Freedom & Frugality go hand in hand.

[maat55]

Originally Posted by creditcardfree

I think it comes down to educating people on all facets of money, particularly compound interest and investing. Many people have no idea how much buying things on interest adds to the price of something. Recent credit card legislation has likely opened many people's eyes to how much they are paying in interest in dollar terms and how long it will take to pay the balance off.

Investing education just gives people the confidence and knowledge to make their money work for them. So many people don't even know what the DOW really is. Just ask 10 people on the street and see how many people could explain it. If you don't understand investing you are less likely to do so, or if you do, you may make some costly mistakes.

You like many here understand the concequences of poor financial decisions. We have a much higher standard for how many is spent. How our government wastes money is an abomination. It is my fundamental belief that a very small government can only waste very small amounts.

But this requires that society man up to its responsibilities and keep its desires in check. One might have to give a car payment for health ins. etc.

Ultimately, people have to value freedom with great intensity. It has to direct ones habits.

[maat55]

Originally Posted by Mjenn

Many families continue to live in small apartments until the children are school age and they want a backyard.

I don't see a lot of out of control spending here, especially not in comparison with my shopping trips to the states. People here like clean design, without a lot of 'stuff'. The stuff they buy does tend to be more high end (or Ikea) and that is because they expect it to last a long time and not need replacing.

In the beginning I didn't believe much in the system here, now I have to say I think it is great. And yes, that probably is because I am benefiting from it in some way - I also paid into it a great deal before hand and will continue to do so when I go back to work.

So in proportion to the amount of social programs here vs. the US one would expect that here people would be even less frugal. And I'm saying I don't think that is necessarily the case.

I believe there are fundamental truths when it comes to the two different systems. Freedom and personal responsibility demand personal effort in order to prosper, but with greater rewards, with a socialistic society, your freedom is limited by your after tax discretionary funds.

In a socialistic society, there have to be high taxes which lower disposable incomes. This results in lower living standards, basically, the government is forcing the individual to pay for things a free society may ignor such as healthcare etc. I also happen to accept that humans are lazy by nature and need motivation to succeed.

The question is: does the free market provide a more abundant life than a socially engineered society? I believe so, and I happen to charish freedom(although our free market is not nearly free enough to provide the rewards it could) and the responsibility it comes with over the restaints of government.

I'm not totally against government aid, I could live with medicaid for those 18 and under, with unemployment up to three months. But, I would rather all social programs be in the hands of state government and not the federal government. The people can better manage welfare from the state and local level than by an out of control federal government.

[thekid]

Originally Posted by maat55

Ever wonder why the cost of higher ed is so high? If free market forces were in play, prices would likely be lower allowing an individual to pay as you go. I have no problem with private entities loaning for college. But, passed in the health ins. bill, the government now controls all student loans.

This is why higher education is much cheaper in almost every other developed country (western europe, canada, australia)?

[thekid]

Just curious, would you be in favour of governmental regulation of lending and borrowing practices or do you just leave it to banks, derivative markets and consumers to regulate themselves?

[Mjenn]

Originally Posted by maat55

I believe there are fundamental truths when it comes to the two different systems. Freedom and personal responsibility demand personal effort in order to prosper, but with greater rewards, with a socialistic society, your freedom is limited by your after tax discretionary funds.

In a socialistic society, there have to be high taxes which lower disposable incomes. This results in lower living standards, basically, the government is forcing the individual to pay for things a free society may ignor such as healthcare etc. I also happen to accept that humans are lazy by nature and need motivation to succeed.

The question is: does the free market provide a more abundant life than a socially engineered society? I believe so, and I happen to charish freedom(although our free market is not nearly free enough to provide the rewards it could) and the responsibility it comes with over the restaints of government.

I'm not totally against government aid, I could live with medicare for those 18 and under, with unemployment up to three months. But, I would rather all social programs be in the hands of state government and not the federal government. The people can better manage welfare from the state and local level than by an out of control federal government.

Except that living standards in the nordics are among the best in the world. My rent controlled apartment is cheaper than what I was paying 10 years ago in the states and is renovated constantly -due to legal requirements- and is much larger than my friends paying the equivalent rent in the US. I strongly recommend traveling or atleast learning about places that practice social democracy before presiding judgement on the living standard there.




I totally respect and do not feel the US should become more like the nordics, but I don't think we are in danger of that either. I just think spending practices are a lot more cultural than government mandated. In the US everyone wants to be the best and have the best. Thus a lot of people buy into this idea,for better or worse, and buy 'the best' even if they cannot afford it. To give the impression of success.

In the nordics the idea is often to prioritize family time, enjoying life, and having free time. Your success isn't jusged just by the size of your car, but by your ability to spend time with your family, relax on vacation, etc You don;t want to show off too much with stuff or accomplishment, because that is considered gaudy.

[Snodog]

Thank you Mjenn for another perspective. Its nice to get a different viewpoint besides the US-centric media always telling us what to think.

[maat55]

Originally Posted by thekid

Just curious, would you be in favour of governmental regulation of lending and borrowing practices or do you just leave it to banks, derivative markets and consumers to regulate themselves?

I believe the government should have reasonable regulations in order to maintain a fair free market. I don't agree with predatory lending practices. The derivatives market instability was based on risky mortgages allowed and promoted by government policies.

The problem was not the market, it was the governments influences into the market that were not self corrective. Bankers will make safe loans when they have to to survive, government backing only distorted risk allowing the bubble then burst.

In essense, the government is more an enemy to the free market than a safe regulator. I still believe we have to have regulation, I'm just not sure our corrupt government can provide it. If I had to choose between a corrupt government and a regulation free market, I would go with the regulation free market.

[cschin4]

Yes, I look at the stuff I have "consumed" from cars to electronics, etc and think of the money I could have had in the bank. Now, I view consumer items with suspicion as I know it parts me from my money and thus makes me slave that much longer to "the Man". Someone at work recently rolled in with their new car. Of course you ooh and aah, but in reality, I don't every want to pay the cost of a new car again. How many hours of my labor does it take to pay for such items is what I ask myself. And, how many more years of working am I adding to my life before I need to retire or what if something happens and I need to retire early. I still buy stuff but try to be more careful now.

[thekid]

Originally Posted by maat55

The derivatives market instability was based on risky mortgages allowed and promoted by government policies.

And greed. And short term gain. And the inherent risks of an under regulated financial industry.

Seriously, to come out of 2008 and think the US needs less regulation of financial markets baffles me.

I can understand the romantic appeal of ideals of free markets and peoples, but in reality a more nuanced approach often reaps best results. I don't care much for labels and slogans, I care for effective approaches to goals and challenges.

Take your use of the word freedom, for starters. What does it mean? I'm a fairly conservative guy with regards to my life choices: fairly frugal, fairly safe good wage employment, good net worth, etc. A good buddy of mine is self employed (with unstable income), low net worth, etc. He also just bought a yacht, goes on vacations often, flexible work schedules, etc. Which one is more "free"? How do you measure that? Are Americans "more free" than Norwegians or Swedes or the British, for example, simply because they are taxed less? Are you "more free" when you live in a rich country with safe cities and less work time?

How about the concept that "more free" markets are always best. Take your claims on the costs of higher education. In most other developed countries (western europe, canada, australia, etc.), higher education costs are significantly lower than in the US because government has had greater control of such costs while footing a much larger portion of the bill than in the US. Similar for health care. Did you know that the US government spends a larger percentage of GDP on health care than most other developed countries while covering much fewer services? As with education, a "more free" market for these services has lead to much higher service costs.

I think it best to stay away from simplistic ideological catch phrases and over generalizations when discussing public policy.

[PennyPinching]

The name of this thread is such a great summary. By saving money and spending less, you can create a much better safety net to provide you with the things you need.

[maat55]

[quote]

Originally Posted by thekid

And greed. And short term gain. And the inherent risks of an under regulated financial industry.

Derivatives where packaged mortgages and other loans, many of the loans became toxic due to not knowing which were good and which were not. The problems was how many were becoming toxic. In the free market, there would not have been enough to sour the investment. The government does not operate as an functionable business, when it decides to make homes more accessable it introduces improper market risk, this is what caused the economic collapse, not wallstreet for taking advantage of the rules government made.

Seriously, to come out of 2008 and think the US needs less regulation of financial markets baffles me.

We do not necessarily need more regulation(i'm sure there is somewhere it would help), what we need is no government intervention(F&F,government backed student loans,medicare,medicaid for those over 18). Government intrusion introduces extreme risk and distorts market prices.

This crisis is government caused, the free market would not have allowed mass numbers of toxic assets. For some reason, people ignor the governments intrusions into the free market and blame wallstreet and capitalism.

I can understand the romantic appeal of ideals of free markets and peoples, but in reality a more nuanced approach often reaps best results. I don't care much for labels and slogans, I care for effective approaches to goals and challenges.

When businesses operate improperly, they will fail. The free market manages risk and eliminates inefficiency, it is designed to produce goods at the lowest price possible. This is what makes things more affordable, while creating jobs.

The government does not operate in this manner, it operates as an mob which spends as it pleases and extorts taxpayers and/or just prints money at will.

Take your usntof the word freedom, for starters. What does it mean?

Freedom means, I am responsible for me and no one else(other than my children). I provide my own food, clothing, shelter, healthcare, retirement, education(State or local entity) and income. I choose who I give charity to. I am responsible for my prosperity in a fairly regulated free market.

The government is not as motivated as I am to provide my wants or needs. It by nature is not efficient. It never applies the right solution, it only applies compromised solutions, it should only control things that are general in nature(common defense and general welfare, go to my blog for an better understanding of general welfare as explained by James Madison(father of the constitution).Freedom, Frugality, Personal Responsibility and Charity=Prosperity

How about the concept that "more free" markets are always best. Take your claims on the costs of higher education.

We do not know how affordable higher ed could be, it has not been based in free market principles for quite some time. Government backed student loans create far too much demand with little incentive for competition.

In most other developed countries (western europe, canada, australia, etc.), higher education costs are significantly lower than in the US because government has had greater control of such costs while footing a much larger portion of the bill than in the US. Similar for health care. Did you know that the US government spends a larger percentage of GDP on health care than most other developed countries while covering much fewer services? As with education, a "more free" market for these services has lead to much higher service costs.

Again, our markets are distorted by government intrusion and regulations.

I think it best to stay away from simplistic ideological catch phrases and over generalizations when discussing public policy.

I see the world for what it is, and I understand human nature. I see the world governments heavy in debt and placing an unfair burden on future generations. Aside from this is the fact that mankind was not created to be ruled, the american experiment has proven that freedom works and big government fails.

[thekid]

[quote=maat55;267538]

Derivatives where packaged mortgages and other loans, many of the loans became toxic due to not knowing which were good and which were not. The problems was how many were becoming toxic. In the free market, there would not have been enough to sour the investment. The government does not operate as an functionable business, when it decides to make homes more accessable it introduces improper market risk, this is what caused the economic collapse, not wallstreet for taking advantage of the rules government made.



We do not necessarily need more regulation(i'm sure there is somewhere it would help), what we need is no government intervention(F&F,government backed student loans,medicare,medicaid for those over 18). Government intrusion introduces extreme risk and distorts market prices.

This crisis is government caused, the free market would not have allowed mass numbers of toxic assets. For some reason, people ignor the governments intrusions into the free market and blame wallstreet and capitalism.

To each their own I guess.

To me it is clear that irresponsible sub prime loans were made because lenders would package them with lower risk loans and sell them off (broadly, lower risk loans covering for the higher risk ones and providing investors with better rates of return than simply the more credit worthy loans). Commercial paper of this nature was given AAA credit rating, mainly because it was believed that the collateral was sufficient (it was as per then market rates). Creating and selling these instruments made extending sub prime loans good commercial practice. When the subprime bubble burst, all of these instruments became virtually unsellable as no one knew to which extent they contained bad loans. Financial instruments fueled the bubble. The housing market didn't go bunkers on affordable housing programs (which i'm not a fan of anyway).

In Canada, real estate loans and bank speculatory practices with such financial instruments were much more stringently regulated and as a consequence zero canadian banks failed and there was no housing bubble and subsequent crash. Canada has affordable housing programs and a governmental equivalent of feddie/fannie.

I do believe in free markets, not as an ideology though.



[quote=maat55;267538]

When businesses operate improperly, they will fail. The free market manages risk and eliminates inefficiency, it is designed to produce goods at the lowest price possible. This is what makes things more affordable, while creating jobs.

Don't know that people realize the extent to which the worlds biggest financial institutions failed. Without state intervention, the world's financial system would have crumbled. The businesses that operated imporperly were the world's biggest financial institutions and they would have gone bankrupt in scores. Anybody that thinks this should have happened as per free market ideology needs to look at the consequences of that. It is unthinkable. It would have sent the world economies into the dark ages.


[quote=maat55;267538]

We do not know how affordable higher ed could be, it has not been based in free market principles for quite some time. Government backed student loans create far too much demand with little incentive for competition.

For some reason every other developed western country has more governement intervention in the higher education market and lower costs. Health care is another biggy. Again, the US government spends a higher percentage of its GDP on health care than any other developed country (most of which have nationalised health care systems) while covering far fewer services. That's absurd! Lack of government intervention in these markets (not too much intervention) has lead to much higher prices. That's not all bad, the US has the best education and health care institutions in the world (the incentives are there). It's not all good either, everybody pays a higher price...even for (mostly) crapier educational and health care services.

[quote=maat55;267538]

I see the world governments heavy in debt and placing an unfair burden on future generations. Aside from this is the fact that mankind was not created to be ruled, the american experiment has proven that freedom works and big government fails.

Ironically, the US national debt is in much worse shape than many other developed countries with greater social programs....much due to irresponsible tax cuts, unnecessary wars and massive bailouts of under regulated (too free?) financial institutions. As for the reasons mankind was created, I won't reply as that seems to fall out of the scope of a discussion forum on finance.

[snafu]

Some of this discussion is down right scary! When Americans abruptly stopped buy cars, GM went into bankruptcy, line workers were laid off, dealerships shut and a lot of those employees defaulted on their mortgages. The housing market crash had millions of jobs tied to its millions of components.

I could hardly believe what I was reading! So many posting described China. In that Communist country, everyone is responsible for their own success. It is almost totally a cash society. Credit cards are not available so if you want to buy something you must have the cash. If you want to eat, you must work. If you are sick, you'd better have good relationships with extended family who are willing to keep a roof over your head and food to sustain you. When you go to a walk-in medical clinic [very rare to have a private Dr. or appointment] the 1st person you see is the cashier. She takes your $$$ and gives you a paper which entitles you to go to the waiting room and wait until your turn [like a bake shop or a deli]. You may be sicker than the 100 people ahead of you but that's not how the system works.

Having a car is likely the number one desire of every family. Public transit is cheap, efficient and crowded beyond description. Deodorant isn't a well know product and the people jammed near you smell awful. Everyone want their children to go to school. Schools are mostly private and even public schools charge tuition. No money, no education, no education makes getting a job...any job nearly impossible. When you finally get a job as a porter carrying heavy bricks up bamboo ramps the contractor delays, forgets, never pays you. You have no support. Yes, there are laws that are similar to American laws but no one enforces them. The job of the government is to protect you from the unknown. They spend an incredible amount of money monitoring/spying on their own citizens. There is a camera on every light post. Chinese must have authorization to go to another city or another province. Tourists/foreigners can go where they like.

Taxes are very low, in a cash only society earnings and profit are what you say it is. No check back system. 2.1 billion people so the government is thrilled they have mostly ended people dying from starvation.

They charged the guy who made the decision to add bleach to baby powder milk formula to make it whiter and more appealing to new mothers. Yes, several hundred babies died and government officials were embarrassed by international attention.

Prior to the Beijing Olympics, they wanted to tear down the more than 100 y/o Hutongs [communities] as they still lacked indoor plumbing. The seniors were summarily moved out even though they could prove generations of ownership. The developers could see the god of PROFIT.

ok, kicked over the soapbox BUT Watch out what you wish for, I doubt you would like it.

[maat55]

[quote]

Originally Posted by thekid

Financial instruments fueled the bubble. The housing market didn't go bunkers on affordable housing programs (which i'm not a fan of anyway).

Many of the subprime loans were accepted by F&F which were promoted by the government. Investors would not have participated without government backing.

In Canada, real estate loans and bank speculatory practices with such financial instruments were much more stringently regulated and as a consequence zero canadian banks failed and there was no housing bubble and subsequent crash. Canada has affordable housing programs and a governmental equivalent of feddie/fannie.

Despite driving the cost of housing up since the 70's, F&F operated fairly safely. It was the CRA initiative that prodded the bubble into existence, along with Bush's housing policy.

I do believe in free markets, not as an ideology though.

Free markets are not an idiology, and they are not supposed to be purely free, it is to have limited fair regulation, not heavy government participation.

Don't know that people realize the extent to which the worlds biggest financial institutions failed. Without state intervention, the world's financial system would have crumbled. The businesses that operated imporperly were the world's biggest financial institutions and they would have gone bankrupt in scores. Anybody that thinks this should have happened as per free market ideology needs to look at the consequences of that. It is unthinkable. It would have sent the world economies into the dark ages.

This is a tough call, but this country would have been better off in the longterm to have allowed them to fail. IMO, the government exposed them to a virus but they accepted it. The whole point of a free market is to self regulate risk, they allowed the government to distort free market principles.

For some reason every other developed western country has more governement intervention in the higher education market and lower costs. Health care is another biggy. Again, the US government spends a higher percentage of its GDP on health care than any other developed country (most of which have nationalised health care systems) while covering far fewer services. That's absurd! Lack of government intervention in these markets (not too much intervention) has lead to much higher prices. That's not all bad, the US has the best education and health care institutions in the world (the incentives are there). It's not all good either, everybody pays a higher price...even for (mostly) crapier educational and health care services.

We have the best institutions in the world, the best facilities, the most resources, this is not due to government management. What we do have is enough government intrusion to distort their costs. Canada has a handfull of MRI machines, the us has over 2500, you cannot compare the us to any other country.

Ironically, the US national debt is in much worse shape than many other developed countries with greater social programs....much due to irresponsible tax cuts, unnecessary wars and massive bailouts of under regulated (too free?) financial institutions.

We have too much debt due to too much defense spending and social programs. The bailouts should not have occured, and again, the financial institutions were distorted with government involvement into the free market.

As for the reasons mankind was created, I won't reply as that seems to fall out of the scope of a discussion forum on finance.

I bring this up due to the world is not one big secular arena, it is filled with those of some form of faith. This country was based on christian beliefs. How we conduct our government and economy is not just an dicussion from an secular point of view, the american Constitution was designed to protect God given freedoms, this plays a very important role in the governing and economy of this country. As this country turns secular, it is also decaying.

[thekid]

We agree that the norm should be free markets and that regulation should be the exception. We disagree on the impact and optimal scope of such regulation.

That's fine. I've said my piece, you've said yours and it was a fun discussion.

I won't get into a religious discussion save as it relates to finances and limit that intervention to stating that I clearly think that religious belief should be of no consideation when discussing economic policy.

[maat55]

Originally Posted by thekid

We agree that the norm should be free markets and that regulation should be the exception. We disagree on the impact and optimal scope of such regulation.

That's fine. I've said my piece, you've said yours and it was a fun discussion.

I won't get into a religious discussion save as it relates to finances and limit that intervention to stating that I clearly think that religious belief should be of no consideation when discussing economic policy.

Enjoyed it, live long and prosper.