60 Minutes - People losing their homes..

[HiredGoon]

Your brain may initially reject the idea, but it really starts to make things seem clearer.

Now you know why in this supposed boom time with lots of money everyone is in immense amounts of debt - it couldn't be any other way.

If people stopped taking out bigger and bigger loans to buy property, there simply would not be anywhere near enough money in the economy for those who are currently indebted to pay their mortgage bill. New and crazier schemes to increase indebtedness must be found to pass the mass foreclosures and eventual deflationary collapse onto new buyers, and save the ones currenly in debt.

Maybe it is subconcious - I'm not sure that most people who are heavily in debt know this, but is this why they try and convince others to buy and take out debts? To save theirselves?

 

[Kingbrown]

So, in summary:

1. Banks create money.

2. There will always be debt.

3. The money I use to pay interest on my loans comes from thin air.

Well, I just used thin air to buy great Malaysian food.

I love economics!

 

[timmyboy]

Well said Nat, not sure if I would have picked it over the "Wine Appreciation" class in year 11, but would definetly have picked it over history.

It could easily be part of the economics class.

Dave

i did economics thru yr 11 and yr 12.
whilst i appreciate the whole supply and demand thing.......
i appreciate a good red on occassion and a good white more regularly

Tim

 

[timmyboy]

Problem is that most teachers dont understand enough about money to be able to teach it. And then, anything the kids would be taught about money would probably be viewed as 'greed' and 'anti-social' so there's no hope there.

I went to a high school as part of a careers presentation recently, and they did appear to be teaching the year 9/10 students about loans, finance etc, but I dont know how much.

I'd love to go to my kids school when they're in secondary school, and just teach them about money for an hour. I'd get through as much as I could before they dragged me out of there, but it would be nice to get kids to think about how to make money work for them, and how it can help them in their lives. Beats working 9-5 in a crappy job until you're retired and too old to enjoy it (no offense to those who are retired AND enjoying life!) But school is all about churning out wage earners.

Money is a very misunderstood thing. It runs through our entire society, and yet people bury their heads in the sand about it. They think its unimportant, but if you look at the things that ARE important to people, nearly all of them can be acheived, or at least helped along in some way with more money. eg. The desire to spend more time with your family can be helped if you had more money, since you wouldnt have to work as much, if at all.

And yet everyone bitches and moans about their job, but still say that money isnt important to them.

Well, that's about it for me on the topic for now.

I agree with pretty much all of the above about making money work for you etc...
however - how does a kid fresh from school, whatever level that may be - actually lay his/her hands on any of this money in the first place, in order to get an amount that they may be able to then make work for them?
Other than get a job and work for your money for a few years, or inherit, or win the lottery, or borrow at no interest/no repayment, or fall across a suitcase in the street....??

Tim

 

[WinstonWolfe]

Australia has been increasing it's borrowing at a rate of 16% compounding annually since the 1970s. We're currently at a debt:GDP ratio of 160% and starting to see a record number of foreclosures. Pointing out that 16% growth in debt with 4% wage inflation is not sustainable is hardly necessary.

This probably sounds like I'm making this up. I wish I wasn't. Ask Alex Lee, he works in a bank.

HG, I enjoy your posts in general. You express yourself well and always seem logical. I agree with much of what you say......however, consider this.

To my simple mind, debt is just a promise to repay money sometime in the future. If people are making promises to pay money further into the future, there will be more debt on the books. Is that such a bad thing?

Well, it is if they lose the ability to earn money at the rate they thought they could.


Nevertheless, the boys at BHP reckon the resources boom is not something short term, and that Australia has many reasons to focus on upside for decades to come.

 

[sailor]

high school is starting to get to late - unless you catch the kids in yr 7-8. i would like to see something in the primary schools, even if it was serveral games of cashflow for kids played once every 2 months by the entire class.

imo, that would be more important than making coconut ice.

Good point Lizzie. I remember in Grade 1, the CBA came around and we all opened a savings account, where we deposited one shilling a week. It was such fun to see our bank books grow each week. By the time we had a pound we were thrilled. Such good training for saving money, and we were only 6 years old at the time.
I also think that some parents (many of the ones I come across), just buy their kids doodads. Kids don't have to do any chores around the house to EARN this money or the doodads. So they don't learn about having to exchange their labour for $$$$. They then learn that you just get money for the asking...just like they do from the banks when they want to buy their McMansion.

I dont know why they dont use financial scenarios to teach maths in High school. Rather than the stupid problems they give, use examples like

a) How many hours a week does John have to work to pay for his car?

b) If Sue pays for her holiday on Credit card, how much does it really cost her?

c) How much do interest rates have to rise before Mark cant pay for his house?

After a few months of answering questions like this, the penny is bound to drop....

Good point Dis. The educators of this country could make maths more applicable to real life. Kids need to learn this stuff somewhere.

 

[DrGraeme]

Financial education in schools etc.

Dave

In referring to Robert Kiyosaki as "Robert Kimosabi" I don't know whether yours is a real question or just some ignorant or sarcastic comment. Until we get some clarification maybe its better to just ignore your question.

Graeme :-(

 

[BoatBoy]

Dave

In referring to Robert Kiyosaki as "Robert Kimosabi" I don't know whether yours is a real question or just some ignorant or sarcastic comment. Until we get some clarification maybe its better to just ignore your question.

Graeme :-(

Sorry bloke, not derogertory at all, just a funny name I picked up from a previous poster here.

Go ahead

Dave

 

[lizzie]

Your brain may initially reject the idea, but it really starts to make things seem clearer.

i really enjoyed you post explaining money ... for the last 20 years i've not considered money a physical thing. money/promisy notes are just a means of exchange.

amazing how freeing and stress reducing that concept is - as long as you have something to exchange, be it labour, ideas, goods, then you'll survive.

 

[alexlee]

I agree with pretty much all of the above about making money work for you etc...
however - how does a kid fresh from school, whatever level that may be - actually lay his/her hands on any of this money in the first place, in order to get an amount that they may be able to then make work for them?
Other than get a job and work for your money for a few years, or inherit, or win the lottery, or borrow at no interest/no repayment, or fall across a suitcase in the street....??

Get a job and save. There is no reason that a normal person can't save 10+% of their after tax income. You don't have to buy a property at 18. Save money FROM 18 and you can buy a property at, say, 25. The first one is the hardest. You can start buying shares for $500. In the early years it's the experience, not the numbers. The numbers will grow naturally: you need to work on experience.
Alex

 

[DrGraeme]

Financial education in schools etc.

Great Dave

Of course Robert goes into it in great depth, but one of the main themes in "Rich Dad Poor Dad" was the lack of financial education in the school system and it's delaterious affects. One particular point he raises is that the poor and middle classes are taught that one's principle place of residence is an asset when it is really a liability.

Graeme

 

[alexlee]

One particular point he raises is that the poor and middle classes are taught that one's principle place of residence is an assett when it is really a liability.

Graeme

Most of us have read the book. Though 'teaching' people that their PPOR is an asset is surely the fault of the parents. Parents ask the school system to make their children employable. Parents do NOT ask the school system to teach their kids to become investors. You can hardly fault the system to do something that no-one asked them to do and arguably no parent really puts much value on (at least not when compared to the academic stuff that will get your marks for the exams).
Alex

 

[BoatBoy]

Great Dave

Of course Robert goes into it in great depth, but one of the main themes in "Rich Dad Poor Dad" was the lack of financial education in the school system and it's delaterious affects. One particular point he raises is that the poor and middle classes are taught that one's principle place of residence is an asset when it is really a liability.

Graeme

Yep, had heard that, but haven't got around to reading that book as yet.

Thanks

Dave

 

[Puffdragon]

I personally prefer Scott Adams (creator of Dilbert) take on all things financial
(Taken from his blog at http://dilbertblog.typepad.com/the_dilbert_blog/ )



A reader sent this story about his workplace.

-------------
“A theme from many of your previous comics came true to life for us today. Quality in the workplace.

Yesterday, a pointy-haired boss decided our meeting room needed nice motivational pictures on the wall. Twelve by eight inch, wooden frame, 1940s-style motivational tools (think 'Rosie the Riveter' in artwork, color and font). So an assistant was ordered to procure such things.

The first mistake was where the artwork was obtained from. Rather than pay $15 per picture for the real thing, it was decided to take the small JPEG images of what we wanted from a website that sold these trinkets. Cheap picture frames were bought (from a dollar store, by the look of things).

When the images were enlarged to fit into the 12 by 8 frames, the pixelation was terrible. In itself, this was funny. A picture that celebrates the idea of quality in the workplace looked cheap, and knowing it was a stolen image lessens the impact of the message slightly.”
-------------

This story made me think about one of the great wonders of capitalism: It is driven by morons who are circling the drain, and yet. . . it works!

Think about all the people working and earning paychecks from companies that will ultimately fail. It’s a lot of people. But until those companies fail, the employees are getting paid, buying goods, and contributing to the economy. After the failure, those employees hop over to another sinking ship, and so on.

Within successful companies, a huge portion of resources are dedicated to projects and products that will ultimately fail. But in the meantime, everyone is getting paid and propping up the economy.

I once worked in a bank, making loans to small business start-ups. Our rule of thumb was that 90% of new businesses fail. The exceptions were franchisees and pizza places. But we saw no shortage of people willing to mortgage their homes to start their own sporting good stores and boutique dress shops, despite the 90% chance of failure. Without clueless optimists, the economy would grind to a halt. My own career has been a long string of failures and a few notable successes.

I understand the math of capitalism, and how the few successes are so large they pay for all the failures and then some. But at any given moment, the majority of resources in a capitalist system are being pushed over a cliff by morons. This fascinates me. And it’s clearly the reason that humans rule the earth. We found a system to harness the power of stupid.

In the rest of the animal kingdom, being a moron is nothing but bad. A moron lion, for example, who can’t catch anything to eat, is adding nothing to the lion economy. But a moron human who starts a business selling garlic flavored mittens is stimulating the economy right up until the point of going out of business.

My point is that I hope the monkeys that already know how to use sticks for tools don’t start using leaves for money. If that happens, we’re screwed.

 

[steveadl]

I agree with pretty much all of the above about making money work for you etc...
however - how does a kid fresh from school, whatever level that may be - actually lay his/her hands on any of this money in the first place, in order to get an amount that they may be able to then make work for them?
Other than get a job and work for your money for a few years, or inherit, or win the lottery, or borrow at no interest/no repayment, or fall across a suitcase in the street....??

Tim

No one said they can do it fresh from school/uni. They're going to have to save up first, but the idea behind more financial education at school is that they actually do save it, or at least are aware of the consequences if they don't. Otherwise the cycle continues of building up large credit card debts, car loans, overseas trips ASAP, McMansion @ 100%LVR at age 22 etc.

 

[DrGraeme]

Alex

Your reply raises a few questions.

Most of us have read the book. Though 'teaching' people that their PPOR is an asset is surely the fault of the parents. Parents ask the school system to make their children employable. Parents do NOT ask the school system to teach their kids to become investors. You can hardly fault the system to do something that no-one asked them to do and arguably no parent really puts much value on (at least not when compared to the academic stuff that will get your marks for the exams).
Alex

The suggestion that parents ask the school system what to teach is a like the chicken v the egg arguement. Teachers and parents tend to be products of the school system. How do parents know what to ask schools to teach when they are products of the same system?

One could argue that it was the government (which ironically is made up of a lot of people influenced by the school system) decides school curriculums. They decide that they need certain numbers of trades people, scientists, etc etc to be employees. You will probably find that large businesses would support the government doing that. They need employees and consumers.

Robert Kiyosaki (who's father as high up in the Hawaii education system) said that when he was at school it was policy that 30% of students should be failed so as there would be enough workers for the suger cane industry.

More recently my son was required to do LOTE (Language Other Than English) for the first three years of secondary school. He had to choose between Japanese, Italian and one other. He ended up doing Japanese. For most of the subjects taught, whether english, mathamatics, science, home economics, woodwork etc one could argue that there was a good probablility that things taught would be of use to the student. What are the odds that Japanese will be of use though. Even if the student does need to deal with another country in the future what are the odds that it is Japan? Spanish would be much better, as it is possibly the most widely spoken language in the world. being sarcastic Russian would be more useful because there is a plentiful supply of Russian brides.

Why do they have to do LOTE for three years. Its not because parents request it. It's arguably not for the benefit of the student. They do it because the government and powers to be deem that Australia needs to be able to trade with the rest of the world, hence we (as a country) need enough people to speak each of the other languages.

Graeme

 

[Norwester]

Puff Dragon,

My point is that I hope the monkeys that already know how to use sticks for tools don’t start using leaves for money. If that happens, we’re screwed.

Suggest you steer clear of the Planet of the Apes movies.......lest you freak out.

and Welcome to the SS forums..........

ciao

Nor

 

[alexlee]

More recently my son was required to do LOTE (Language Other Than English) for the first three years of secondary school. He had to choose between Japanese, Italian and one other. He ended up doing Japanese. For most of the subjects taught, whether english, mathamatics, science, home economics, woodwork etc one could argue that there was a good probablility that things taught would be of use to the student. What are the odds that Japanese will be of use though. Even if the student does need to deal with another country in the future what are the odds that it is Japan? Spanish would be much better, as it is possibly the most widely spoken language in the world. being sarcastic Russian would be more useful because there is a plentiful supply of Russian brides.

Funny you should mention Japanese, of all things. I studied Japanese for a few years (just for fun, while working), ended up living and working in Japan, and will be marrying a Japanese girl next year. I disagree that Japanese isn’t useful. Long odds, to be sure, but who knows what the future will bring? In terms of its affect on my life (mainly in the form of my fiancé, mind) Japanese has kicked the crap out of any subject I studied at school. Tell your son about the JET program (teaching English in Japan, often in rural areas). Another language opens up new horizons. In fact, a foreign language is exactly the sort of non-academic stuff that we should be encouraging more of in schools.

Why do they have to do LOTE for three years. Its not because parents request it. It's arguably not for the benefit of the student. They do it because the government and powers to be deem that Australia needs to be able to trade with the rest of the world, hence we (as a country) need enough people to speak each of the other languages.

If parents don't request it, they should. A language, in my opinion, is FAR more important than many subjects. It's about understanding that it's a wide world out there. Understanding that other people are different. Americans in general could use a lot more education in foreign culture, especially those in power. Many wars and arguments could be avoided if only different peoples understood each other better.

In my own case, I fully plan on encouraging my kids to learn as many foreign languages as they can / want. You certainly don't need another language to live overseas: it's for the culture. In any case, foreign language skills are generally pretty crap amongst Australians, compared to the Europeans, say.

I still don’t see what you point is. I’m saying that the school system, rightly or wrongly, is not designed to teach financial skills. Whether it should or not is a separate issue. The education system does what we planned for it to do, however unconsciously: produce employees and consumers. Parents want their kids to ‘succeed’ so they play the game. I’m saying don’t look to the education system for financial education. Do it yourself. We didn’t design the system to produce investors, and that’s our stupid fault if we now find that we need more.

Saying that parents don’t know what they want is just denying responsibility for one’s own actions. They have everything they need on the net or in their local library.
Alex

 

[wylie]

Have to say, without getting into the whole LOTE argument, that parents don't have a say as to whether the student takes a LOTE. It is mandatory for certain grades.

Personally, I would like to see it as a choice, because my 11 year old hates learning Japanese, and it colours his school experience because the teacher is scary and he doesn't excel. I would rather see him do something he loves twice a week to see him look forward to the lesson, rather than dread the lesson.

I think there are other ways to learn about a culture than try to learn a very complicated language.

Wylie

 

[steveadl]

You raise a good point Graeme! I had to do a LOTE as well for yrs 8-10, and considered it a HUGE waste of time! I had the choice of French, Italian or Chinese.

Had no interest in learning any of them, and can barely remember 2 sentences from the subject I did. That I would consider a BIG waste of time. Fair enough for the people that want to learn another language, but why force it on those that don't?