How do you think losing the AAA rating will effect you on a personal level?

[a742246]

The downgrade is way beyond my control so I can not worry about that.
Just remember one thing, your health (and family) are the most important
thing, so just be concerned about the things you can control and be happy
with what you have.

 

[padawans]

We have big economic problems in this country, but in comparison to those, this S&P downgrade is a grain of sand in the Sahara.

The first problem we face is that our currency has no intrinsic value. When a currency is not backed by anything of finite value, you can make it up out of thin air, and we have. I'm not going to get political, but when you have unlimited dollars, a government can engage in basically any activity it wants with little immediate pain to its citizens. Gone are the days, such as back during WWII, when we had victory gardens, and gave up silk stockings because we had to, because resources are finite.

Now we just print more money and buy what we want, pushing the day of reckoning down the road in the form of inflation.

We have a bank, in the form of the Federal Reserve, that controls interest rates, but is not a government entity and does not answer to the government.

Again, not getting political, or meaning to, just trying to say that things don't make much sense.

Interest rates have nowhere to go but up. Get rid of your variable rate debt by locking it in or paying it off.

If we have runaway inflation, money in savings loses value compared to money you're earning on the job, so consider taking some savings and making any urgent repairs/purchases now.

Keep an amount in readily-available cash that makes you comfortable and gives you a safety net.

Consider stocking up on things you know you'll use, especially things like a new set of tires, or imported items, that make heavy use of petroleum products in one way or another.

As a general practice, try to become as self sufficient as possible. It's good for you!

Meet your local food producers! If the cost of oil skyrockets, the more you can buy within a 20-mile radius of your home, the better. And locally grown food, in season, is highly likely to be better for you anyway.

I wouldn't panic, though.

I agree with you. No fiat currency throughout history has ever survived. When we stopped backing our currency in gold in 1971 we were done for. There is nothing political about it is what it is. It will be interesting to see where this all ends up.

 

[shortbun]

I sure hope those folks with all the money start spending some of it to stimulate the economy. At this point, I think that's the only thing that will save us from really high inflation.

 

[ScottOKW2K]

I sure hope those folks with all the money start spending some of it to stimulate the economy. At this point, I think that's the only thing that will save us from really high inflation.

Shortbun - WE are "all those folks." In this time of uncertainty everyone is playing it safe, whether it be that individual or family delaying any large purchases, cutting back on current purchases or services, or businesses waiting to see what the demand for their products/services will be or what their expected expenses will be.

I will tell you that my current plan is to use what I have, buy only what I need as necessary, and save to have more available cash. Not great for the economy, but much better for me and my family.

 

[DawnM]

Well, based on the poster's siggy line, I don't think he/she considers her/himself to be one of those to have to do any of the stimulating of the economy!

This is the siggy line:

USE IT UP, WEAR IT OUT, MAKE IT DO OR DO WITHOUT.

IF YOUR UPKEEP EXCEEDS YOUR INCOME THEN YOUR OUTGO WILL BE YOUR DOWNFALL.

Shortbun - WE are "all those folks." In this time of uncertainty everyone is playing it safe, whether it be that individual or family delaying any large purchases, cutting back on current purchases or services, or businesses waiting to see what the demand for their products/services will be or what their expected expenses will be.

I will tell you that my current plan is to use what I have, buy only what I need as necessary, and save to have more available cash. Not great for the economy, but much better for me and my family.

 

[Colleen27]

I will tell you that my current plan is to use what I have, buy only what I need as necessary, and save to have more available cash. Not great for the economy, but much better for me and my family.

We're doing just the opposite. Right now I believe that some level of inflation is inevitable, so rather than squirreling away more cash than we normally would we're buying a little extra here and there as sales of non-perishables arise, pushing up the timetable on some minor home improvements and building projects, and basically making cash reserves a lower priority than they've been. The emergency fund is still there and untouched but we're not plowing more into it because I believe those dollars will have less buying power down the road than they are now.

 

[crusoe2]

We're expecting some pretty high inflation rates at some point in the not too distant future. We don't think it will reach the point of hyperinflation but do think prices could get so high that even households with two good incomes will have trouble paying the bills.

To prepare, we're doing whatever we can to keep our monthly expenses as low as possible. We're doing as others have mentioned - taking care of any crucial purchases/repairs/improvements now and stocking up on necessities. We figure we can buy ahead on things like household supplies and clothes for our 8yo. But we can't stock up on things like electricity and insurance. We want to free up as much of our income as possible to cover those kinds of things.

We've already paid off all debt except our house - we don't have any other bank loans, credit card debt, student loans, or anything. (Gotta tell you, that took years but it was an awesome feeling when we made our goal.) Cars are paid for and we're making do with just 2 of them even tho we have 3 drivers in the house. For the moment that works okay for us and we don't see that changing for awhile. We are keeping an eye out for a good deal on a third car tho - preferably something we can pay cash for. Then if circumstances change and DS and I can no longer keep our current sharing arrangment, we won't be put in the position of having to buy a car in a hurry and at any price.

We're currently working on getting our variable rate mortgage changed to a fixed rate and borrowing enough extra to take care of some much needed home repairs and improvements. Wish we didn't have to borrow the extra but it's for things that are absolutely necessary now and/or could make a huge difference in how well we're able to cope later. For example, we plan to put in a wood-burning stove for an alternate source of heat since what we have is electric. We've already replaced our central heat and air with a MUCH more energy efficient system - literally cut our power bill in half. But if power rates go up drastically, even our nifty new h/a unit may be too expensive to run.

Judging by some of the previous posts, it sounds like some of you are "preppers." I'm fairly new to it myself and would love suggestions of good websites and discussion forums on the subject. Many of the ones I've found are aimed at more extreme measures than I feel will be necessary (for my family, anyway). Please share if you have some good ones.

 

[Princesca]

I sure hope those folks with all the money start spending some of it to stimulate the economy. At this point, I think that's the only thing that will save us from really high inflation.

Ironically, if we have high inflation, people spending is exactly what you DON'T want. Inflation is a result of too many dollars in the workplace, which is why people are worried that quantitative easing done by the Federal Reserve will cause inflation. Once dollars are flooded into the system, especially in a recession, they are hard to pull back. One way they will try to pull them back is by jacking up the rate you can get with a savings account, say... therefore encouraging people to pull money out of the economy. In a recession, though, not many people can afford to save, because the cost of goods keeps rising while salaries lag behind. That's why inflation is so often a vicious cycle that keeps feeding on itself and is incredibly hard to stop.

 

[Princesca]

We're doing just the opposite. Right now I believe that some level of inflation is inevitable, so rather than squirreling away more cash than we normally would we're buying a little extra here and there as sales of non-perishables arise, pushing up the timetable on some minor home improvements and building projects, and basically making cash reserves a lower priority than they've been. The emergency fund is still there and untouched but we're not plowing more into it because I believe those dollars will have less buying power down the road than they are now.

I completely agree. Not to mention that, especially as regards repairs, labor can be had for dirt cheap these days. In short, if you need a new roof, and you have the cash on hand to pay for it without leaving yourself strapped, you should probably go ahead and do that now. At least, that's my opinion.

 

[Princesca]

I should add, though, that inflation is going to be GREAT for people that have a lot of fixed-rate debt. You'll be paying it off with dollars that are worth less, per dollar, than when you took out the loan, and your salary should be going up (if a little delayed) in relation to inflation as well. You'll also be well-positioned if you have a lot of assets that will appreciate in value... and I would include stocks in that. We don't often think of it this way, but a company's stock price is also subject to the laws of supply and demand, therefore also inflation.

It's going to be scary for people like my mom, who are on Social Security. There are usually COLAs for those, but they're not going to happen quickly, because the government will not want to admit that we have an inflation problem - the public tends to get upset when they hear that news, and inflation has a really bad rap, generally. So it won't be acknowledged for quite awhile, which means that those on government assistance, including the elderly, will probably have income that will lag significantly behind the cost of living.

In fact, at least a few weeks ago, we were already seeing mortgage rates start to slowly tick up, and the Fed hasn't raised their rates, so the mortgage rates are ticking up of their own accord. As a previous poster mentioned, you can see it at the grocery store too. Have you seen the price of butter lately?

 

[Free4Life11]

This rating agency gave AAA ratings to subprime mortgages that were no better than junk bonds, why exactly should we care what they think? Clearly, they have bad judgement. I get it, they still have a lot of "pull" but I can't get over how so many key players have faced NO consequences from that entire mortgage debacle.

I just hope this does not cause interest rates to increase as I'm trying to pay down debt and a higher rate will just make it that much harder.

 

[Colleen27]

Judging by some of the previous posts, it sounds like some of you are "preppers." I'm fairly new to it myself and would love suggestions of good websites and discussion forums on the subject. Many of the ones I've found are aimed at more extreme measures than I feel will be necessary (for my family, anyway). Please share if you have some good ones.

If they are out there I haven't found them. I mostly lurk at Freedom Gardens and IDigMyGardens.com because I'm still fairly new to heirloom gardening and seed saving and have a lot to learn, and both forums have a homesteading/prepper/self-sufficiency element but any forum that is for preppers tends to be too extreme for me. I'm not looking to fight my way through the zombie apocalypse after all.

I don't consider myself a "prepper" because I feel like the term evokes a far more radical set of views than I personally hold. I'm just someone who is used to dealing with variable income (for 5 years now our sole income has been DH's home improvement company, and before that he was working for someone else in the same variable/seasonal industry). When times are good we stock up on things we know we'll need, because bad times - even if only the winter slow season - are just part of what we do. The same habits that work for seasonal ups and downs have worked equally well against economic ups and downs.

 

[Princesca]

Personally, I would start with the Red Cross recommendations for bare bones disaster preparedness. That's a kit that will cover you for 72 hours. Only you know what your family needs, but I consider the general basics to be:

- A gallon of potable water per person, per day, not forgetting pets

- Food that will provide your caloric needs for 72 hours. Should be non-perishable (as much as possible), easy to open, and edible without heating

- An OSHA approved first aid kit and fire extinguishers

- An all-hazards alert radio with digital SAME technology

- A spare set of clothes, or two

- Extras of essential medications and multivitamins

- Flashlights, spare batteries, duct tape, plastic tarp, latex gloves, respiratory masks

- Copies of your most important documents - deeds, birth certs, etc.

- Contact info. for friends, relatives, and service providers (like your family doctor)

And most of all, have a plan! Again, the Red Cross website has all the info you will need. FEMA's ready.gov is a good resource too.

http://www.redcross.org/portal/site/en/menuitem.d8aaecf214c576bf971e4cfe43181aa0/?vgnextoid=72c51a53f1c37110VgnVCM1000003481a10aRCRD&vgnextfmt=default

ready.gov

 

[Princesca]

Here's another resource: a week by week to-do list to help you get prepared. I haven't been following mine, but I hope to get to it soon.

http://FoodStorageMadeEasy.Net

 

[punkin]

I think the drastic fall of the stock market (which I think is only tangentially related to the downgrade) will affect me more. I'm getting ready for a real wipeout.

Of course should interest rates go up, paying my mortgage (ARM) will be interesting.

Also, my current thinking is that there will not be significant inflation in the near future. I am more afraid of depression.

 

[fkj2]

This rating agency gave AAA ratings to subprime mortgages that were no better than junk bonds, why exactly should we care what they think? Clearly, they have bad judgement. I get it, they still have a lot of "pull" but I can't get over how so many key players have faced NO consequences from that entire mortgage debacle.

I just hope this does not cause interest rates to increase as I'm trying to pay down debt and a higher rate will just make it that much harder.

Or, finally, a credit rating agency is trying to re-establish its own credibility.

The problem, as I see it, is that despite the recent increase in the debt ceiling, no significant responsibility has been accepted that will improve our debt-to-income ratio in the USA that will improve our country's creditworthiness.

Look at this board: If people have excessive debt, they cut back on expenses and maybe get another job to improve their credit score. USA needs to do the same thing: cut back and get another job. Trouble is, we keep off-shoring them so that companies can take advantage of low-cost production, which boosts the value of their stock. We allowed the ever-increasing stock market prices to do our "retirement savings" for us. Now that's at risk if the market trends downward.

My biggest concern is what we, the public, don't know about the fundamental problems below the surface.

 

[Princesca]

We may not know about them, but I assume we're rife with them. Generally, I follow the disaster preparedness adage of: Plan for the worst, hope for the best.

As I mentioned previously, the biggest problem as I see it is that our money has no intrinsic value because it isn't linked to anything of finite value. That enables us to make all kinds of poor fiscal and public policy decisions because we can, theoretically, pay for everything and anything. We don't understand the concept of sacrifice anymore, in terms of our national behavior (as individuals, we are coming to know it all too well) and a whole slew of people try to tell me that you can't apply the sound principles of personal finance to the government. To that I say, "Baloney!" I have yet to hear one good reason why government cannot be expected to manage its money like we have to manage our family finances. You spend more than you make? You have two choices: spend less, or make more. Or both. There is no third option for us of printing money in our basement. In fact, I'm pretty sure the government would take umbrage over that. Yet, if you think about it, how different is quantitative easing, really? I mean... if counterfeiting is illegal because people shouldn't be able to just create money and buy stuff they shouldn't have...

 

[gina2000]

If entities dump treasury securities and dollars, interest rates will rise. Too much supply, not enough demand.

The Fed has already eased in the hope of stimulating the economy and it has not worked thus far. If consumers begin to spend, there will be modest inflation and growth rippling through the economy. You won't see rampant inflation until the demand for dollars exceeds its supply or the dollar becomes so worthless against other currencies that it goes thru devaluation. In the past, the Fed has been known to tighten much more quickly against inflation rather than ease to stimulate the economy. During this economic cycle easing has done nothing to stimulate demand. Bring jobs back and you'll see employment stability and spending....and demand.

Gold is a floating price commodity. The only way to establish a credible link between money supply and gold is to stabilize both. And if you can stabilize money supply, you don't need to link it to a gold standard.

We've got a mess on our hands because the government can't spend its way out of the recession. And consumers will not...due to lack of jobs, credit problems, or lack of job security. Corporations are sitting on record amounts of cash that they will not commit until they see demand. Corporate spending is probably the only way to stimulate the economy at this point....and corps are exceedingly reticent to spend based on consumer behavior.

 

[HHSTigerFan]

We refinanced our mortgage and pulled money out for home improvements that were badly needed because figured thats the cheapest money we will get in some time.. Now going to focus on getting CC debt paid off as quickly as possible, just switched most of it to a new fcard with a fixed rate of 6.9% for life on transferred amount..

 

[padawans]

If entities dump treasury securities and dollars, interest rates will rise. Too much supply, not enough demand.

The Fed has already eased in the hope of stimulating the economy and it has not worked thus far. If consumers begin to spend, there will be modest inflation and growth rippling through the economy. You won't see rampant inflation until the demand for dollars exceeds its supply or the dollar becomes so worthless against other currencies that it goes thru devaluation. In the past, the Fed has been known to tighten much more quickly against inflation rather than ease to stimulate the economy. During this economic cycle easing has done nothing to stimulate demand. Bring jobs back and you'll see employment stability and spending....and demand.

Gold is a floating price commodity. The only way to establish a credible link between money supply and gold is to stabilize both. And if you can stabilize money supply, you don't need to link it to a gold standard.

We've got a mess on our hands because the government can't spend its way out of the recession. And consumers will not...due to lack of jobs, credit problems, or lack of job security. Corporations are sitting on record amounts of cash that they will not commit until they see demand. Corporate spending is probably the only way to stimulate the economy at this point....and corps are exceedingly reticent to spend based on consumer behavior.

I have to disagree with you fiat currencys don't work the only way you can stabilize the money supply is to link it to gold. Gold has been used as money since the beginning of time.