What’s YOUR Credit Rating?Friday, October 16th, 2009
By Author Linda Brady Traynham
My internet provider is fond of asking me that every time I log on and from time to time while cluttering up space I have better use for. My answer may surprise you: “I hope very much that my credit rating is lousy. It ought to be. I work at it.”
Goodness, that is at least unamerican, isn’t it? Terrible things happen when you have a bad credit rating, don’t they?
Remember that I’m as Contrarian as they come, and I think I’m on to something good, here. I had a head start, because I was told, after I was widowed, that I had “no credit rating.” Okay, I’ve got cash. No, I do not need or want a mortgage on the house I’m buying, and I refuse categorically to pay five percent more “because I’m a widow with no credit rating.” Let’s see…I’m losing 1.5% in taxable interest by paying cash, and you want me to pay you nine percent to use yours? Don’t think so.
Credit isn’t even a mixed blessing other than in very stable times when the economy is good and you want to start up or grow a business. Credit was never intended for personal use.
What’s wrong with it? First, credit is an open invitation to buy things which you cannot afford. If you could afford them, you would write checks or hand over cash. You know that!
Second, credit leads to the dreaded “monthlies,” bills that must be paid no matter what else happens unless you want to pay fines, have to talk to bill collectors, and risk having your wheels repossessed by the bank. Not paying bills leads to fines, increased interest rates, perhaps overdrawn bank accounts (more fines), and sleepless nights.
Credit cards today have precisely one use: buying things on line from firms which do not accept e-checks or PayPal. Those must be paid off in full every month, because at twenty percent per annum no matter how good a price you got on the bigscreen TV you wanted, the price went out of sight. Well…you could default on them, of course. One major card lost seven billion dollars that way last quarter.
What do you want credit FOR on this crisp fall day in 2009? If you don’t have a house with an upside down mortgage do you want to risk acquiring one? Yes, real estate prices are down spectacularly from five years ago, but we ain’t seen nuthin’ yet, baby. You hear a lot about all the defaults in sub-prime mortgages, and some know that a pile of ARMs are set to go up so dramatically that a lot of the signatories aren’t going to be able to make the payments on them…but if you noticed, the latest stats show that over a third of prime mortgages are at least thirty days in arrears now. The number of bank failures this year is staggering, and I wouldn’t invest in Citi or BOA if I were you, either. Tax revenues are down 17%, and a pretty good guess is that your friends at the Tax Assessor/Collector’s office (and the Feds) are going to raise rates nastily.
Put that way, and considering rising taxes, and upkeep…what do you want to buy real estate for? In particular, why do you want to take on a mortgage, interest, insurance, homeowners’ assocations (a pet peeve of mine), and irrational town councils? Lease a nice house and be happy. Buy a small house in the country and fix it up slowly, because that will be your refuge if we all have to plant Victory Gardens again, a pretty good bet. In a couple or three years…we’ll see about “investment” properties. Once the Greater Depression settles heavily on the land everything from houses, to acreage, to yachts will be available quite affordably IF you have what the owners want for them.
Buy a new vehicle? Whatever for? Why would you want to take on a five or six year committment to pay for a tinkertoy hunk of tin can that is small, uncomfortable, unsafe…and unpaid for? If you want another car buy a used one. Preferably a Jaguar from about 1988 to 1995. She’ll get 25 mpg, be good for at least another 150,000 miles, have lower insurance costs, and always be a Jaguar. A Mercedes Diesel would be a terrific choice; that, too, will get good mileage, burn diesel (which will be available readily long after gas is rationed, and diesel can be stored, which gas can’t), and…all together now, “It will always be a Mercedes!” An older model car will cost you a small fraction of what an undistinguished, unsafe, cramped, ugly current model will. You can get a beauty in good mechanical and physical shape for between two and ten thousand dollars.
Why should we send more money to Japan or Korea, and who wants anything much made in America other than a big Ford truck? My 1988 Chevy Silverado Extended Cab cost me $1600 bucks, has a terrific deep-throated roar, and call pull stuck tractors out of the mud while laden with a ton of feed. I’m probably more proud of it than the original owner was! By jingo, that thar’s a truck. It bears the scars of a thousand tasks well done. Don’t want no sissified pretend truck or an SUV here on the ranch. The Vroom-Vroom truck will outlast me.
“Well”…someone may bleat, “What about investments?” In the first place it is illegal to borrow money to fling at the stock market. Said market is quite likely at or near the top of what we call a “dead cat bounce,” and six months from now the chances are high you would regret anything you put in mutual funds. IF you really know what you’re doing (or have a really splendid financial advisor), and IF you are dabbling very, very carefully in oil, commodities, or precious metals, a cautious okay.
So we’re back to…what do you want credit for? We hear a lot about the “benefits” of repaying current obligations with “cheaper” dollars. Those dollars aren’t “cheaper,” they’re worth less. There is a big distinction, there. Far more to the point, most of us are not going to have more dollars to work with. We’re going to be on pensions and Social Security, or find hours or salaries cut, or be out of jobs. It’s all very well for the government (the cause of the problem) to talk about repaying loans for what we will laughingly call a trillion dollars with stuff they print a couple of years from now that will only buy, say, 75% as much. (I expect it to be worse than that, eventually, but for purposes of arithmetic…) That devaluation, or inflation, or default, however you think of it to yourself, is fine if you are the one printing money or collecting taxes and not bound by mythical budgetary constraints. If you’re Joe the Plumber a hundred thousand dollars “then” will only buy what $75,000 does now. Got that? Let’s say you’re a widow on Social Security, with $2,000 a month due you. At present, the state takes away 5% immediately as your non-voluntary contribution to Medicare. (No, you do not have to pay it. The government will be glad to keep your whole check.) Obama has announced that you are not going to have a COLA (Cost Of Living Allowance) increase for the next three years because “there is no inflation.” No, I don’t know where those who came up with that idea shop. In addition, the fees you pay for Medicare are going to increase 20%. Let’s keep it very simple and suppose you are on no medication. You are still going to lose $1440 a year off your SS. $24,000 – $1440 = $22,560. Divide that by four. If the dollar is worth 75% of what it is now in 2012, your gross adjusted income will then buy what $16,920 does today! You thought life was bad on less than two thousand a month, imagine it on what will be effectively $1410 monthly. “Pay debts back with cheaper dollars?” Right.
It doesn’t matter what your income is, and I hope it is far higher than mine. Unless you own a thriving business and Congressmen and Senators, this “cheaper dollars” nonsense isn’t going to do you the least bit of good.
Which is why I neither want credit, nor buy things or credit, nor have more funds than necessary parked in banks and other financial institutions. I’m busy turning mine into commodities and durable goods. It is frosting on the cake that others, having mortgaged their futures to houses, cars, and consumer purchases, are now devouring the accumulated wealth of the past. If you have a place to put them cattle are a great value and will increase greatly in value by next year–and I promise I’ll write an article on why soon. Crystal, china, silver, jewelry, furs, motor homes, bass boats, just about any dream you ever had is for sale now at a steep discount, used. IF you have prepared for all of the things which can go wrong, you can have Christmas early with my blessing. Since you probably haven’t, stockpile food, seeds, tobacco, alcohol, soap, bullets, and other things which will be superior tradegoods if we revert to a barter society. It could happen. It could happen easily before 2015, which does not mean I think you have that long.
Money today is rather like a gift card with an expiration date on it. We don’t know when the value of our fiat currency is set to expire or diminish, but we are certain it will happen. Don’t forget we can still have “Friday Surprises,” too. Don’t worry about losing the 1% your bank may be paying, pull a nice hunk out every Friday. If your bank is still there on Monday, you may put it back. It’s safer in a mason jar buried in your back yard.
One final point: every time you take your wealth and turn it into a tractor, a side of beef, or a case of cigarettes, you make life harder for the tax and spend crew. A thousand dollars left in the bank can turn into eight thousand dollars which are taxed, plus what the bank makes, some of which is redeposited in banks to be multiplied yet again. When you pay the butcher $400 for meat, sure, he spends it…but the magic fractional reserve fairy does not multiply it and send it forth to generate revenue for midnight basketball and importing Hamas “refugees.” Ask not what your country to do for you–and stop supporting those who are reducing all of us to poverty. Prepare for The Greater Depression, because it is coming.
Linda Brady Traynham
No related posts.