British Expatriate Network

I've been watching Fox News a lot the past week (for the entertainment value rather than to learn anything) and enjoyed the smugness they are feeling over what is going on in France.

O'Reilly had a guest on who was American but warning that the US economy would crumble before the French one, to which O'Reilly of course disagreed strongly.

The thing is though (and I write this as a layman with little to no knowledge of global economics), the guest (whose name escapes me but he'd written a book on the subject) pointed out that France's economy was not based upon massive borrowing.

I've always questioned the borrow/spend system that seems to come from the bottom up - or is it in fact the top down? To be in debt to anyone is not a situation to aim for surely, whether an individual or the world's largest economy.

On a much smaller, closer to home scale, I think of the multitude of items and services that we are strongly encourage to buy every day but truly do not need. We're encourage to take loans, use the equity in our homes, credit cards, store lines of credit and other creative means to spend money that we do not have - ultimately lining someone else's pockets with the interest payments made for those items which on reflection are not generally worth the total cost. Does this not apply to countries spending money they do not have also?

One area here that I question is the traditional American oil change. It seems to be a national pastime, to take your car in every few thousand miles and get the oil changed. I drive about the same number of miles here as I did in the UK but I don't recall getting the oil changed nearly so often - perhaps once per year and the cars never suffered any ill effects.

Here I get a note in the mail saying its due from the servicer and of course the little reminder sticker on the inside of the windshield.

The thing is though, my car (and many others made in the past few years) has an oil life sensor that monitors the usage, temperature and consistency of the oil in the engine and lets me know when it is approaching the end of its life. I looked through the cars records at the weekend and I get a reminder every 3 months to change the oil, yet the car accurately tells me that I only need to get it done every 8 months or so.

Do the math and someone is trying it on. I wonder how many other businesses or services are doing the same and how many of us fall for it?

I think we are living in a false economy and its making me more and more sceptical and miserly.

Completely agree. In fact I wrote to the Wall Street Journal after the Autos editor hotly contested whether you should believe it when you're Porsche tell you need your oil changed at 15000 miles. I thought this was quite normal. I had a BMW in the early 80's and it went 20000 miles without a oil change warning.

The thing is you mention this to Americans and they think you are making it up and you are stark raving mad.

When I passed my test in '83 the usual oil change interval was 6000 miles. Very shortly after that is went up to 9000 miles. The last car I bought was a '96 Escort and the interval was 10,000 miles, which is exactly the same as my Audi now.

I have managed to wean my wife off of the black stuff but I must admit there is little hope for the rest of the nation.

Fox News seems to be turning into a paranoia station - 'It's not me thats the problem, its the rest of the world...', or in this case, 'there are no problems here,... its the "liberal" media reporting everything as bad...'. Its becoming more funny to watch that Comedy Central.

Most amusing was how they attacked the 'mainstream media' for reporting the economy as bad, followed by a news report on how 'consumer spending was down...'...is this negative reporting too?

In my heart I agree with you but in my head, I don't.

On the oil thing, two forces at work here. The manufacturer tells you that the car will do 7500 miles between services as long as you do a good part of the mileage over longish distances, you don't drive through dry dusty roads etc. or other deletirious conditions. The dealer makes his money from servicing the car so he encourages frequent service, he assumes you've driven to the supermarket and back each time you've driven; that's to his advantage. Years ago, they did make loose engines and you would get the combustion products sliding down into the oil and mixing with condensation to form acids. Now they are a lot tighter and can go further between services. The oil sensor on my Saturn is only to be followed if most driving is done in optimal conditions.

The other thing though, the debt is interesting.

On the personal level it took me a while to persuade my wife to take a thirty year mortgage on our first house. I thnk the house cost $28,000 and we borrowed $25,000. (circa 1970)

I had to convince her that we were, in effect borrowing 100,000 loaves of bread,and that after 15 years, with 5% inflation, our dollars would only buy 2 loaves (rule of 72), and when we made our final payment, the buck would only buy 1 loaf. The net result, in terms of loaves of bread, is that we only paid a little more than we borrowed, even if it did look bad in dollar terms.

The trade deficit is also interesting. We had a similar situation in the Reagan era. The Japanese had a trade excess and had bought all the American government bonds they could handle, so they started buying high-value real estate and art. There were complaints that they were buying America etc. etc. Because they were in the market, prices went up. Because prices went up, inflation went up and we went into recession and the art and real estate values went down. Because there was less business in Japan, and because the Japanese banks kept items in the books at the buying price, they suddenly found that the actual value of their reserves were too low, and they got in trouble. They had to sell much of their purchases back at much lower prices. All this time, Japanese banks paid nothing or next to nothing in interest to their customers. They don't have a fast turnover economy. It is only in recent years that their economy has climbed back. They don't borrow and spend the money necessary to get the economy going, they rely on us to do that.

Sorry if I was not very clear here, but I don't want to write a book.

I read an interesting book by this guy a while ago:

"The New Rules of Money are clear: A big, 30-year mortgage is the best thing you can have. You should get as big a loan as possible, and never pay it off. Forget about 15-year loans, never make extra payments, and forget about those bi-weekly mortgage payment plans."

http://www.ricedelman.com/planning/home/rule21.asp

Thats how i have always worked we got a 100% 30 YEAR va loan on this home leaving the profit from selling our previous home for saving or investment .

money (cash )is always the hardest thing to abtain when you most need it .

IF you do fall on bad times and your home is foreclosed you still have whats in the bank *or invested *to rely on but the bank takes a larger hit ( amount of morgage ) you owe .

I do the same with big purchases if the stores offer a pay within 6 /12 months no interest programe i buy the item with that ,and pay an amount every month that will insure the cost is paid up within that grace period .

I usually go 5 months for a 6 month programe and 10 months for a 12 month programe .

I also have 3 c/c with rates under 6 % and im looking for a new offer (usually i get at least 3 offers a week that offer no interesat for 12 months on transfers )and i card surf a lot (transfering one cc account onto another less interest bearing one )
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But if you fall on bad times and don't have a mortgage and own your home, surely the least that will happen is you don't have a huge mortgage to pay so you don't lose your home and keep your security and roof over your head, and still have investments in the bank because you haven't been paying your mortgage for 15 years!

I think you will find that this idea will depend on where you live. Live in an area where property does not change in value for many years, then I can understand why property is not considered an investment. But live in an area where property appreciates at a regular rate then you will always make a profit, if that is what you are looking for. Some of us, however, just want security for ourselves and our children :)

I saw that too...the blamed the liberal media but gave no specific examples I recall.
but all agree vociferously that there was nothing wrong with the US economy. I watch many news channels but can't understand this view. The US mainstream media seems bland and as soon as they have a decent story they turn it inot some kind of human tragedy/personal drama...let's wander round New Orleans and ask everyone how they feel about losing their homes...effing suprise they are all a bit upset..hold the front page.

To return to Pilgrim's point. I agree that we are increasingly bombarded with pressure to buy stuff. I think I manage quiet well to avoid spending on silly stuff I don't need.

I read an interview the Dalai Lama gave recently. He noted that 'the West' (or people who came to see him) were confused. They had a lot of possesions, enough to eat and place to sleep but were very unhappy. I think he advises people to focus on simple pleasures and a spritual life. While I'm not about to go and shave my head and live in a cave I get his point.

I recently returned from Southern Italy where my wfie is from. People there clearly have less money than the average American. However, the sun shines the food is great and I would say people take great pleasure in small things (food/going for a walk/hobbies). They drive very small cars too but I don't know their philosophy on oil changes. I don't know if the average Italian is happier than the average American but they get by with a lot less. I've adopted many of these habits and the feeling of doing without things and living simply works well for me.

I certainly dont understand the US economic arguments that say it is ok to spend money you don't have or that debt is good. I do think it is a cod a time will come when it all goes wollop surely

I agree, it does seem to feel a bit like the heady days before the fall of the Roman Empire here.

People do increasingly seem to be buying an awful lot that they can't handle and this includes services. I do not think that our street is particularly affluent but I get bombarded with sticky things on my door for Merry Maids, garden and landscaping services, laundry services etc. Yet I do see the vans stopping outside other peoples houses during the day. I think however much money I had I'd maybe only start getting these services when I'm too old and infirm to do it myself.

Oh, and when I traded in my 99 Escort this past January I swear I hadn't changed the oil since 2003. Still ran OK.

If you want to be happy, become a Republican and get a job. Republicans are consistently happier than Democrats.

http://pewresearch.org/social/pack.php?PackID=1

"Some 45% of all Republicans report being very happy, compared with just 30% of Democrats and 29% of independents. This finding has also been around a long time; Republicans have been happier than Democrats every year since the General Social Survey began taking its measurements in 1972."

"The correlation between happiness and family income is very strong indeed - reported happiness rises in a nearly straight line through eight levels of annual family income. At the highest income category -- $150,000 and above - fully 50% of respondents report being very happy; by contrast, just 23% of those who have a family income below $20,000 say they are very happy."

I assume this is because Republicans have a positive outlook and a sense of personal responsibility while Democrats just spend all day whining about everything and blaming other people for their problems.

Yeah, and have you noticed Beelzebub has a fuck off evil toothy grin on his face whilst Jesus just smiles benignly? :wink:

Well it seems simple enough.

Earn lots of money, get my weekly dose of Jesus at the megachurch, vote straight republican, watch only Fox news, and be happy.

My only worry is when to schedule the lobotomy.

That's interesting because I'd just assume they are born liars and continue this trait through telephone polls! Or maybe just take great pleasure out of pontificating and telling everyone else how much better they are :razz:

Seriously, thanks for the responses and the other side of the coin, which I had not considered. I'm still not convinced but it does expand the picture somewhat.

Jesus? Wasn't he the guy who got nailed to a piece of wood for saying everything's going to be ok? Typical liberal. He should have got a proper job, then he'd be happier. :smile:

Oh yes, I'm sure it was his own fault he got crucified for being a non Roman lefty. roll

Seriously, we got the same mortgage advice from my father in law as in the link in your article. He said that basically nobody gets such a good loan rate on anything else so any spare cash should to to other things.