What does really bad mean in our financial situation??

[Tanya in KS]

Yesterday, I read almost all the thread in regards to the bailout not passing trying to understand what is happening in our country. Several people stated over and over it is going to get really bad.

 

What does that mean? What is going to get bad?

 

I live in VERY rural Kansas. Farming community. We are not close to any major cities - closest one is two hours away. Hubby does not think all this will affect us - I just am not sure because I do not understand the "really bad".

 

Thoughts to my ignorant mind would be appreciated.

[Sarah CB]

I envy your location. I was looking online at a lovely little hobby farm far away that could be self-sustaining. The thought of 12 acres, a cow, a pig, and some chickens is very tempting right now.

[Renee in NC]

The dangers are hyperinflation and unemployment. Eventually these trickle down to almost everyone. Money is worth less and there is less of it (due to unemployment), so there is less to go around.

 

Where does your dh work and what does he do?

[hsmamainva]

The first major way that this might affect you is in your ability to get loans or credit -- I'm not sure if that affects farmers or not, but I believe it does; for instance, if you need to purchase a new tractor or something. The lines of credit just won't be there or will become very expensive.

 

(Borrowing rates are already escalating, according to CNN today)

 

On a personal note, my dad grew up during the Great Depression (he was born in 1918) and he said that the Depression really didn't affect them that much because they were poor before the Depression, during the Depression, and after the Depression. ;) Whereas my mother, who lived in the city, was hit really hard by it. In that respect, at least you have the ability to grow your own food (which is what my dad's family was able to do)

 

If your children are possibly going to college, student loans will be very hard to come by and also very expensive.

 

Don't know if you have anything invested in the stock market.

[HollyDay]

My cynical side wants to reply:

the fat cat bankers will earn less than $20mil per year.

 

Seriously, the bankers are making money hand over fist and the stock holders are suffering from their outrageously poor choices. This will trickle down into harder times for everyone.

 

BUT, our country does not currently fit the profile for the term "recession". Our gross national product is still up. Seriously, I wonder how much of this is media controlled hype designed to impact the election?

 

Is there a financial crisis? - certainly there are very troubled times, currently and ahead. Everyone is affected in some way. I guess the super rich will have to cut back on getting their nails done. I heard on the news yesterday, a popular singer (who I had never heard of - boy am I getting old!) is having to cut her entourage from 60 down to 50 due to the financial crunch.

 

There is so much more I would love to type, but this is not the forum for it or the place and I do have PMS. For the first time in years though, I am generally afraid for our country and its future.

[Renee in NC]

My cynical side wants to reply:

the fat cat bankers will earn less than $20mil per year.

 

Seriously, the bankers are making money hand over fist and the stock holders are suffering from their outrageously poor choices. This will trickle down into harder times for everyone.

 

BUT, our country does not currently fit the profile for the term "recession". Our gross national product is still up. Seriously, I wonder how much of this is media controlled hype designed to impact the election?

 

Is there a financial crisis? - certainly there are very troubled times, currently and ahead. Everyone is affected in some way. I guess the super rich will have to cut back on getting their nails done. I heard on the news yesterday, a popular singer (who I had never heard of - boy am I getting old!) is having to cut her entourage from 60 down to 50 due to the financial crunch.

 

There is so much more I would love to type, but this is not the forum for it or the place and I do have PMS. For the first time in years though, I am generally afraid for our country and its future.

 

We're not in a recession because they are still calculating inflation at 3% which is too low. Wages have stagnated for many people and the basic costs of living have gone up tremendously. I don't care about the wealthy - they can cut back some and still have a very high standard of living. Those who were just barely making ends meet can't anymore and that *is* bad.

 

We haven't laid anyone off, but we did cut hours. Small businesses are folding at a high rate (especially in hard hit areas like FL.)

[jmgconner]

Yesterday, I read almost all the thread in regards to the bailout not passing trying to understand what is happening in our country. Several people stated over and over it is going to get really bad.

 

What does that mean? What is going to get bad?

 

I live in VERY rural Kansas. Farming community. We are not close to any major cities - closest one is two hours away. Hubby does not think all this will affect us - I just am not sure because I do not understand the "really bad".

 

Thoughts to my ignorant mind would be appreciated.

 

 

I wonder that, as well. I've heard that it would be hard to get loans. Personally, my DH and I have no intention on taking out loans in the future, so we hope that this won't affect us much. I was wondering, if it was difficult to get, say a car loan, would we begin to then see the price of new cars coming down in an attempt to make them more affordable? After all, they wouldn't be able to get a loan, so they'd have to save.

[Alana in Canada]

In broad general terms this is how it may affect you:

 

1) Lack of money in the money supply means banks won't have it to lend. The cost of money will be very high (because it is scarce) thus loans that can be had will be a high interest rates.

Think of anything you may want to purchase with a loan and you'll pay through the roof.

 

2) Secondly, the cost of items themselves may rise. This is a bit more complicated. Take a car for example. Auto manufactuerers aren't able to get the loans they need to continue to build them. So they build fewer cars. Fewer cars mean higher prices. Or secondly, they get these high cost loans--and pass the expense to you. Car prices still go up. However, the cost of those loans mean they can't afford to pay workers what they used to. Either wages will go down for those workers, or the company will have to lay people off (or both). Now you have people with less money than before trying to pay for items which cost more than ever before. Because of the stock market activity and the failure of banks, people also do not have savings to fall back on.

 

Think of every single thing you buy: that's your "car" whether YOU borrow to pay for it--or the company you purchase it from does. This is why so many commentators are decrying an economy based on credit.

 

3) If the Treasury decides to print more money in order to increase the money supply, then it gets dicey. Printing more money always makes the money already in the system worth less. So instead of borrowing $50,000, now you have to borrow $60,000. That cost gets passed down through the system and has the same effect as higher interest --except that now the dollar you do have is worth less than it was before. It IS a way to sort of spread the effects around a bit more--but it is a delicate balance.

 

In either case, prices rise and real purchasing power still goes down.

 

The less you need to borrow or buy, the less you will be affected.

 

I hope I got that right. Please feel free to educate me if I've misremembered my economics 101 class!

Edited September 30, 2008 by Alana in Canada

[Renee in NC]

I wonder that, as well. I've heard that it would be hard to get loans. Personally, my DH and I have no intention on taking out loans in the future, so we hope that this won't affect us much. I was wondering, if it was difficult to get, say a car loan, would we begin to then see the price of new cars coming down in an attempt to make them more affordable? After all, they wouldn't be able to get a loan, so they'd have to save.

 

That may happen, but the likelihood is that people just won't buy new cars. Then the automakers will lay people off and close factories due to lowered demand, which will increase unemployment and reduce consumer spending (which accounts for 2/3 of our economy.)

 

This is all hypothetical, though, as we don't know what will happen, just what could happen.

[Melissa in FL]

My cynical side wants to reply:

the fat cat bankers will earn less than $20mil per year.

 

Seriously, the bankers are making money hand over fist and the stock holders are suffering from their outrageously poor choices. This will trickle down into harder times for everyone.

 

.

 

My husband is a banker and we've never made that kind of money. A lot of our friends are bankers and believe me when I say they are not making "money hand over fist". Most of them are just like you (I'm sure I am), they are struggling to deal with the rising price of gas and food, they are watching their 401K's dwindle, clipping coupons and worrying about the future. Only a few are "fat cat's" and you will find them at the top of all businesses in the USA.

 

To the OP: What does really bad mean? Like I said, my dh is a commercial banker, he has worked with all sorts of companies. What it means to you and me is companies we deal with all the time won't have credit. What does this mean?

 

The gas station down the road uses a line of credit to pay for the gas before delivery and pays the line back down after he sells you the gas. Without the line of credit, he has no way to pay for the gas before you do. Dh has had gas stations as customers.

 

The local grocery store uses a line of credit to keep groceries on the shelves and pay employees. As customers pay for items, they pay off the line of credit and then reuse it when more inventory comes in. If they have no line of credit, they can't pay for the food on the shelves prior to you paying for it. Dh has had major supermarkets as customers.

 

The farmers have a line of credit to pay for new machines (or just repairs), pay for new seed and fertilizer, pay for employees, and transportation of goods. At the end of the farming season they pay it all back. If they have no line of credit some won't be able to plant. Dh has had large farms as customers.

 

Almost any company uses credit on a day to day basis. I know yesterday some said companies should all pay up front, but there are barely any companies who do this. A lot of the lines of credit are secured by the owners home and other owner assets. When those credit lines are secured by those and the value of the home goes down, the bank has to decrease the line, it hurts the company. What happened yesterday on Wall street is scary, a lot of companies lines of credit are backed by the owners stock, when that stock falls the banks have to adjust the credit, which means the company can't stock as much. It is a spiral and it's going out of control.

 

These are small examples of how it might effect YOU, but there is much more to the problem and many more problems than one post can talk about. It's one thing if the local station does not have gas, but what about when BP (just a random example) does not have the credit to get the gas from the middle east? When we have to come up with cash to import the gas we rely on to get to work and get food to the stores? They don't keep that much cash, most of those big companies have their cash invested in the market (which means most of it is gone right now).

 

Bad means BAD! If something isn't done it will effect every aspect of our country, there will not be anyone not effected. Even if a small business is using cash instead of a line of credit, will there be anyone with money to do business with that business? I would say that if something is not done soon it will get really scary, but for us it already is.

 

I hope this sheds some light on an answer for the OP.

Melissa

[Amy in NY]

My husband is a banker and we've never made that kind of money. A lot of our friends are bankers and believe me when I say they are not making "money hand over fist". Most of them are just like you (I'm sure I am), they are struggling to deal with the rising price of gas and food, they are watching their 401K's dwindle, clipping coupons and worrying about the future. Only a few are "fat cat's" and you will find them at the top of all businesses in the USA.

 

To the OP: What does really bad mean? Like I said, my dh is a commercial banker, he has worked with all sorts of companies. What it means to you and me is companies we deal with all the time won't have credit. What does this mean?

 

The gas station down the road uses a line of credit to pay for the gas before delivery and pays the line back down after he sells you the gas. Without the line of credit, he has no way to pay for the gas before you do. Dh has had gas stations as customers.

 

The local grocery store uses a line of credit to keep groceries on the shelves and pay employees. As customers pay for items, they pay off the line of credit and then reuse it when more inventory comes in. If they have no line of credit, they can't pay for the food on the shelves prior to you paying for it. Dh has had major supermarkets as customers.

 

The farmers have a line of credit to pay for new machines (or just repairs), pay for new seed and fertilizer, pay for employees, and transportation of goods. At the end of the farming season they pay it all back. If they have no line of credit some won't be able to plant. Dh has had large farms as customers.

 

Almost any company uses credit on a day to day basis. I know yesterday some said companies should all pay up front, but there are barely any companies who do this. A lot of the lines of credit are secured by the owners home and other owner assets. When those credit lines are secured by those and the value of the home goes down, the bank has to decrease the line, it hurts the company. What happened yesterday on Wall street is scary, a lot of companies lines of credit are backed by the owners stock, when that stock falls the banks have to adjust the credit, which means the company can't stock as much. It is a spiral and it's going out of control.

 

These are small examples of how it might effect YOU, but there is much more to the problem and many more problems than one post can talk about. It's one thing if the local station does not have gas, but what about when BP (just a random example) does not have the credit to get the gas from the middle east? When we have to come up with cash to import the gas we rely on to get to work and get food to the stores? They don't keep that much cash, most of those big companies have their cash invested in the market (which means most of it is gone right now).

 

Bad means BAD! If something isn't done it will effect every aspect of our country, there will not be anyone not effected. Even if a small business is using cash instead of a line of credit, will there be anyone with money to do business with that business? I would say that if something is not done soon it will get really scary, but for us it already is.

 

I hope this sheds some light on an answer for the OP.

Melissa

 

Thanks for this post, Melissa. It's very helpful.

[laylamcb]

Thanks for this post, Melissa. It's very helpful.

 

I agree--an excellent post. I fully expect that when Congress returns on Thursday from campaigning at home, they'll get right to work on some new legislation. What might happen is that the Senate will make some slight change to the Paulson bill and then pass it, which puts more pressure on the House. What I WISH would happen is that real economists and other financial experts would head to the Hill where they'd be involved in crafting something entirely new that doesn't have the Paulson approach at its core and that takes a number of different strategies into account while simultaneously building transparency AND accountability into the plan.

 

But in any case, I think that we can all agree that bad is really BAD. And I have no doubt that things will get worse before they get better.

[Kris]

The inability to get loans thing won't affect us because we don't "do" credit. But Sweetie is worried about his job because businesses *do* rely on credit, and the company he works for is no different. When trucking companies close shop, they don't say, "Here -- let us help you get home." The guys are pretty much left to their own devices, no matter where they might be when it happens. So he told me this weekend to make sure we have enough cash set aside so that I can not only go get him -- wherever he might be -- we can also get back home.

[Quiver0f10]

How will this effect (affect?:confused:) credit card interest rates? Thats what worries me the most. We have way too much CC debt :banghead: and are working on paying it down, but if the % rates rise it's going to be much harder to do that.

[Alenee]

That may happen, but the likelihood is that people just won't buy new cars.

.

 

I actually don't see this happening. We're a consumer country. We want it NOW. I do not believe that the majority of our citizens will actually learn to deal with less. I think they'll be the same as they've always been, doing whatever it takes to get what they want, when they want it.

 

Cynical I know, but look at the track record.:glare:

[Renee in NC]

How will this effect (affect?:confused:) credit card interest rates? Thats what worries me the most. We have way too much CC debt :banghead: and are working on paying it down, but if the % rates rise it's going to be much harder to do that.

 

Very likely so, unfortunately!

[Quiver0f10]

Very likely so, unfortunately!

 

Drat. :sad:

[Melissa in FL]

:sad::sad:

I agree--an excellent post. I fully expect that when Congress returns on Thursday from campaigning at home, they'll get right to work on some new legislation. What might happen is that the Senate will make some slight change to the Paulson bill and then pass it, which puts more pressure on the House. What I WISH would happen is that real economists and other financial experts would head to the Hill where they'd be involved in crafting something entirely new that doesn't have the Paulson approach at its core and that takes a number of different strategies into account while simultaneously building transparency AND accountability into the plan.

 

But in any case, I think that we can all agree that bad is really BAD. And I have no doubt that things will get worse before they get better.

 

I know all my Representatives are in Washington right now working on a better deal, hopefully more of a workout instead of a bail out. I've talked to all their offices today and all three of mine are at work today and plan to have something to vote on Thursday.

 

One of the problems everyone is having is how involved all these different things are that "caused" this. It's so involved in so many levels. My dh has an economics degree, a masters in Finance, and nearly 20 years in the banking world and he's still having a hard time grasping all the pieces that caused this. Everything we hear and read about this is just parts of the problem. Right now what we need is a bill to help the financial world, once it's stable again we can really look into the causes. I asked dh what he thought about what congress is doing, he said it's ridiculous that all these politicians are acting like they know what caused it when most of the best economists in our country haven't figured all the causes yet.

 

We had one of the scariest conversations of our marriage last night. Talking about what we will do if the bank he works for fails. We're praying that does not happen, and if it does we hope it's bought by another bank and doesn't just fail. He's worked for a few different banks in his career and has contacts all over the country, but I'm thinking they won't be looking for new employees if his fails. And if more banks fail it may be the tip of the iceburg and jobs may be scarce. All we can do is hope it goes well and our reps find a solution that frees up the banks.

 

Melissa

[jmgconner]

How will this effect (affect?:confused:) credit card interest rates? Thats what worries me the most. We have way too much CC debt :banghead: and are working on paying it down, but if the % rates rise it's going to be much harder to do that.

 

I'm not sure, but if you close the account now (meaning you'll make at least the minimum payment and not charge anything new), I think they have to continue to honor your current rate. Maybe someone else can chime in and let us know if that's true.

 

That may happen, but the likelihood is that people just won't buy new cars. Then the automakers will lay people off and close factories due to lowered demand, which will increase unemployment and reduce consumer spending (which accounts for 2/3 of our economy.)

 

This is all hypothetical, though, as we don't know what will happen, just what could happen.

 

Ahhhh, I see. Yes, that makes sense.

[Sara R]

Really bad--

 

I'm well known here as a bit of a doom-and-gloomer, so take my opinion with a grain of salt--

 

I think really bad is:

 

inflation in the cost of commodities (the things we need)--of course, as a farmer that may not be so bad for you, because people always need food, and those prices would hopefully go up

 

wages don't go up as much as they did in the 1970s, because we are competing on a global job market

 

Peak oil: this is not related to the current economic crisis but I think it will affect our way of life in the future. Oil production has started to fall, new discoveries aren't entirely making up for decreased production, and oil producing countries are using a lot more of the oil themselves. That means less certain supplies of oil and higher prices (or at least more volatile--prices do go down too, as we've seen in the last few months--but the trend is higher prices). Oil is in a lot of things (plastics, fertilizer).

 

Increased cost of oil leads to more food being produced locally.

 

70% of our economy is retail spending. As people lose jobs and spend less a lot of those jobs are lost.

 

Foreclosures and people tightening budgets could mean that more families share housing.

[Audrey]

Yesterday, I read almost all the thread in regards to the bailout not passing trying to understand what is happening in our country. Several people stated over and over it is going to get really bad.

 

What does that mean? What is going to get bad?

 

I live in VERY rural Kansas. Farming community. We are not close to any major cities - closest one is two hours away. Hubby does not think all this will affect us - I just am not sure because I do not understand the "really bad".

 

Thoughts to my ignorant mind would be appreciated.

 

Are you farming? Do you own the land? If yes, you're going to be in a much better position than most people. Land (not talking about houses here, but real LAND) will be the most valuable asset you can have.

 

Got land? Then you've got a place to live, space to grow food for yourselves and depending upon how much, you may have income from the excess food. Food prices will be going up, so charge accordingly. Not saying you should "stick it to people," but don't undervalue your product either.

 

I'm very glad that we own our land and house free and clear (no mortgage). It was a very tough road to get to that point of having it all paid off, but doggoneit! It's sure looking like it was worth all the sacrifice now!

 

Also, if you're farming, you've likely got very valuable skill sets that are marketable as well. You can probably do a lot for yourselves that others would have to hire out to get done.

 

All in all, I'm not worried one tiny bit. Roof over the head secure? Check. Food? Check and double check. Debt free? Check. Lots of wood cut and piled up for winter? Well... we're working on that one, but mostly a check.

 

To quote my dearest Hutterite friend: We may not have all the things we want, but we know we'll have all the things we need.

[Kathy in MD]

Yesterday, I read almost all the thread in regards to the bailout not passing trying to understand what is happening in our country. Several people stated over and over it is going to get really bad.

 

What does that mean? What is going to get bad?

 

I live in VERY rural Kansas. Farming community. We are not close to any major cities - closest one is two hours away. Hubby does not think all this will affect us - I just am not sure because I do not understand the "really bad".

 

Thoughts to my ignorant mind would be appreciated.

 

Even if you're self-sufficient today and don't think you need to worry about money, what happens if:

 

You don't have cash to pay your taxes, including property taxes? During the depression, many farms were auctioned for non-payment of taxes.

 

If you have crop failure? How will you feed your family, much less have crops to sell? Ask the "Oakies" of the depression what happens then.

 

If no one else has cash to buy your crops, how will you get cash for the things you need? You probably will be able to do some bartering, but your lifestyle will still suffer. Also farmers have often dumped their products because they would lose money to harvest or ship them to market.

 

Are you truly self-sufficeint? How do you get the energy you need to run tractors? Electical equipment? Wells? Do you grow and save your own seeds? Where do you get wood to repair buildings? Tractor repair parts? Can you act as a blacksmith? Butcher and freeze your own meat? Get canning supplies to preserve your food?

 

Finally, what happens if you have someone become extremely ill? Can you pay for the medical expenses and transportation costs to get care? Will the medical equipement and drugs even be available? Will the hospitals be able to stay open?

 

You may not suffer as much as those with few resources in urban areas, but you won't be immune. If it's really bad, it's bad for everyone.

Edited September 30, 2008 by Kathy in MD

[Kathy in MD]

The inability to get loans thing won't affect us because we don't "do" credit. But Sweetie is worried about his job because businesses *do* rely on credit, and the company he works for is no different. When trucking companies close shop, they don't say, "Here -- let us help you get home." The guys are pretty much left to their own devices, no matter where they might be when it happens. So he told me this weekend to make sure we have enough cash set aside so that I can not only go get him -- wherever he might be -- we can also get back home.

 

Even if you don't do credit, it will affect you! Melissa wrote an excellent post on how credit affects all aspects of our economy, and if you buy anything, it will affect you. If your dh loses his job because of lack of credit in the economy, it will affect you.

 

By avoiding using credit yourselves, you WILL be in a better position than most. You don't need to worry about paying off loans and can use your income for purchasing current essentials, like food and property taxes. If you suffer a momentary economic blip, either personally, nationally or globally, you have a good chance of riding it out financially. But if the economic situation gets REALLY bad, you too will eventially run into problems unless you have huge reserves and can invest them well.

Edited September 30, 2008 by Kathy in MD

[Kathy in MD]

:sad::sad:

 

I know all my Representatives are in Washington right now working on a better deal, hopefully more of a workout instead of a bail out. I've talked to all their offices today and all three of mine are at work today and plan to have something to vote on Thursday.

 

One of the problems everyone is having is how involved all these different things are that "caused" this. It's so involved in so many levels. My dh has an economics degree, a masters in Finance, and nearly 20 years in the banking world and he's still having a hard time grasping all the pieces that caused this. Everything we hear and read about this is just parts of the problem. Right now what we need is a bill to help the financial world, once it's stable again we can really look into the causes. I asked dh what he thought about what congress is doing, he said it's ridiculous that all these politicians are acting like they know what caused it when most of the best economists in our country haven't figured all the causes yet.

 

We had one of the scariest conversations of our marriage last night. Talking about what we will do if the bank he works for fails. We're praying that does not happen, and if it does we hope it's bought by another bank and doesn't just fail. He's worked for a few different banks in his career and has contacts all over the country, but I'm thinking they won't be looking for new employees if his fails. And if more banks fail it may be the tip of the iceburg and jobs may be scarce. All we can do is hope it goes well and our reps find a solution that frees up the banks.

 

Melissa

 

This is so true! It's not one person or one group. Or even several. To quote my favorite quote, "I have seen the enemy, and he is us" - Pogo

[HollyDay]

I just want to clarify something from my post. When I referred to "bankers", I wasnt referring to the average person working for the average bank. I was referring to the Wall Street mega bankers whose take home was in the 6 figures. When WaMu failed, it was the stock holders who took the hit.

 

These financial times really, really bother me. A dear friend just declared bankruptcy this month. Another has had to put her college dreams on hold.

 

We personally are making choices now based on fuel prices, grocery prices - the things that affect the daily life. Trips to visit relatives and home improvements are being cancelled so we can afford our daily needs. It makes me mad and scared when I listen to the news about bailout, taxes, etc.

[Kris]

Even if you don't do credit, it will affect you! Melissa wrote an excellent post on how credit affects all aspects of our economy, and if you buy anything, it will affect you. If your dh loses his job because of lack of credit in the economy, it will affect you.

 

By avoiding using credit yourselves, you WILL be in a better position than most. You don't need to worry about paying off loans and can use your income for purchasing current essentials, like food and property taxes. If you suffer a momentary economic blip, either personally, nationally or globally, you have a good chance of riding it out financially. But if the economic situation gets REALLY bad, you too will eventially run into problems unless you have huge reserves and can invest them well.

 

I absolutely believe that it will affect us -- but we won't lose our house. As far as investments, I've been investing in my coffee can for years. I've never trusted Wall Street with my money -- and now I'm glad.

[mamato4girls]

Melissa- That was an awesome post, thank you for posting!!

My husband is a banker and we've never made that kind of money. A lot of our friends are bankers and believe me when I say they are not making "money hand over fist". Most of them are just like you (I'm sure I am), they are struggling to deal with the rising price of gas and food, they are watching their 401K's dwindle, clipping coupons and worrying about the future. Only a few are "fat cat's" and you will find them at the top of all businesses in the USA.

 

To the OP: What does really bad mean? Like I said, my dh is a commercial banker, he has worked with all sorts of companies. What it means to you and me is companies we deal with all the time won't have credit. What does this mean?

 

The gas station down the road uses a line of credit to pay for the gas before delivery and pays the line back down after he sells you the gas. Without the line of credit, he has no way to pay for the gas before you do. Dh has had gas stations as customers.

 

The local grocery store uses a line of credit to keep groceries on the shelves and pay employees. As customers pay for items, they pay off the line of credit and then reuse it when more inventory comes in. If they have no line of credit, they can't pay for the food on the shelves prior to you paying for it. Dh has had major supermarkets as customers.

 

The farmers have a line of credit to pay for new machines (or just repairs), pay for new seed and fertilizer, pay for employees, and transportation of goods. At the end of the farming season they pay it all back. If they have no line of credit some won't be able to plant. Dh has had large farms as customers.

 

Almost any company uses credit on a day to day basis. I know yesterday some said companies should all pay up front, but there are barely any companies who do this. A lot of the lines of credit are secured by the owners home and other owner assets. When those credit lines are secured by those and the value of the home goes down, the bank has to decrease the line, it hurts the company. What happened yesterday on Wall street is scary, a lot of companies lines of credit are backed by the owners stock, when that stock falls the banks have to adjust the credit, which means the company can't stock as much. It is a spiral and it's going out of control.

 

These are small examples of how it might effect YOU, but there is much more to the problem and many more problems than one post can talk about. It's one thing if the local station does not have gas, but what about when BP (just a random example) does not have the credit to get the gas from the middle east? When we have to come up with cash to import the gas we rely on to get to work and get food to the stores? They don't keep that much cash, most of those big companies have their cash invested in the market (which means most of it is gone right now).

 

Bad means BAD! If something isn't done it will effect every aspect of our country, there will not be anyone not effected. Even if a small business is using cash instead of a line of credit, will there be anyone with money to do business with that business? I would say that if something is not done soon it will get really scary, but for us it already is.

 

I hope this sheds some light on an answer for the OP.

Melissa

[Kathy in MD]

I absolutely believe that it will affect us -- but we won't lose our house. As far as investments, I've been investing in my coffee can for years. I've never trusted Wall Street with my money -- and now I'm glad.

 

But if financial problems are long enough and deep enough, you can lose your home. You still need cash to pay your property taxes. Also exceptional problems may crop up that requie you to borrow money against your house as little as you want to.

 

You're still subject to the possibility of losing your home. But you are more heavily insulated from that possibility than most.

[laylamcb]

Another thing to remember is that even if you're not "falling behind," inflation erodes the value of your savings if that savings isn't making any money. So although socking away a little money in cash around the house makes some sense, all things being equal--which of course they never are--it will be worth less each day. So to pull everything out of interest-bearing investments because you see a looming financial crisis essentially guarantees that you'll eventually face...a financial crisis. (Unless you're Ross Perot or Michael Bloomberg or Bill Gates, of course. But then again you'll never see them pull everything out of interest-bearing investments, either.)

 

Does that make sense?

 

On the bailout: I hear that the Senate is going to take up what is basically the same bill with a couple of tweaks--GOOD tweaks, but still just tweaks--and vote on and attempt to pass it tonight. Grrrr. I was hoping that they could wait until the House came back Thursday and start afresh with some hearings with experts and WITHOUT the Paulson plan as the starting point. Our legislators are absolutely bound and determined to start at the top and continue to throw money at this problem. I feel so helpless.

[Kris]

But if financial problems are long enough and deep enough, you can lose your home. You still need cash to pay your property taxes. Also exceptional problems may crop up that requie you to borrow money against your house as little as you want to.

 

You're still subject to the possibility of losing your home. But you are more heavily insulated from that possibility than most.

 

If this situation lasts longer than five years, there will be bigger problems than worrying about paying the taxes on our house. And we don't borrow money. Ever. Period. We do without. Quite often, as a matter of fact. So that's nothing new here.

[Kathy in MD]

If this situation lasts longer than five years, there will be bigger problems than worrying about paying the taxes on our house. ......

 

Very, very true!