Brianna

If everyone else is jumping off a cliff....

15 posts in this topic

Earlier this evening, i was talking to my mother about some short-term debt I racked up while moving to MI to start my new job (had to stay in hotels for a couple weeks waiting for my apartment, made 4 12-hour round trips driving, had to buy some business wear... you get the idea). She was commenting on the fact that I don't really have much furniture yet in my apartment, and I said I wanted to pay off the credit card first. She asked how much debt I had, I said about $2000 (my salary is enough to pay this off handily if I am thrifty). She said that was nothing, not to worry about it, lots of people my age have that much or far more and it was fine. I replied with the title of this thread. She actually suggested keeping the debt and not paying off much more than the minimum in order to build up a good credit history, despite the fact that it would cost me more money and there would be no point in it, as I already have an excellent credit score.

It's not just that particular attitude either. My mother confuses me. On one level, she understands the fundamental laws of economics and the basics of our monetary system, has read and agrees with much of Rand's work, and in general knows the current trend of the US economy and government policy can only end in bankruptcy. On the other hand, she complains that I am "so right-wing" even as she acknowledges that what I say is nothing but the truth, tells me to "stop being so political" whenever I ask her to stop making comments to the effect that my future as a female engineer is assured b/c of affirmative action, complained about my extensive vocabulary when I was a teenager (it was somehow offensive and condescending to those around me to use large words in their presence), and otherwise continues to behave as though she is in complete ignorance of reality despite the fact that I know she's not.

So here's the point of this thread. My mother is someone who "gets it." I know she gets it, because she's said many things to that effect. However, she is also someone who seems determined to run off the cliff with the rest of the lemmings, even though she can see the cliff approaching and knows what is going to happen. Does anyone else know of people who seem to understand the truth privately in their own minds, and then conducts their lives as though they are in complete ignorance? Can you shed some light on why people might do this?

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So here's the point of this thread. My mother is someone who "gets it." I know she gets it, because she's said many things to that effect. However, she is also someone who seems determined to run off the cliff with the rest of the lemmings, even though she can see the cliff approaching and knows what is going to happen. Does anyone else know of people who seem to understand the truth privately in their own minds, and then conducts their lives as though they are in complete ignorance? Can you shed some light on why people might do this?

Evasion and compartmentalization are psychological methods used by many people who do not want to or cannot integrate their knowledge with their actions. To paraphrase Howard Roark, they only understand "down to a certain point." I think an error you're making is assuming that they understand the truth in their own minds in the same way that you do. How people act represents their true premises, no matter what they say or claim to understand. Actions are the physical manifestation of how well they have integrated their ideas. You need to conceptualize your opinion of others based upon their actions, not what they say. If you do that, you'll grasp that they really don't understand the truth in their own minds.

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I think an error you're making is assuming that they understand the truth in their own minds in the same way that you do.

That is a very common error most people -- especially good people -- tend to make. Not being able to read someone else's mind, they "fill in the blanks" with their own understanding and motivation. It is called "projection" in psychology.

How people act represents their true premises, no matter what they say or claim to understand. Actions are the physical manifestation of how well they have integrated their ideas. You need to conceptualize your opinion of others based upon their actions, not what they say. If you do that, you'll grasp that they really don't understand the truth in their own minds.

I agree and this is very good advice.

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I think an error you're making is assuming that they understand the truth in their own minds in the same way that you do.

That is a very common error most people -- especially good people -- tend to make. Not being able to read someone else's mind, they "fill in the blanks" with their own understanding and motivation. It is called "projection" in psychology.

How people act represents their true premises, no matter what they say or claim to understand. Actions are the physical manifestation of how well they have integrated their ideas. You need to conceptualize your opinion of others based upon their actions, not what they say. If you do that, you'll grasp that they really don't understand the truth in their own minds.

I agree and this is very good advice.

It also occurs to me that the issue applies to "good" people as well. There are people who don't intellectually understand Objectivism fully and disagree with some of its ideas but nevertheless act in accordance with its virtues and pursue rational values.

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Debt is not necessarily a bad thing if used productively. And rates are the lowest ever and unlikely to get much lower (or rather, they have a lot more way to go up than down). If you have productive uses for the cash (such as a startup or to fund expansion of your commercial activities), or you anticipate large payments, now is the time to get cheap (fixed rate) longer term funding. Mr Bernanke is determined to destroy the value of the dollar, as it gets him out of the debt mess, and it is the only solution to the USA's solvency issue in the short term. No point standing in his way.

Amusingly this is how my parents funded our education. The amount they now owe British banks is tiny compared to the value we got out of the cash at the time.

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I will add the Argentinians know this situation well, as as soon as they get paid, they spend (on anything, cars, real estate, USD...). Within a year their money is worth 30% less, which is a strong incentive to move out of cash and into value preserving products. Cars increase in nominal value with use! And now the Argentinians are saying "haha, the Americans want to be like us..."

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I don't disagree that there are valid reasons to be in debt, but I prefer to do that only when necessary and when the money is being used productively and not just a static debt. It should be deliberate and for conscious reasons. Especially when you are starting out, I think it's better to be debt free and with a growing, well-invested nest egg. From there, you don't have to make decisions out of stress, desperation, or carelessness; as those are usually lousy decisions. So I agree with your thinking Brianna. If everyone else is jumping off the cliff, you can enjoy the scenery or paraglide.

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I don't disagree that there are valid reasons to be in debt, but I prefer to do that only when necessary and when the money is being used productively and not just a static debt. It should be deliberate and for conscious reasons. Especially when you are starting out, I think it's better to be debt free and with a growing, well-invested nest egg. From there, you don't have to make decisions out of stress, desperation, or carelessness; as those are usually lousy decisions. So I agree with your thinking Brianna. If everyone else is jumping off the cliff, you can enjoy the scenery or paraglide.

Sustainable debt is necessary to grow a capitalist economy. Borrow now, create capital and invest it, make products and repay when the profits come in. That is the dynamic of a growing economy. Without credit, a capitalist economy cannot function.

ruveyn

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I don't disagree that there are valid reasons to be in debt, but I prefer to do that only when necessary and when the money is being used productively and not just a static debt. It should be deliberate and for conscious reasons. Especially when you are starting out, I think it's better to be debt free and with a growing, well-invested nest egg. From there, you don't have to make decisions out of stress, desperation, or carelessness; as those are usually lousy decisions. So I agree with your thinking Brianna. If everyone else is jumping off the cliff, you can enjoy the scenery or paraglide.

Sustainable debt is necessary to grow a capitalist economy. Borrow now, create capital and invest it, make products and repay when the profits come in. That is the dynamic of a growing economy. Without credit, a capitalist economy cannot function.

ruveyn

The original question addressed specific issues of debt, how to refinance it, and whether it was justified to simply do something because someone else was doing it. Brianna's question was not a general question about monetary policy.

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I've always viewed consumer debt as different than using low-interest debt in a business venture (hopefully borrowing at a rate lower than the yield on your investment). Often, people blur the line between these two in conversations about debt, but they aren't the same thing. Maybe I'm the wierdo on this...

Your mom sounds like my mom in that she says one thing but knows another.

My next car will be paid for with cash, but I might entertain a 2% loan for something really fancy. :)

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I'm more and more tempted to borrow and buy GLD or physical gold (storage in HK is only $80/year for a vault that can hold millions of USD's worth and you can do it anonymously), as well as some property in future havens.

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I'm more and more tempted to borrow and buy GLD or physical gold (storage in HK is only $80/year for a vault that can hold millions of USD's worth and you can do it anonymously), as well as some property in future havens.

If you really want to buy physical, then I'd suggest you talk to David Batson (look him up on FB and send him a message saying Brianna referred you). He does investing for people too, but you need to commit a much higher minimum for that than you do for a simple monthly purchase plan for physical metal.

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Thanks, but I always invest myself, via minimal cost online brokerage, and I live in Switzerland, home of private banks, should I need protection from the breakdown of the rule of law. I might make an exception for real estate and jobs, but definitely not for commodities.

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Make sure you have insurance. 25 years ago, in Vancouver they tunnelled under the floor of a vault, breaking through the concrete floor and emptied the deposit boxes. Dig a hole somewhere to conceal it?

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I'm more in line with Brianna with regard to personal debt. The one thing I made sure of before I left the US more than three years ago was that I'd never get myself into any serious long term credit debt ever again. Before leaving I paid down about $25,000 and sold my car. Currently I rarely extend my credit debt beyond a few months. I would say I have become financially cautious, what with the state of economies lately. Australia is in considerably better shape, but even so, I refuse to put myself in a situation where I could be wiped out if I were to lose my job. Like my physical health, I prefer to remain financially lean and mean.

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