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F-U-CANCER!!!
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Discussion Starter · #1 ·

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F-U-CANCER!!!
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5,750 Posts
Discussion Starter · #2 ·
Some copy - paste from that other thread....

I have a "VERY" successful financial guy telling me that one of the best things a person could do right now is take as much money out of their house at <3% and invest it in relatively safe investments that are earning a solid 8% and if you want to take the risk, much higher rewards. Me, I won't do that as I want to be debt free for retirement. But since you asked.......... there are times debt is good.
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I agree with Brewmenn on paper, it's a bit harder in practice.

Using a barn as an example. In 2020, two people get quotes for a barn for $25K.

Person A gets a 10% home improvement loan with a plan to pay back in a year.
Person B decides to save for a year to avoid having debt.

A year later Person B has $25K saved and goes to get the barn, but 2021 prices are now almost $50K for that barn. Person B has no barn.

Person A has a barn. And if they paid off the mortgage in a year paid about $27.5K for that same barn.

Problem is that inflation is on everything, and hurts most on daily consumables like food, vehicle fuel, electricity and home heating. But yeah, if you know a big ticket item price is going up, and you can get an interest rate less than the rate of inflation, it might be worth it.
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Most of us minions believe we should be debt free when we retire. (me included) Many financially successful people will tell you that's hogwash, if you can make more money by leveraging your debt and using your available cash for investments, many times you will come out far better.

The difference is you and I are afraid of what may happen and we run out of money. The other guys are not afraid because they are confident they will NOT run out of money. It's two different mind sets and neither is right or wrong. You are only right or wrong many years down the road depending on what happened in the world. No one has a crystal ball but hindsight is 20/20.
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You need to be smart with your debt.

Think about money as a relatable commodity attributed to your labor. You don't like working hard for nothing, correct? Why would you do the same with your money?

Whenever I see someone walk into a gas station I know they don't understand money. Everything related to a gas station costs you more than you should the moment you leave that pump. All the rewards for that transaction is at the pump. The rewards card, the cash back on your credit card, your time... all at that pump. As soon as you leave the canopy to go inside you're throwing away your time and money.

I've used other people's money for decades. While in college I was taking out cash from credit cards and putting the money in money market accounts. It paid for a lot of stuff, but it was a bit scary knowing I had tens of thousands of dollars of debt hanging over my head. At one time I had more in credit card debt than I paid for my first house.

I still do similar things today, but a lot of the financial instruments out there for making money is out of "commoners" spending power. I still use rewards cards. I suspect this year I'll be north of $5k back on my credit cards. That's like $400/month salary increase by paying attention to which credit card I use for what, and how I use the points. We bought a new refrigerator last year and paid half price for it because Chase was offering 50% increase on points if you pay your purchase back with points. So I used one credit card that earned 5% bonus points and transferred the points from the purchase to be paid for using the card that offered 50% increase on those points.

I still owe $160k on my house. Could I write a check to pay for it? Sure. But it's a 2.5%. That's less than inflation. Even some bond investments I have pay better than 2.5%. I still owe on my student loans also, but the expensive one is 3.875%. But I haven't paid any interest since March 2020. Could I write a check to pay those off? Yeah, I think I'm down to $16k on those. But do I care? No, most of them are in my parents' name anyway and they get all of the interest back on their taxes. So its like paying my parents like $250 a year.

If I could find something to buy right now that isn't overpriced grotesquely would I borrow every penny I could? Yeap. Inflation is going to make whatever money you borrowed look cheap later.
 

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I'll Direc your TV
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There's logic to that, to a point. You also have to be realistic in how much you're borrowing and what are you borrowing against.

It's pretty good to borrow against your house, refinance, or get a home equity loan, as long as you're not borrowing too much. If you're borrowing say, $50,000 right now, while you're house is worth $200,000, that's no problem. But if you're trying to get $120,000, still probably going to get it, but what happens when the market crashes (sooner rather than later, can already see the trends coming down) and you're house is only worth 2/3 what it was, and now you owe exactly what your house is worth, and you don't have any equity left. IMO, equity is the name of the game when it comes to your house.

Money can be "cheap", in a sense. It always costs money to borrow money, there's this idea that lower monthly payments is the goal, to me, lower total cost should be the goal. I'd rather spend 1.5x the monthly payment for a shorter term credit line, than extending that payment out. The long you pay, the more you end up paying. There's always situations where you may have to extend that payment out, because the options for shorter terms wont work with what you have to spend monthly, and it's something you have to do. There's always a happy medium to be found. Take the Amish sheds; the offer no credit check financing, cheap payments, like $170 bucks a month for 36 months. Cheap right? Hell yea. Until you actually do the math and realize you're paying $6,100 for a $4,000 shed. Same thing with auto loans, but that's also a different story.

My wife and I got a Home equity loan this year, at the time when it rates are super low; got a fixed loan. Even if we didn't do anything with it this year, the material costs would come down; but if we waited until the costs come down then inevitably the rates would have gone up, so instead of getting say 3% for 10 years, the rates went up to 4.0% for 10 years, and have to come closer to the line of what you are more comfortable with spending monthly to having the cash to do the projects you want to do.

As stated, and like already said; now is the time to borrow money (on certain things), while the money is "cheap". Also have the understanding that the money will need to be paid back, and eventually you're available cash will get smaller as inflation on everything else goes up. The estimation right now is that 2022 will see a 5.6% increase in the cost of living. So maybe you can make that $300 a month payment this year, while rates are low, but next year or the year after that $300 a month might start hurting the pocketbook cause everything increased by 5.6%.

Brings it up to the auto loans, auto loan rates are pretty decent too; but the costs of all vehicles have skyrocketed in the past year; so that $12,000 truck you were looking at last year, is now $20,000. So you decide to buy it cause, it's a "good deal" right now; next year, when the market falls out, that $20,000 truck you've had for a year, and paid about $3,300 on, is only worth $12,000 again, yet you owe $16,000. on it. People buying new trucks boggles my mind as well; I hold a different opinion on new trucks than most people. My opinion is that they're never going to be worth what you pay. Unless you're flushed with a shitload of expendable cash, it's not worth it. This year more than ever, the prices of new trucks skyrocketed at the same rate that used did; and yet people are buying them because rates are low or they want them. Next year that same $70,000 truck will be priced at $50,000. I bought a new truck, new used, I paid more than I would have last year, but I also took into account what I had to spend, what I should have to spend next year, what it was going to cost in 2 years, and what I would have to spend on it, relative.

Financing is a great option, especially what the rates are now. I see it as too much of a good things. The market is going to crumble and crash worse that it was in 2008. It's inevitable. So what's going to happen, everything is going to jump up in costs, so those "good rate financing" choice you made in 2021, are now draining all your expendable cash in 2022/2023 and you'll never be able to refinance or consolidate them because the market is in the shitter and banks aren't loaning money out like they were.
 

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Mr. Special Snowflake.
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There's logic to that, to a point. You also have to be realistic in how much you're borrowing and what are you borrowing against.

It's pretty good to borrow against your house, refinance, or get a home equity loan, as long as you're not borrowing too much. If you're borrowing say, $50,000 right now, while you're house is worth $200,000, that's no problem. But if you're trying to get $120,000, still probably going to get it, but what happens when the market crashes (sooner rather than later, can already see the trends coming down) and you're house is only worth 2/3 what it was, and now you owe exactly what your house is worth, and you don't have any equity left. IMO, equity is the name of the game when it comes to your house.

Money can be "cheap", in a sense. It always costs money to borrow money, there's this idea that lower monthly payments is the goal, to me, lower total cost should be the goal. I'd rather spend 1.5x the monthly payment for a shorter term credit line, than extending that payment out. The long you pay, the more you end up paying. There's always situations where you may have to extend that payment out, because the options for shorter terms wont work with what you have to spend monthly, and it's something you have to do. There's always a happy medium to be found. Take the Amish sheds; the offer no credit check financing, cheap payments, like $170 bucks a month for 36 months. Cheap right? Hell yea. Until you actually do the math and realize you're paying $6,100 for a $4,000 shed. Same thing with auto loans, but that's also a different story.

My wife and I got a Home equity loan this year, at the time when it rates are super low; got a fixed loan. Even if we didn't do anything with it this year, the material costs would come down; but if we waited until the costs come down then inevitably the rates would have gone up, so instead of getting say 3% for 10 years, the rates went up to 4.0% for 10 years, and have to come closer to the line of what you are more comfortable with spending monthly to having the cash to do the projects you want to do.

As stated, and like already said; now is the time to borrow money (on certain things), while the money is "cheap". Also have the understanding that the money will need to be paid back, and eventually you're available cash will get smaller as inflation on everything else goes up. The estimation right now is that 2022 will see a 5.6% increase in the cost of living. So maybe you can make that $300 a month payment this year, while rates are low, but next year or the year after that $300 a month might start hurting the pocketbook cause everything increased by 5.6%.

Brings it up to the auto loans, auto loan rates are pretty decent too; but the costs of all vehicles have skyrocketed in the past year; so that $12,000 truck you were looking at last year, is now $20,000. So you decide to buy it cause, it's a "good deal" right now; next year, when the market falls out, that $20,000 truck you've had for a year, and paid about $3,300 on, is only worth $12,000 again, yet you owe $16,000. on it. People buying new trucks boggles my mind as well; I hold a different opinion on new trucks than most people. My opinion is that they're never going to be worth what you pay. Unless you're flushed with a shitload of expendable cash, it's not worth it. This year more than ever, the prices of new trucks skyrocketed at the same rate that used did; and yet people are buying them because rates are low or they want them. Next year that same $70,000 truck will be priced at $50,000. I bought a new truck, new used, I paid more than I would have last year, but I also took into account what I had to spend, what I should have to spend next year, what it was going to cost in 2 years, and what I would have to spend on it, relative.

Financing is a great option, especially what the rates are now. I see it as too much of a good things. The market is going to crumble and crash worse that it was in 2008. It's inevitable. So what's going to happen, everything is going to jump up in costs, so those "good rate financing" choice you made in 2021, are now draining all your expendable cash in 2022/2023 and you'll never be able to refinance or consolidate them because the market is in the shitter and banks aren't loaning money out like they were.
I can see the cost of some items dropping, but not to the extent that you're suggesting. Rarely do we see deflation. Instead, what seems to happen is that as everything goes up, so do pay rates, and especially right now, as there seems to be a trend of workers demanding more. My company has been trying to find people with skills similar to mine and they just aren't finding them. So I see the costs of things going up, my pay going up, but the amount I owe for my truck not going up.
 

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I'm not old, honest...
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I can see the cost of some items dropping, but not to the extent that you're suggesting. Rarely do we see deflation. Instead, what seems to happen is that as everything goes up, so do pay rates, and especially right now, as there seems to be a trend of workers demanding more. My company has been trying to find people with skills similar to mine and they just aren't finding them. So I see the costs of things going up, my pay going up, but the amount I owe for my truck not going up.
You should quit and then reapply. You will make more. A company will pay more to replace you than keep you. You're welcome.
 

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Yooper In Training
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I agree with Brewmenn on paper, it's a bit harder in practice.

Using a barn as an example. In 2020, two people get quotes for a barn for $25K.

Person A gets a 10% home improvement loan with a plan to pay back in a year.
Person B decides to save for a year to avoid having debt.

A year later Person B has $25K saved and goes to get the barn, but 2021 prices are now almost $50K for that barn. Person B has no barn.

Person A has a barn. And if they paid off the mortgage in a year paid about $27.5K for that same barn.

Problem is that inflation is on everything, and hurts most on daily consumables like food, vehicle fuel, electricity and home heating. But yeah, if you know a big ticket item price is going up, and you can get an interest rate less than the rate of inflation, it might be worth it.
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I'm person B :cry:
 

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Registered
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I agree with Brewmenn on paper, it's a bit harder in practice.

Using a barn as an example. In 2020, two people get quotes for a barn for $25K.

Person A gets a 10% home improvement loan with a plan to pay back in a year.
Person B decides to save for a year to avoid having debt.

A year later Person B has $25K saved and goes to get the barn, but 2021 prices are now almost $50K for that barn. Person B has no barn.

Person A has a barn. And if they paid off the mortgage in a year paid about $27.5K for that same barn.

Problem is that inflation is on everything, and hurts most on daily consumables like food, vehicle fuel, electricity and home heating. But yeah, if you know a big ticket item price is going up, and you can get an interest rate less than the rate of inflation, it might be worth it.
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I am "Person B" and I am not happy about it !!!!!!



RBB
 

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Registered
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I can see the cost of some items dropping, but not to the extent that you're suggesting. Rarely do we see deflation. Instead, what seems to happen is that as everything goes up, so do pay rates, and especially right now, as there seems to be a trend of workers demanding more. My company has been trying to find people with skills similar to mine and they just aren't finding them. So I see the costs of things going up, my pay going up, but the amount I owe for my truck not going up.


great in theory but when there are 50 guys outside the door willing to do what you do for 2 bucks an hour cheaper your time will be limited. At least that is how things went down in 08 and 09.


RLB
 

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Mr. Special Snowflake.
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Mr. Special Snowflake.
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great in theory but when there are 50 guys outside the door willing to do what you do for 2 bucks an hour cheaper your time will be limited. At least that is how things went down in 08 and 09.


RLB
It could happen. In 09 I had to take less money and temporarily relocate to keep working.
 

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I'll Direc your TV
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I can see the cost of some items dropping, but not to the extent that you're suggesting. Rarely do we see deflation. Instead, what seems to happen is that as everything goes up, so do pay rates, and especially right now, as there seems to be a trend of workers demanding more. My company has been trying to find people with skills similar to mine and they just aren't finding them. So I see the costs of things going up, my pay going up, but the amount I owe for my truck not going up.
I might have misspoken, but I didn't mean to imply deflation. Cost of things goes up, and is going to go up. Pay is not going to increase at a similar rate; not since probably the 50s.

The amount you owe on your truck may not go up, but the trucks worth is going to go down, and continue to do so; at a rate much quicker than the payments most people are making. Maybe not for you, but there's always people that it works out for; it doesn't prove the point false though.

As far as pay increasing, so far at least, the higher pay being advertised hasn't seemed to do anything to increase the workforce in the past 12 months. Not only that, also consider that if the work force increases back to even 3/4 what it was, do you really think any company is going to be able to keep up with the higher pay scales? Absolutely not, not with the costs of raw materials going up and the general costs of doing business.
 

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Project Antitube
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So inflation is a natural function of an economy. It usually ticks along at somewhere around population growth.

The most expensive part of most every company is labor. When there is any disruption in the labor from the time some resource is pulled from the Earth to the time it shows up in your house, there is going to be huge fluctuations in cost. When this happens, it shifts behavior. Some companies mask it (ever notice a package of Oreos or a jar of Miracle Whip keeps getting smaller) hoping to avoid behavior shifts. for roughly 20 months we've had a huge disruption in labor. In the meantime, it also changed people's behaviors. Some industries are never coming back. It will probably be a couple more years before things shake out. In the meantime I would expect a lot of positions never to come back and some middle management and sales positions cease to exist due to automation.

Deflation is rare. It's the problem that Japan has been battling for decades and China is struggling with right now. Japan is because their population is aging and not replacing, China is because they have the same problem plus have begun to lose control of devaluing their currency. This is because a large portion of China doesn't want to be indentured servants anymore.

Rarely do the Poors lose on inflation in a developed nation. It is actually a great redistribution of wealth when inflation goes up. That's because the Poors get a salary increase while all their debts stay the same. Who are they paying the debt back to with the new cheaper money? The Rich Bastards.


The tricky part is if you're one of those Poors of the Dumbass variety that lives paycheck to paycheck with high fixed costs and variable interest rates. When you work as HVAC technician somewhere but have your student loans go from 3.99% to 11.99% and your house go from 3.25% to 10%... while the tank of gas goes from $40 to $90... you're screwed until you get a decent raise because last year's 2% ain't hackin' it... or can shake out some costs. So now you shake out some costs because you're one payment away from the $15k on your Citi card going to 23.99% and that means not going to BW3s. Well, now all the BW3 workers have the same problem as you. Suddenly no one needs to pay you overtime to fix their busted ass HVAC at BW3s because no one is going anymore and now you're out that sweet, sweet overtime. Rinse, repeat, welcome to 2008.

I think if you want to see what kind of insanity is going on right now, take a look into how the ledgers work for the stock market. Then take a look at Collateralized Loan Obligations (not the same as CDOs we're all familiar with). I think the housing market unraveling will be the beginning of a lot of things falling apart.
 

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I'll Direc your TV
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I think if you want to see what kind of insanity is going on right now, take a look into how the ledgers work for the stock market. Then take a look at Collateralized Loan Obligations (not the same as CDOs we're all familiar with). I think the housing market unraveling will be the beginning of a lot of things falling apart.
This.
 

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I'll Direc your TV
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There's going to be another drop, I just hope it's not like it was in 08 / 09.
I believe it is going to be worse. All loans being given out right now for homes/property; because people can "afford" them when they stopped traveling and doing things. Most people probably can do extra $X00 payments per month for a short time; but the problem comes in the long term. Those $400 a month payments get pretty stiff when you go back to normal and want start doing what you used to do; and when shit starts needing money, like the $200,000 house you just bought that now needs $4,000. Housing loans are the biggest problem IMO. Auto loans are another separate problem, nobody cares where you got your down payment money from for a new truck, and 75% of those people came up with the cash because of the government handouts like PUI and "stimulus" checks, (all fake money); and they can continue to make their $3-400 a month car payment on their $70,000 truck because of the same fake money; so that will money will dry up; not if, when.

Couple that with the increase in cost of living, think it was like 5.6/5.9% increase for 2022, everything becomes more expensive to do, see, and make. So what you can "afford" right now means nothing.
 

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Project Antitube
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I'm not sure how it will be. I think it will be a slow decline until it hits like a freight train and people will look back to now and say "this is when it started". Inflation is going to eat into a lot of people's lack of savings. Many families already chose to go to a single income due to childcare costs so a lot of the slack in the system is already gone there because people don't have the luxury of a second combatant to earn the almighty dollar. People going down to one person working already removed a lot of services consumption (childcare, less people driving, less lunches and dinners out). This caused a re-alignment in the rat race such that places that could stay open with the reduction of services required now have to pay more because people realized they could get by in other methods.

For the first time in my life I've seen bank closures. Used to be every strip mall that went up had a bank branch in it. Now they're closing all over the place.

I think now is the time to pay more attention to where your money goes and change habits to maximize their value to you. That doesn't mean live like a pauper, that means get the most from your money. Remember, you can't take it with you when you die.

With people going remote, that also reduces the needs for a lot of services from cleaning meerkat alleys (cubicle farms) to catered office lunches. Neighbor lady cleans offices here in town. When I say offices think small shops like a insurance office or CPA. She lost most of those jobs and now mostly cleans homes... which is a lot harder and pays a lot less.

I think the redistribution of how we work and how we value work is still changing. Combine that with inflation (not price changes from supply/demand) and it will change a lot of other behaviors also. Energy policies of other countries as well as dart board decision making of our executive branch will likely lead to significant expenses to rural/single family households.

This redistribution of how we work and how we value work is what caused the residential construction boom. Those jobs are going to come to a screeching halt when rich Chinese people can't buy US real estate as "investments" and all of us Plebeians have had our home offices built out and walls put into our "open concept" houses. The younger Millennials are all that's left that are buying houses en masse and as soon as 40 million of them have to start paying their student loans again that will come to a screeching halt. Suddenly all the Paslode Punishers are going to be collecting unemployment.

I've seen some evidence of it. My cousin said they're no longer backed up at the dealership he works at. It's been 2+ weeks for everything since May 2020 until this past Labor Day he said it stopped. The neighbor kid got a sweet gig getting paid a lot putting in hardwood flooring this spring, so much so he bought a brand new Silverado at 18 years old... was gone from sun up to sun down six days a week and now the truck doesn't hardly ever leave the yard except a couple days a week.

Policies in other countries are going to have a profound effect on this one. Remember we are net exporter of certain agricultural products and a tremendous exporter of Intellectual Property and "Professional Services". We also are the war machine of the world. People only pay for IP when money is available. People buy agricultural goods on the open market, normally, but many markets are being protective and many places are starving right now. The US dollar being overvalued in many places is the only reason why people in the US aren't feeling the same pain as everywhere else. Our dollar is still very valuable most everywhere. With Biden funding the world but not using the war machine to protect the interests of american businesses things will shift again.

With the electrification of a lot of things, we're probably going to see the distant suburbs and the rural areas pay significantly for it. Which will have a profound effect on the first and second ring of the suburbs as well as the inner city. Cities depend on cheap labor and transportation of rural folk.

With places learning that many people are single income, it breeds hate and disdain for giving truly working people (not mere pixel pushers) appropriate wage increases because they believe people won't quit to get a different job because they have no safety net.

I've been expecting a recession for two years this month. We briefly had one Spring 2020. The reason I've been expecting it is due to the increase in defaults on cars, credit cards, and student loans.
 

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Gustafson
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I believe it is going to be worse. All loans being given out right now for homes/property; because people can "afford" them when they stopped traveling and doing things. Most people probably can do extra $X00 payments per month for a short time; but the problem comes in the long term. Those $400 a month payments get pretty stiff when you go back to normal and want start doing what you used to do; and when shit starts needing money, like the $200,000 house you just bought that now needs $4,000. Housing loans are the biggest problem IMO. Auto loans are another separate problem, nobody cares where you got your down payment money from for a new truck, and 75% of those people came up with the cash because of the government handouts like PUI and "stimulus" checks, (all fake money); and they can continue to make their $3-400 a month car payment on their $70,000 truck because of the same fake money; so that will money will dry up; not if, when.

Couple that with the increase in cost of living, think it was like 5.6/5.9% increase for 2022, everything becomes more expensive to do, see, and make. So what you can "afford" right now means nothing.
Speaking of the increased cost of..... Everything recently. I feel like I went from making a decent living to not, seemingly overnight.
 
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