Nassim Taleb on Debt

Nassim Taleb says in this interview that the debt problems of 2010 are worse than those of 2008, he has re-released his now famous book ‘Black Swan’, and his core belief presently is that recession is not the issue, debt is the issue. Fragility is exacerbated by high levels of debt – we can see that from an Irish context on Sovereign Debt/Bank Debt (whether the problem is real or perceived).

One of the most poignant things Taleb talks about is the failure of stimulus, and he rightly points out that Greece is not being asked to ‘stimulate’ their way out of their debt issues, they are being asked to look for austerity solutions, perhaps Keynesian beliefs might be shunted once again into history?

The point holds true in our opinion, high levels of debt are a wealth destroyer and inhibitor to prosperity, the drag on economies, in particular our own, will be evident for many years to come.

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An ounce of prevention beats a pound of cure – banks need to change how they deal with arrears

Currently banks are not interested in dealing with customers who ‘might go into arrears’, they tend to brush them off – instead focusing on the people who are already in actual trouble. This doesn’t seem rational to me from a business perspective – and this approach would fail any standard test of common sense – if you knew a storm was coming would you carry an umbrella? If you knew and were warned in advance that it was going to be a blazing hot day would you get some sun-cream? Oddly the Irish mortgage lenders defy logic when it comes to knowing that certain clients are going to fall into arrears, and this is going to ruin thousands of credit histories that could otherwise be maintained. Credit aversion might be the name of the day now, but these same consumers may feel differently in five years time.

Any credit crisis we have encountered on individual levels has always had …

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How can I avoid reposession?

With news coming in that repossessions are rising it is an opportune time to give our readers a few ideas of what you can do should you find yourself in difficulty. Repossession is always a last resort for a lender, they will generally not come out of the deal profitably, the person who bought the property will also come out a loser with a bad credit history to boot.

So what should you do if you think you may be have problems with your mortgage? First and foremost you need to contact your lender straight away once you feel there is a problem, ignoring the issue is the worst thing you can do because it means you will be passing by viable options and could arrive at a point where they no longer exist with the double whammy of still having problems, problems which will only escalate if not resolved.

1. Switch to an Interest Only loan: This may be an option on your home and …

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Debt Reduction blog: 11th September 2008

There are two types of debt, good and bad. It really is that simple, broadly speaking there is personal debt and investment debt. Personal debt would be anything that is spent on assets likely to depreciate rapidly (some would argue housing belongs in there recently!) or that has no ongoing inherent wealth creation once used. If you were to say that with the two debt types they can be either good or bad then personal debt would lean to the ‘bad debt’ side, although it doesn’t mean it’s an actual bad debt in the sense that payments are being missed.

An example of this would be money spent on a car, clothes, furniture etc. with personal debt you should always try to ensure you have a good reason for incurring it in the first place, not simply out of ‘ease of use’. If your car broke down a new (new can also be second hand!) car may be warranted, a new car for the craic may be affordable but from a debt perspective its deplorable.

Then we get onto what …

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Debt reduction & personal finance weekly blog Aug 25th 2008

Today I will give you a tip about the single best way to reduce and avoid debt, it is perhaps the most effective method known to man. Here it is…

“Don’t borrow any more money”

Simple enough to almost make you feel conned I bet? The fact is that debt begets debt and if you enter into a lifelong debt cycle it is something that is virtually impossible to free yourself from. The very first step towards financial freedom and a life out of debt is to realise this fact and to come up with a solution.

Some people think that if they consolidate loans that they will then have more money, but what do most of them do with this ‘extra money’? Save it? Or do they then get more debt and the extra money thus goes into the debt vortex as well?

All good ideas have an exit plan [one of the very reasons Iraq was such a terrible idea to begin with], and you can make yours. To do this you have to decide how you will …

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Debt reduction & personal finance weekly blog Aug 25th 2008

Today I will give you a tip about the single best way to reduce and avoid debt, it is perhaps the most effective method known to man. Here it is…

“Don’t borrow any more money”

Simple enough to almost make you feel conned I bet? The fact is that debt begets debt and if you enter into a lifelong debt cycle it is something that is virtually impossible to free yourself from. The very first step towards financial freedom and a life out of debt is to realise this fact and to come up with a solution.

Some people think that if they consolidate loans that they will then have more money, but what do most of them do with this ‘extra money’? Save it? Or do they then get more debt and the extra money thus goes into the debt vortex as well?

All good ideas have an exit plan [one of the very reasons Iraq was such a terrible idea to begin with], and you can make yours. To do this you have to decide how you will …

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Debt Reduction Blog. What happens if you miss mortgage payments? August 16th 2008

A question we are sometimes asked is ‘what do we do if rates rise and we find it hard to make payments?’. The root of the answer lies in not getting into debt you may not be able to service in the first place, having said that the home of your dreams is not always going to be sold at a dream price and many people are feeling an increasing debt burden in 2008. This is down to a slowing economy, redundancies, increased margins on loans, and ECB rate increases.

Today’s post will have some simple tips about money management and ways to avoid bad debt. For a start you need to get a piece of paper and write down guaranteed outgoings, such as mortgages, personal loans, credit cards, groceries etc. If there is a hierarchy in what requires priority food comes first then further down the line debts, for debts (if you ever have to make that choice of which one not to pay) make sure you pay your mortgage first, and personal loans further down the line.

However, …

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