cancel
Showing results for 
Search instead for 
Did you mean: 
Veteran Contributor

Re: Interest Rates

You people absolutely baffle me. On one hand you are worried about our nations debt and on the other hand you think the answer is for taxpayers to give more from the private economy to further grow the government which in turn will transfer more to social programs that only creates more need for the govt . Govt does not grow the economy never has never will.

 When tax rates were cut in the 80's govt revenue grew but Reagan didn't force the big spenders hand on the spending side. I know you're going to say that the military grew and that was Reagan's goal. You are right and that is also constitutional where as the social spending is not constitutional. And don't bring up the general welfare clause cause that doesn't cut it.

We are heading down a path of unsustainability and I think we can see the ugly end. Greece is the first clue. 

0 Kudos
Senior Advisor

Re: Interest Rates

So what are you going to do. Cut social spending severely? And then what? Are taxcpayers going to keep sending in 10's pof thousands in Fica taxes with no hope of a return?

 

You have been borrowing those funds for so long that the general fund thinks it is their money. Social security and social programs did not create the debt. The general fund is borrowing from SS trust fund not from a defense budget surplus. Infact SS funds are paying for these wonderful tax cuts that have ru7n us into the ditch to the tune of 14 trillion dollars.

 

Don't you think it's time for the 30 year experiment to end?

0 Kudos
Honored Advisor

Re: Interest Rates

 tax cuts created debt?????????????------------

0 Kudos
Contributor

Re: I really wonder about the value

The rates we are currently experiencing wouldn't exist if influenced naturally by market trends. As a general rule, the less new and small business has to pay for money, especially if it's "renting" that money under fixed rate terms, (and yes, I said "Renting", after all what else is a loan but rented money?)the more bang it gets for the buck.

 

An established and/or larger business has some shielding from the effects of rising rates as it's rented money is usually a smaller percentage of it's operating capitalization, and often it needs the interest as part of it's tax startegy, anyway. 1/2-1% won't usually have a huge impact on anyone in the short term, (if you have a financial calculator, add 1% to your base rate, recalculate your 30 year amortization, and compare the outcome with what your "Truth In Lending" sheet prognostigates, now. There IS a difference. Note, ANY prepayment of principal on long term paper offsets a lot on the back end. To see, add an amount to your total of monthly payments and redivide by twelve, then plug that new payment into your calculations to determine how many payments are needed to pay off the note. You should find it has a bigger impact than you expected, and financially? The dollar difference between the TIL and your new figure may surpsise you.)it's whether the Banks, and especially the Central Bank, will STOP there.

 

If you look back at the period between 1999 and 2001, what REALLY happened is the FED wanted it's piece of the burgeoning pie being created by small business expansion in concert with the growth of Internet Marketing. The Internet, nor "Irrational Exubrance was at fault. The low interst on easy to get Business Credit Cards created a problem never experienced before. Generally ALL new businesses "run in the red" for up to five years. Part fo the start up, along with savings and VC, would have typically been SBA Loans, paid back over ten years at an average of 9-11 1/2% Fixed. These cards often had $100-250K limits with rates at anywhere from 3.99-7.99%, and though 'Market Based' had only been down-trending for several years.

 

What happens to ANY new business if your debt service costs double and triple in less than a year? Then, what if you're late on a couple of payments, and now have late fees, an impending Over The Limit Fee and a "Default Rate" of 30% plus versus your , let's say, 5.99%?If you have other Credit tied to your business it soons reflects similar changes.

 

Many did not survive.

 

The Fed found out, to it's shock and chagrin, that a much larger number of "Traditional Brick and Mortar" Businesses were leveraged into the Web. It nearly took the whole house of cards down. Use the rates as long as they're there but understand what those rates can do when "the Market" (I.E. The Fed) starts "adjusting them, again. They WILL always get their "piece of the action".

 

If you have any significant adjustable or revolving rate Credit, I would suggest wrapping it into something fixed as soon as feasable.

0 Kudos
Senior Advisor

Re: I really wonder about the value

A very good post! Thanks

Contributor

Re: I really wonder about the value

Thanks...but be careful-you might encourage me.

0 Kudos
Senior Advisor

Re: Interest Rates

Look at it this way. You have a full time job making $20K per year. You are spending $22K per year or a $2K deficit. You quit your job and get a part time job paying $15K per year. Now you have $7K deficits and argue that you should opt for an even smaller paycheck.

 

Yeah I guess that makes sense to some folks because alot of them argue for that.

 

Of course they also argue that you cut the light bill, cut the grocery bill, cut the insurance bill, cut the medical bills, cut the clothing bills, but lets spend more on rifles, shotguns, and hand guns. Even though you own more firearms that anyone else inthe community..

 

Does that about explain it?

0 Kudos
Senior Advisor

Re: I really wonder about the value

Thoughtful posts are welcome even if they differ from my point of view. That doesn't mean I won't challenge you.

Contributor

Re: I really wonder about the value

That seems most fair to me-besides, I like it when someone makes me think...especially when jumper cables aren't needed.

0 Kudos
Senior Contributor

Re: Interest Rates

Your post baffles me.  On one hand you say the path we're on is unsustainable which I totally agree.  We cannot continue to dig the debt hole any deeper.  Then on the other hand, you don't want any taxes raised.  If you want to see what happens when a country tries to dig out of a debt hole by doing nothing other than reducing spending look no further than Greece.  With the austerity measures being taken there, it has created their slow but sure death because it has completely crippled growth.  Never once did I say that extra taxes should be used to grow gov't.  In order to get out of our situation, two things have to happen:  gov't needs to reduce spending and we need to increase taxes. 

0 Kudos