

    do u also believe the world in end in 2012 :) did u see the movie 2012? i would also keep some money for a plane to china where they are building the boat..... :) :)



    More (or less) painful for whom? It all depends on which part of the timeline of this crisis you are in.

    For you perhaps 2008 was more painful. Ask a person (especially youngster) in Greece, Spain, Italy, Ireland, or any one of the many countries going through a more severe crisis they have ever seen in their lives, then its much more painful now.

    2008's pain merely got shifted to the future via money printing and "liquidity" injection. The Central Banks thought this was a Liquidity problem, not able to see that its a Solvency problem. I had stated this maybe from 2008 onwards.

    That future in gradually returning now and is being desperately fought off by infinite money printing. This printing has failed to revive the real economy (which was the actual purpose of printing) and any further printing will see possibly no impact at all even on sentiment.

    2008 was FAR better than what 2012-13 and onwards is going to bring. Even here in India because the Engine of Growth (and therefore jobs) is slowing down and when Europe and America and Japan finally stop and reverse their engines the BRICS will also follow suit, perhaps to a GREATER degree as its been seen in 2008 that we did worse than the West (the source of the problem).

    We are as broke as them and nearly as indebted as them. Perhaps the only saving grace is that Privately we hold nearly 10% of all the gold every mined! And that might make India perhaps the richest country in the world sometime in the near future (2-5 years)! :D

    cheers
    CommentQuote
  • Finally we are agreeing ... on my (DEFAULT) terms!

    Originally Posted by herohiralal
    High debt should not always result in default. It depends a lot on the type of country and how it manages it debt and the currency in which the debt is raised.

    Look at US. Even though the debt is 15 trillion + the US fed had taken a lot of that debt on its books using QE (printing money). Most of US debt is owned by foreign countries still people cant have enough of US fed bonds.

    Japan on the other hand is a different story. Most of the debt is owned by local investors. Demographic is different to US. People save more and these savings fund Japan's debt binge.

    On the other hand Argentina faced a problem cause its debt was based in USD and Argentina could not print USD so it defaulted on its debt.

    Russia didnt even pay back the debt it owed in its own currency something we saw in Greece where private creditors had to take a 60-75% haircut.

    So a blanket statement that high debt results in hyperinflation and default is wrong.

    Countries like UK are using QE + budget cuts to keep interest rates low and still are not seeing hyperinflation. Just printing more money does not lead to hyperinflation. It what people do with that money that matter. In germany the salary of people was linked to inflation so when new money was printed govt spent more and it caused inflation which in turn resulted in those salaries to raise which again fed inflation.

    But in UK the govt is cutting spending by freezing salaries, cutting projects, firing workers, asking employees to pay more for pension, linking benefit to a slowly growing inflation measure etc. At the same time BOE is buying govt bonds and keeping interest rates low. Lower oil prices are helping keep inflation under control as is reduced demand.

    In the case of India high debt will result in inflation as we import so much of our energy needs but will result in India defauting as things currenty stand (where FII can buy only a few billion USD in debt)? No India wont default on it debt. Its debt in based in rupees. Its imports will fall but exports will rise as the currency depreciates as the RBI performs more and more OMO (QE)

    So the jist is -
    If I pay in my own currecny then the value of my currency may go down and people may demand more of if everytime i go to purchase something and it may either mean I have to produce my own goods and stop buying from others but does that mean I cant pay other members of the family the debt i owe them in the currecny i can just print anytime i want?

    Now the people who lent me money will get a bad deal i.e the worth of the money i return to them will be less but contractually i am supposed to pay back the principal and the interest and not gaurantee that the worth of the money increases or remains same.



    Please understand precise what I stated ...

    Excess Debt (which is unpayable in the foreseeable future, like USs $100+ Trillion and Japan's 400%+ Debt to GDP or UKs 800%+ overall Debt to GDP; yes UK is the most indebted nation on this planet, so beware) WILL ALWAYS result in its resolution via DEFAULT in one of 2 ways ...

    1. Straight Default (like Greece; to answer you the "haircut" only happened because Greece is still having Euro as its currency and so it cannot devalue its Drachma at will and default like Russia did)

    2. Devaluation through Fiat OR Hyperinflation (Hyperinflation always follows a major devaluation; after all, if my money can only buy 1 tomato when the same bought 10 earlier, what is it but price hyperinflation, and to help me buy the 10 tomatoes the Govt will print 10 times the money and thats monetary hyperinflation).

    When Greece quits the Euro - as will Spain and Italy - they will revert to their own currencies and will immediately start the process of the race to the bottom. They have no choice but to devalue, hyper-inflate and ultimately default via the stealth default mode.

    In either case, this IMPOVERISHES THEIR OWN PEOPLE! for decades, sometimes. And thats what we should worry about.

    Once again, show me an instance when an excessive debt situation did NOT result in either one of the 2 DEFAULT situations.

    You are being literal (like the Eurocrats in Brussels who doing all the damage
    by trying to avoid the term "default" by whatever means possible) and saying "default" will not happen OR "default" has not happened so far due to desperate money printing which is actually INCREASING the debt and the possibility of DEFAULT (my usage of the term).

    Its only a matter of time until this money printing fails and leads to DEFAULT (my usage) one way or another.

    Time will tell.

    cheers
    CommentQuote
  • Originally Posted by wiseman
    You are being literal (like the Eurocrats in Brussels who doing all the damage
    by trying to avoid the term "default" by whatever means possible) and saying "default" will not happen OR "default" has not happened so far due to desperate money printing which is actually INCREASING the debt and the possibility of DEFAULT (my usage of the term).

    Its only a matter of time until this money printing fails and leads to DEFAULT (my usage) one way or another.

    Time will tell.

    cheers


    Wiseman,

    Samjha karo. In today's perverse world, the ' D ' word is absolutely taboo. You can call it inflation, or bailout, or restructuring, or rollover, or amnesty, or debt jubilee, or refinancing, or haircut, or throat-cut, or .... well, you get the idea.

    But you cannot, ever call it default.

    Shhhh .... anytime you say ' default ', the sheeple will perk up their ears and they might wake up. Can't have the herd panic. Everything must seem normal, so that the politicians continue to loot, the banksters continue to profit from asset bubbles, the MNCs continue to exploit the Earth and its serfs ... and the common folk continue to mortgage their lives for the basic necessities.

    Like the Queen says to Alice

    " We have to run harder and faster just to stay in the same place."

    Now go buy an ipad or a couple of flats. And don't forget to acquire both on finance !

    CommentQuote
  • Originally Posted by wiseman
    Please understand precise what I stated ...

    Excess Debt (which is unpayable in the foreseeable future, like USs $100+ Trillion and Japan's 400%+ Debt to GDP or UKs 800%+ overall Debt to GDP; yes UK is the most indebted nation on this planet, so beware) WILL ALWAYS result in its resolution via DEFAULT in one of 2 ways ...

    1. Straight Default (like Greece; to answer you the "haircut" only happened because Greece is still having Euro as its currency and so it cannot devalue its Drachma at will and default like Russia did)

    2. Devaluation through Fiat OR Hyperinflation (Hyperinflation always follows a major devaluation; after all, if my money can only buy 1 tomato when the same bought 10 earlier, what is it but price hyperinflation, and to help me buy the 10 tomatoes the Govt will print 10 times the money and thats monetary hyperinflation).

    When Greece quits the Euro - as will Spain and Italy - they will revert to their own currencies and will immediately start the process of the race to the bottom. They have no choice but to devalue, hyper-inflate and ultimately default via the stealth default mode.

    In either case, this IMPOVERISHES THEIR OWN PEOPLE! for decades, sometimes. And thats what we should worry about.

    Once again, show me an instance when an excessive debt situation did NOT result in either one of the 2 DEFAULT situations.

    You are being literal (like the Eurocrats in Brussels who doing all the damage
    by trying to avoid the term "default" by whatever means possible) and saying "default" will not happen OR "default" has not happened so far due to desperate money printing which is actually INCREASING the debt and the possibility of DEFAULT (my usage of the term).

    Its only a matter of time until this money printing fails and leads to DEFAULT (my usage) one way or another.

    Time will tell.

    cheers


    If you want to use your own defination of default then it fine as long you put a disclaimer with it. The reason for being technical about a default should be quite straight forward. Investors who lend money to govt hedge their risk by buying CDS (credit default swaps) which is an insurance just like life insurance. When the bond defaults the CDS is trigerred. So defining a default is very imp just like with a life insurance there is need a death certificate to claim life insurance.

    Now you may want to change the defination of death to also include people who have have life sentences and wont be free but the life insurance company wont pay out the claim :)

    Instances where high debt was reduced without defaulting - US, UK and europe after World War 2. As the war spending was reduced so did the debt.

    New innovation like the internet helped US achieve budget surplus so who is to say shale gas, solar energy or nano technology wont lead to massive gains in productivity and reduce the import bills of US, Europe and UK and lead to budget surplus?

    For India to reduce it debt is difficult given the lack of leadership and clear mandate from elections but other countries have reduced their debt quite successfully. India may opt for inflation to reduce its debt but then thats what the people want in the country when they vote for populist policies like no SEZ, free mixer, free laptop, yamuna expressway, debt forgiveness to farmers, no disinvestment etc.

    Japan will also reduce it debt but whether the bond markets force it or it does it before yields starting going up (like how UK did soon after the elections in 2010) is to be seen.

    The tea party in US is fighting for govt debt reduction and you might have heard about the fiscal cliff which will occur from 2013 when Bush tax cuts expire and automatic cuts to US govt spending comes into play.

    So its not a given that govts wont be able to reduce debt.

    The countries in the Euro zone are not able to reduce their debt cause they have made the mistake of joining the Euro which does not allow them to adjust their currencies in tandem with economic performance which is like joining a gold standard (no exchange rate flexiblity) and someone was proposing the gold standard as the solution to solving the excess debt that countries face.
    CommentQuote
  • Originally Posted by wiseman

    You are being literal (like the Eurocrats in Brussels who doing all the damage
    by trying to avoid the term "default" by whatever means possible) and saying "default" will not happen OR "default" has not happened so far due to desperate money printing which is actually INCREASING the debt and the possibility of DEFAULT (my usage of the term).
    cheers


    Just because Euro is flawed and would lead to defaults in Spain and Italy does not mean countries who manage their own currencies are going to default. Dont think that all countries have the same polices like the ECB and the US fed and UK BOE have been very good at controlling defaltion and -ve money supply whereas the ECB is driving euro to collapse.

    If ECB had taken the approach to print money we would not have seen the problems that we are seeing in Greece, Ireland, Portugal and Cyprus. But then again Euro is just a monetary union and not a political union so its a big mess.
    CommentQuote
  • Originally Posted by herohiralal
    Most of US debt is owned by foreign countries still people cant have enough of US fed bonds.



    This is not correct.
    Foreign debt is some 30-35% of the total US debt.
    The foreign debtors do not have much of a choice in terms of buying anything else.
    CommentQuote
  • Originally Posted by SanjanaSingh
    This thread pertains to a different topic than the ones some of us have been discussing for the past few pages. Not to hijack this thread, but my whole point is that there is a lot going on below the surface that is completely and purposefully blacked out by the mainstream media. Its happening at an alarming speed and none of it is good.

    After Moodys downgraded Spanish banks, the liquidity probs have escalated and client harassment has begun.

    Whether this contagion can affect India, I do not know. But one should be prepared for the unexpected in these uncertain times. Just a couple of things that come to mind:

    1] Cash at home equivalent to 4 / 6 months expenses.

    2] Stocking up on non-perishable necessities

    Since inflation is guaranteed, the latter will not be a losing proposition. As an aside, this year the rains might be deficient, so food inflation looks to worsen.

    If some form of worldwide economic collapse does happen, those living in pigeon-holes in ghettos will be worst affected.

    This sounds too much like some survivalist web sites I have seen.

    When the Wacko Texas David Koresh thing happened, this kind of stuff was everywhere.
    Last year there was a church group from Florida going around in RVs preaching about end of world in 2011 itself.
    At the time of Y2K there were plenty stories of people stocking food, MREs and gasoline etc.
    There is always some set of people predicting end of the times. Many times the times end for those people.

    Anyhow, I am going to buy Dal/Chawal enough for 6 months :) ( which I usually do anyway). Electricity would be off after the collapse so no use buying wheat as cannot grind it.:)

    This sounds too much like some survivalist web sites I have seen.

    When the Wacko Texas David Koresh thing happened, this kind of stuff was everywhere.
    Last year there was a church group from Florida going around in RVs preaching about end of world in 2011 itself.
    At the time of Y2K there were plenty stories of people stocking food, MREs and gasoline etc.
    There is always some set of people predicting end of the times. Many times the times end for those people.

    Anyhow, I am going to buy Dal/Chawal enough for 6 months :) ( which I usually do anyway). Electricity would be off after the collapse so no use buying wheat as cannot grind it.:)

    This sounds too much like some survivalist web sites I have seen.

    When the Wacko Texas David Koresh thing happened, this kind of stuff was everywhere.
    Last year there was a church group from Florida going around in RVs preaching about end of world in 2011 itself.
    At the time of Y2K there were plenty stories of people stocking food, MREs and gasoline etc.
    There is always some set of people predicting end of the times. Many times the times end for those people.

    Anyhow, I am going to buy Dal/Chawal enough for 6 months :) ( which I usually do anyway). Electricity would be off after the collapse so no use buying wheat as cannot grind it.:)

    This sounds too much like some survivalist web sites I have seen.

    When the Wacko Texas David Koresh thing happened, this kind of stuff was everywhere.
    Last year there was a church group from Florida going around in RVs preaching about end of world in 2011 itself.
    At the time of Y2K there were plenty stories of people stocking food, MREs and gasoline etc.
    There is always some set of people predicting end of the times. Many times the times end for those people.

    Anyhow, I am going to buy Dal/Chawal enough for 6 months :) ( which I usually do anyway). Electricity would be off after the collapse so no use buying wheat as cannot grind it.:)

    This sounds too much like some survivalist web sites I have seen.

    When the Wacko Texas David Koresh thing happened, this kind of stuff was everywhere.
    Last year there was a church group from Florida going around in RVs preaching about end of world in 2011 itself.
    At the time of Y2K there were plenty stories of people stocking food, MREs and gasoline etc.
    There is always some set of people predicting end of the times. Many times the times end for those people.

    Anyhow, I am going to buy Dal/Chawal enough for 6 months :) ( which I usually do anyway). Electricity would be off after the collapse so no use buying wheat as cannot grind it.:)

    This sounds too much like some survivalist web sites I have seen.

    When the Wacko Texas David Koresh thing happened, this kind of stuff was everywhere.
    Last year there was a church group from Florida going around in RVs preaching about end of world in 2011 itself.
    At the time of Y2K there were plenty stories of people stocking food, MREs and gasoline etc.
    There is always some set of people predicting end of the times. Many times the times end for those people.

    Anyhow, I am going to buy Dal/Chawal enough for 6 months :) ( which I usually do anyway). Electricity would be off after the collapse so no use buying wheat as cannot grind it.:)
    CommentQuote