A Reaction that is Too Strong to Debt Issues

A Reaction that is Too Strong to Debt Issues

Many people who are experienced and sophisticated know that financial issues become so complicated after each economic cycle that they conclude that “This Time Is Different”. Analysts conclude that doom and misery are here to stay. The economic cycle that collapsed recently was a little different. Greenspan was the Fed Chairman in the US who believed that the best way to smooth out economic cycles is by printing money whenever a bump appears on the horizon. In the aftermath, the economic downturn became much more pronounced than it otherwise would have been. So much for the government being a benefit to all of us.

You’re probably not in a bad situation if you’re already reading this. It’s okay if you find yourself in a financial crisis. As long as you keep your head above water, it is not the end of world. You can prevent debt by using some, or all, of these money-saving tips.

The Extremes of Doom and Gloom

The German government sold bonds worth US$5,13 billion on July 18, 2012 at an average yield -0.06%. That is MINUS 0.06 percent. You invest money to receive less than you invested when the investment matures. The German government borrowed the money for less than zero. The German government will repay the original $5.13bn minus 0.06% when the bonds are due to expire in 2 years.

In this year, the Netherlands and France also issued government bonds with negative yields. They’ve also been able do this like Germany because European bond investors prefer to park their money in a bond which is guaranteed to lose a small sum rather than risking losing more by investing in a PIIGS Bond where they could earn interest.

1. Budget your money. Many Americans fail to create a budget, even though it seems obvious. Many Americans say that they do not have the time to make a budget, they believe they don’t require one or they [insert an excuse here]. Just as you wouldn’t just hop in the car and drive to your destination, you also need to carefully plan out how much money you spend. You can do this by creating an annual budget and monthly or even weekly budgets.
2. When possible, buy generic or store-brand products. You can save a lot of money by not buying name-brand products. You can save money on everything from toilet paper to food, household toiletries and soda.
3. When it makes sense, walk or take public transport. Why not walk if you’re not in a rush and your destination is just a few streets away? This is assuming that it’s not raining or 100 degrees outside, and you’re at a safe wake. Gas will be cheaper and you’ll have more exercise. You can carpool with a friend to save money on gas if you are going a long way. Even a two-day-a-week carpool with parents in your neighborhood to take the children to school can add up.

Doom and Gloom?

Investors had a different explanation for this phenomenon. They view German, French and Dutch bond as cheap options in the event of a possible breakup of the Eurozone. If the EU currency unit collapses, the euro-denominated bond issued by these specific countries would likely be paid in reissued deutschmarks (or francs), guilders or francs. These currencies will be worth more than the original euros spent on the bonds. This is a cheap way to wager on the collapse of the ECU. This thinking has led to a huge demand for bonds in these selected countries. In other words, the fear of a massive meltdown is so great that people are placing large bets to hedge against it.

Purchase When Blood is Spilling in the Streets

Baron Rothschild said, “Buy when there is blood in the streets.” Warren Buffet and many other successful investors have realized that the world will continue to exist after each economic cycle. Exuberance reaches its peak, then crashes, bringing with it misery, loss, and fear. When there is a sense of despair, it can lead to a loss in hope. Once the markets for houses, investments, stocks, currencies or other assets bottom out, people start to invest and buy. Those who do so profit greatly.

1. Use websites such as Amazon to buy books and other used items. They can even be in brand new condition, but at a much lower price!
2. Buy a used car instead. Value starts to depreciate as soon as you drive off the lot. A car just a few years old will save you a lot of money and provide plenty of value. By the time you are ready to buy another car, you will probably be able sell it for the same price as if you bought it brand new.
3. Pay your credit card and other bills promptly. Sign up for automatic payment if you are forgetful. Many places offer automatic bill pay for this reason.
4. Do not have children? If you don’t have children, then there is no need for a landline in your apartment or home unless your landlord requires it. By canceling your landline and switching to your cell phone, you can save money. As long as your cell phone service is good.
5. Brown bag whenever possible. You can save a lot by bringing your lunch to work. Eating at home is cheaper than eating out.

Investing in gold

Some people who are predicting financial disaster cite the historical value and say that gold is the best way to invest. Gold has seen a steady rise in price from $250 in 2001 to $1,900 today. Gold has been stuck in the $1,600-$1,750 range, despite several attempts to move above this high. It was currently trading at $1704 today. It hasn’t reached $2,500 nor $5,000. Like all asset classes, it has responded to the economic slowdown in a reasonable and measured way. In my previous posts I have tracked gold, the reasons for its rise and the technical analysis of it. I will not repeat that here.

What to do

This too will pass, just as in every cycle. The US fiscal cliff is resolved. The US fiscal cliff will be resolved. Politicians may pontificate and pose, but ultimately, reason will prevail. The debt ceiling will rise, expenses will be reduced, and taxes raised. Over the next decade, the US economy will continue to improve, and the natural growth will make the deficit appear smaller each year. Although the US debt is far too high, it is still only a little above its historical average. It is a tragedy that these previous debts were for national defense or urgent matters. Alan Greenspan, the US government and his predecessors are indirectly responsible for this debt.

The USA won’t disappear, and the value of its assets will increase. Although the European Economic Union may be flawed, the individual countries that make up the EU will remain as they are. China’s rise has more than compensated for the economic weakness that the EU lost. The world does not end, but the next cycle has already begun.

Nobody wants to be in a weak financial state during the holidays. The purchasing power of a person is limited by a weak financial state. Insufficient funds are the reason why those with insufficient funds on their account will look for any way to borrow money.

According to reports, approximately 1.55 million people filed for bankruptcy in 2010. You are not the only person to have filed for bankruptcy. You’ll see that many people in your area have been through the same situation as you.

Bankruptcy can lower your credit score by between 200 and 250 points. You will find it difficult to borrow money. Your credit score and report may discourage lenders from lending you money.

At this moment, you need to take two actions. You’ll need to first find ways to improve your chances of obtaining money. You’ll also need to figure out how to celebrate the holidays on a small budget.

This blog is a collection of opinions and not an investment advisory. Investors should consult a licensed professional for guidance and not rely solely on the opinions presented here. This blog does not solicit investment, and we will not accept unsolicited funds.