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Unintended Consequences - Creating More Debt by Trying to Make Less
Unintended Consequences
Creating More Debt by Trying to Make Less
By
Cognitive Dissonance
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Towards the end of my recent radio interview (@ 1:48:00) we briefly discussed the financial system illusion, the potential for social disruptions that would result from the deconstruction of the system and the process of withdrawing or disentangling from the system itself. I mentioned to the interviewer an ironic twist that may result from disentangling or withdrawing to some degree or another from the system.
If you think it is difficult changing banks when so much of our financial life is entangled by direct deposit of wages, dividends, interest, social security or pensions; automatic debits and bill paying of mortgages, credit cards, insurance, utilities etc, then imagine the complications involved when substantial withdrawal from the system is attempted and many financial and physical connections are severed. It can become quite entangled and complicated, more so at least initially, rather than if we had done nothing.
For example let’s say you moved several hundred or even a thousand miles away to a more rural area. While you could and probably will still maintain your existing banking relationship, at least for a while, your local credit union or small community/regional bank may not have branches where you are moving to. In fact in many rural areas there is only one bank within ten, twenty, even fifty miles of your new home and possibly only two or three within several hundred miles.
Since modern life still requires checks to be cashed and/or deposited, personal checks to be written and currency to be held on hand, a new banking relationship would need to be established where you now live. This means several different types of accounts under various titling would be required since you still need to maintain (or increase) certain outside financial relationships until you can sever them.
Essentially you would need to maintain some portion of your old life at the old bank and also extend it to your new bank and location, plus create your new life at the new bank. Some of this will eventually be unraveled, but for now you have fed the banking system both by opening additional accounts and by moving more ‘money’ into the fractional reserve system as you liquidate assets. On the margin you have actually increased your Ponzi presence rather than reduce it. But it gets worse, much worse.
Regardless of whether you are selling a primary residence, income producing commercial property, a partnership or business, something we all must do to some extent or another if we are to move and begin to withdraw, while you may be paying off the debt associated with the properties, the buyer is more than likely taking on even more debt in order to purchase the asset.
Often this is simply because the asset you are selling has been held for many years and its debt has either been significantly paid down or extinguished during that time period. In some cases the asset has appreciated as well, requiring the buyer to take out a mortgage for an amount even greater than your original mortgage, let alone the balance now due.
In addition, even though your intention was to own your new residence free and clear of all debt, because you are initially cash crunched you might decide to take out a small first mortgage on the new place in order to preserve some of your cash to afford you more flexibility while you sold other assets and made improvements and repairs to the new property. This small debt could be extinguished soon, but once again more debt was created in order to help you disentangle.
Finally, as noted above you are probably making several improvements and repairs to your new place which requires additional spending above and beyond what you would normally engage in. While the expenditures are essentially capital improvements that will enable or assist you in continuing to whittle down your footprint within the Empire, it is still more short term fuel on the Ponzi fire.
This doesn’t include any additional spending by those who purchase your real estate, either to enhance or repair the property, meet newly enforced code requirements or just to be able to fix it up to increase revenue potential or in order to resell to others. In addition I’m not taking into account all the various closing costs on both sides of the HUD-1 that feeds the industry that feeds the real estate market that feeds the Ponzi leverage.
Oftentimes commercial property is bought with as much leverage as possible and with the intention of extracting any built up equity at a later date to once again leverage the purchase of another property. While that may not have been your intent if you kept your income producing property or business, it is more likely to be the case for the purchaser of the property you are divesting to. The beast is fed once again.
Of course, there are other ways to skin a Ponzi. You could have remained in your primary residence and begun the process of leveraged investment divestiture from there. Then when that was complete, and depending upon how much cash you wound up with, you could purchase your new home followed by the sale of your primary residence, Or do it the other way around: sell your house, then rent while you looked for and purchased your new home. This would have limited to some degree the feeding of the beast.
But as we all know, or will know soon enough, the real estate ‘bidness’ is up and down and the best time to sell is when there is a market for the sale of your properties, pushing the sales price up, and the best time to buy is when there isn’t a market for the property you wish to purchase, pushing that price down. Since you would be doing both, and time may be of the essence because of several complicating personal issues, for example a child unit that needs to be settled in a school system or the place you want won’t be there for long, you probably don’t want this process extended out over many months and potentially years. So you choose the devil you know.
You most likely won’t receive a windfall from the sale of the properties. While stock market assets may have been boosted by the Federal Reserve, personal and commercial properties have not responded equally well. In some cases, particularly personal property, while the potential selling price may be off the floor set in 2008-09, they have not recovered anything close to their highs except in a few select markets. Commercial income producing property is a little better, but there again it is all about location, location, location and not all commercial property is doing well. Not exactly the best time to sell.
You are committed to deleveraging your life, both personal and financial, so if it can be avoided you don’t wish to bring harm to yourself just to minimize the effect on the Ponzi. Thus your goal is to finish this process, or at least this portion of the process, as quickly and efficiently as possible. That said you’ll probably pick the path that suits you best since you do not owe allegiance to the Ponzi nor to those who will be left behind when it falls.
When the deleveraging process has begun it will be remarkable to witness first hand, once pen is put to paper and outcomes are projected to the end of the divestiture, how the entire financial system is geared towards stacking the chips higher and higher, with leverage upon leverage utilized to leverage even more. Each financial intermediary along the way of stacking and restacking of the Jenga blocks encourages the swift passage of their portion of the Ponzi simply because they are financially compensated to do so.
There is simply no way for the financial system to regress, to contract or even just to stabilize in order to buy some time to dismantle it and create something more sustainable. When every step along the way someone is dipping their buzzard’s beak into the cow pie, either for a living or for wealth enrichment and enhancement, no outcome other than collapse or a slightly slower crumble appears possible.
It is supremely ironic that those who wish to withdraw or minimize their interactions with the Ponzi might actually feed it on the way out. This alone speaks volumes towards how dysfunctional and truly unsustainable it is.
03-30-2014
Cognitive Dissonance
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here a tangentially associated musical link
that may make sense but surely does the heart
some kind of sound good.
.
Tom Waits - Gun Street Girl
https://www.youtube.com/watch?v=l4XZWZ91kfc
.
this one offered with a full dose of
empathy, prayers and for-give-ness.
peace
Bobbie Gentry - Ode To Billie Joe
https://www.youtube.com/watch?v=CZt5Q-u4crc
My wife says that this sounds like one of those animatronic blowhards at Disneyland.
Take me away CogDis.
Just because there are unintended consequences doesn't mean we shouldn't continue to withdraw. But it is important to be settled with all aspects of the process so that there are no regrets later on.
https://www.youtube.com/watch?v=HP4tt81S8OI
Pointer Sisters - Cloudburst
I think you should ditch the namby bamby "ice flow" name and try out "the faces of fleece" to "rev it up" here.
noun: floe; plural noun: floes; noun: ice floe; plural noun: ice floes 1.
a sheet of floating ice
Thank God I'm not all namby pamby and there is an actual definition for my website misspelling. :-)
All the more reason for the need for a good general education. Narrow-mindedness is a disability, vet or no vet.
When did you become so angry? You weren't always this way. Why beat your fellow slaves about the head? What does it actually accomplish other than to bring you some morbid satisfaction?
WTF If you're going to withdraw you might aswell take the biggest mortgage you can get, or student loan if you don't have the 'credit score' for a mortgage, and NOT PAY IT BACK. Then you may purchase precious metals or whatever you may wish with the newly created currency and just ignore the bank thereafter.
Why would you give a shit about your 'credit score' if you are "withdrawing" from the system anyway?
So you will sell your soul for the short term gain?
So you place ill gotten gain over that of principle?
Let's go hunting. I will seek out psychopathic ilk to hunt. There will be a plethora of game in the Killing Fields.
There is no justification for fraud and theft. NONE.
The wages of sin are DEATH.
Here is my street address...
12223B Woodside Avenue
Lakeside, CA USA
Let's go hunting...
So it seems that just because other people can slash and burn their way out of the forest I should as well? Sorry, not wired that way. But help yourself, there seems to be some time left to play in the mud. I'll keep myself busy playing wanna be mountain man.
I remember once many years ago asking my Grandfather how he managed to survive the Great Depression. His answer was illuminating:
He said that early into it, the banks called every loan that they knew could be repaid......at that time it was good to either be debt free or up to your neck in debt, but not liquid. Those folks got hosed. He was completely vested in land with no great amount of cash in the bank. Land prices had crashed because of illiquidity, so there was no marketplace for the banks to force a sale. He weathered the storm.
Nobody
Your grandfather was right but it applies to more than the Depression. Once a fractional reserve bank runs into liquidity issues then demand loans are the first to be called, at any time, depresson or no depression. Less liquid loans and loans that are hugely underwater are the last ones a bank will deal with.
To Cog: If you elect to produce less- things of value- then you create a smaller tax footprint. I've reduced my tax footprint (and other attendant headaches that went along with being a workaholic). I have 80% less employees, less property taxes, less fees, etc. and nothing I am doing is contributing to the Ponzi.
But I agree that the Ponzi will carry on... until it can't.
Regards
K
Walking away from debt might just be a very risky fantasy.
Think 3rd Party collectors chasing you the rest of your life and the return to Debtor Prisons. Consider the trend to private prisons which fosters the criminalisation of more behaviours to ensure corporate revenue streams and cheap (forced) labour for profit targets.
Debt is slavery.
http://www.zerohedge.com/news/2013-12-26/how-debtors-prisons-are-making-...
http://www.zerohedge.com/news/2013-08-14/us-consumer-bankruptcies-jump-m...
Veritas. Bankruptcy works so long as not many people do it.
Once everyone does it, the velvet glove is removed and reveals an iron fist.
Those who don't learn from history and basic economic principles will tend to be pummeled badly.
Yes...The ol' Iron Fist.
But Iron can be corroded. It does oxidize readily. (I like the smell of thermite in the morning. It smells like Death and Destruction. It is armor piercing also.)
Of course that Oxidation process can be made more rapid, rather explosive, when the conditions become right...
Like, for instance, when the masses go hungry.
FAMINE.
Coming to an American theater soon...
Don't miss it, folks.
It will be Audience Participation Night.
It will gnaw at you.
It will be spectacular.
I've just completed a total move out of the TBTF federally governed bail in banks to a provincially regulated credit union not subject to bail ins. I sleep better now. Can't understand why anyone would continue their exposure to the big banks.
When you leave the Ponzi, there is one less victim ensnared. There are many steps to climb out of their hole. Whereas, you choose to climb out, others choose to climb in or stay in. There is no moral value or intellectually consistent requirement to stay ensnared, because others are ensnared.
Free,free at last,is a choice without a required guilt.
at above. @
"Unintended Consequences
Creating More Debt by Trying to Make Less"
.
it has been analogized as a
"rat through a snake" and
financed with nothing but
debt conjured from thin air
but with strings, ropes, chains
and balls attached.
economics and demographics,
dismal as a science.
.speaking of the forest and the trees,
is it just me or did you ever notice;
.
in the forest there sometimes appears
a space and state of being,
an environment or (local) milieux
termed a "spirit room"?
probably no google search to describe this.
.
a space where the trees in apparent
perfect harm-onic to uni-son
have grown revealing a canopied silence
a carpet of last year's cover
filled with nothing
but spirit
space and silence become a soft
cool breeze from below.
spirit of the forest under
space between the trees speaking
unmistakably, loud and clear.
.
but i wonder concerning a photograph
of this and how the eye, should there be a
broken and fallen tree or branch, is invariably
drawn, as to fire, to that one.
.
is this how all can be gained/lost
in a moment of artistic interest
and beauty?
anyway poems *tm
.
musical type links upon request.
Nice. Been there, experienced that, spent years learning how to get a photograph that hints at it Group f64 -style.
The government pays for me to exist. I liked the article though.
?
omg , this is so incredible
I see 4 ponzi schemes in existence right now:
1. Social Security
2. The stock market
3. Education (as it stands today)
4. The U.S. dollar
Even Houdini couldn't get out of all these.
'Just when I thought I was out, they pull me back in.' Godfather III
'Just when I thought I was in, they brutally pulled me out of heaven'
Casanova jailed in the Doge's palace cells for licentious behaviour in Venice.
(As reported in his autobiographical "Story of my life").