£10,000 Debt

[Hugo a Gogo]

turbobloke said:

Hugo a Gogo said:

Murph7355 said:

TTmonkey said:

.... If the greeks decide they wont continue with the pain being inflicted upon them, it could easily all unravel....

You of course mean the pain the Greek's inflicted upon themselves...

you can't seriously believe that the man on the Greek street, Stavros Averageopolous, is to blame? yet they are the ones suffering for it

First line of a 2010 paper by Manos Matsaganis and Maria Flevotomou titled 'Distributional Implications of Tax Evasion in Greece':

"The shadow economy and tax evasion are both widespread in Greece."

Headlines from that source and others cited in it include placing the shadow economy at 30% to 37% of GDP, tax evasion at 15% of GDP, self-employed under-reporting of income at 53% of filed returns, aggregate rate of income under-reporting for the purpose of tax evasion at 10% resulting in a 26% shortfall in tax receipts.

The Inspectorate Service of the Social Insurance Foundation IKA estimated that 27% of all workers were/are in 'informal' unregistered jobs.

Plenty of Stavros Averageopouloses worked the system.

so self employed 'correct reporting' was near half, 63% were in normal official jobs
a lot of scamming going on, yes

half of the cars on the road are speeding, so we'll give everyone a ticket

so why was the government still spending more than they got in and fiddling the books to get in the Euro?

[Big E 118]

Putting all types of debt into one basket is just a way of the media creating headlines. I'll give you two examples of debt.

A few years back I was in Currys, queuing at the till. The couple in front of me were buying a £1,000.00 TV. When they went to pay they had 4 credit cards, some cash and a bit of paper. they'd obviously pretty much maxed out their credit cards so had written down how much they could put on each card and had the cash as the balance. They were £10.00 short so asked the girl on the till to let them off, which she wouldn't. Why the fk are they buying a £1,000.00 TV if they can't afford it!?!

Example two, say I earn in the 50% tax bracket and decide to buy a £40k car. I can pay the £40k up front out of money I've already paid tax on. The car will depreciate near on £20k over the three years I plan to have it. I decide to take a PCP deal, £1k down and nearly £20k in payments over three years. I put the remaining £39k I would have had in a depreciating asset into my pension (yes I know pensions can depreciate, but for this example lets assume it's doing well). I know have a £20k debt but am I better or worse off than not having the debt?

[anonymous-user]

I have also found recently, refusing to take on any debt is a good indicator of how much you want something

I really wanted an iPad a while ago, due to operating within tight margins due to wedding savings, I would need to save £100 a month for 4 months to pay for it, I havent bothered, indicating to me that whilst I would like an iPad I dont really want one that much as I have chosen to spend that money on other things

Compare to a lot of my mates who stuck it on Apple finance and picked up other bits at the same time, suddenly they are in hock to Apple to the tune of £1000 for stuff they didnt really want or need

[turbobloke]

Hugo a Gogo said:

half of the cars on the road are speeding, so we'll give everyone a ticket

No, just lower limits...speed austerity.

[GBB]

blueg33 said:

The point is that the debt was serviceable and I had cash to spare, so was I living beyond my means?

The thing for me is that my industry has been hit hardest by the recession so my income has stopped growing at the rate it was. Thats why I decided to pay off the loans. The fact I could pay them off demonstrates that I was not beyond my means.

But, I admit I made a mistake, in business I use debt to enable growth, I made the mistake of thinking that because debt was good in business it was good at home. But in reality, maybe mortgage is the only good personal debt as generally the asset it pays for grows in value whereas debt for a holiday is not. But yet again, feeling good is important, it helps with confidence and confidence in business increases success. It is not simple.

If you have surplus cash, why not use debt to spread payments over time? If the debt is serviceable then you can afford the item.

If no one financed a new car there would be no second hand cars for people to buy without a loan.

Edited by blueg33 on Thursday 31st May 09:08

Buy assets, lease liabilities.

Debt is OK if used to fund sustainable growth but not if used to fund items you can't afford to buy outright.

Were you living beyond your means? Well definitely in the long term as has been proven. I'm not sure what industry you work in but nothing is forever and we can be guaranteed a recession every 7-8 yrs, this one got hidden in 2001 due to rapidly lowered interest rates post the 9/11 attacks so is doubly vicious and longer than it should be, and it's got a long way to go yet.

Even a mortgage isn't a good use of debt if prices are falling faster than the rent paid out monthly. Unfortunately housing is about buying at the right time and if house prices fall a lot of people will be left with negative equity or rental properties where the rents don't cover mortgage costs.

The older ones of us (and I'm only 43) can remember interest rates above 10% and will have geared decisions around "can I afford it if rates rise to those levels", I fear a lot of younger people believed Gordon B when he said "no more boom and bust" and believed interest rates will never go above 5% again.

[housen]

Big E 118 said:

Putting all types of debt into one basket is just a way of the media creating headlines. I'll give you two examples of debt.

A few years back I was in Currys, queuing at the till. The couple in front of me were buying a £1,000.00 TV. When they went to pay they had 4 credit cards, some cash and a bit of paper. they'd obviously pretty much maxed out their credit cards so had written down how much they could put on each card and had the cash as the balance. They were £10.00 short so asked the girl on the till to let them off, which she wouldn't. Why the fk are they buying a £1,000.00 TV if they can't afford it!?!

Example two, say I earn in the 50% tax bracket and decide to buy a £40k car. I can pay the £40k up front out of money I've already paid tax on. The car will depreciate near on £20k over the three years I plan to have it. I decide to take a PCP deal, £1k down and nearly £20k in payments over three years. I put the remaining £39k I would have had in a depreciating asset into my pension (yes I know pensions can depreciate, but for this example lets assume it's doing well). I know have a £20k debt but am I better or worse off than not having the debt?

worse as you would have have paid interest on that car loan

debt sucks

interest sucks

it has been abused , and now everything is 5 times more expensive than it should be

[GBB]

housen said:

fido said:

I'm guessing the avarage Brit also has a couple of grand in savings as well.

is early so dont know if that was a joke

but if that were true the UK would be a very rosey place indeed

unlike the real situation we are in currently

2k per person savings

62mm x 2000£ = [phone] £ in savings

we can only wish !!!!

Edited by housen on Thursday 31st May 08:34

It wouldn't suprise me.

Look how many pensioners there are and a lot of them actually have quite hefty savings.

One pensioner with £20,000 in savings would cover 9 other members of the population.

The older generations were bought up to live frugally and within their means and many do.

As you move through generations then attitudes towards savings and debt (and lifestyle) shift.

[Big E 118]

housen said:

worse as you would have have paid interest on that car loan

debt sucks

interest sucks

it has been abused , and now everything is 5 times more expensive than it should be

But you wouldn't be paying tax on the £40k investment.

[blueg33]

GBB said:

Buy assets, lease liabilities.

Debt is OK if used to fund sustainable growth but not if used to fund items you can't afford to buy outright.

Were you living beyond your means? Well definitely in the long term as has been proven. I'm not sure what industry you work in but nothing is forever and we can be guaranteed a recession every 7-8 yrs, this one got hidden in 2001 due to rapidly lowered interest rates post the 9/11 attacks so is doubly vicious and longer than it should be, and it's got a long way to go yet.

Even a mortgage isn't a good use of debt if prices are falling faster than the rent paid out monthly. Unfortunately housing is about buying at the right time and if house prices fall a lot of people will be left with negative equity or rental properties where the rents don't cover mortgage costs.

The older ones of us (and I'm only 43) can remember interest rates above 10% and will have geared decisions around "can I afford it if rates rise to those levels", I fear a lot of younger people believed Gordon B when he said "no more boom and bust" and believed interest rates will never go above 5% again.

A mortgage works because it is a long term debt against an asset that over a 25 year term has always (to date) increased in value.

I am 46 when I started my first business my mortgage was at 15% and my business loan 17%. I have seen recession in my industry before (I am a property developer/investor), this time was total decimation, it was barely reported but 50,000 jobs went in the first 4 months of 2008. If someone had said that British Aerospace was going to loose 50k jobs in 4 moths their would have been an outcry and government bail out

In the long term I was possibly beyond my means only because of increased costs eg fuel above forecasts, taxation etc. If I had kept the loans I am sure that I would have started to feel the pinch and would end up paying the mortgage off more slowly.

[TTmonkey]

turbobloke said:

First line of a 2010 paper by Manos Matsaganis and Maria Flevotomou titled 'Distributional Implications of Tax Evasion in Greece':

"The shadow economy and tax evasion are both widespread in Greece."

Headlines from that source and others cited in it include placing the shadow economy at 30% to 37% of GDP, tax evasion at 15% of GDP, self-employed under-reporting of income at 53% of filed returns, aggregate rate of income under-reporting for the purpose of tax evasion at 10% resulting in a 26% shortfall in tax receipts.

The Inspectorate Service of the Social Insurance Foundation IKA estimated that 27% of all workers were/are in 'informal' unregistered jobs.

Plenty of Stavros Averageopouloses worked the system.

Whatever the tax avoidance in Greece is, its still peanuts compared to their deficit and debts, and would make neigh on negligable difference. Even Christine LeGarde recognises this. Its a minor factor in their problem.

And their problem will become ours.


Fekkers should retire at 70 though, not 55!!!!

[housen]

Big E 118 said:

But you wouldn't be paying tax on the £40k investment.

arr yes ...free money then for sure

[Butter Face]

Ari said:

Butter Face said:

Lots of money borrowed here, doesn't phase me at all. Had a stunning wedding, lovely holidays, had everything I've ever wanted/needed and it's always paid on time. An ever better credit history means that I can always borrow as much as I like when I like.

Borrowing money is not a bad thing unless it doesn't he paid back.

Do you ever worry about what would happen if you lost your job?

I don't worry. If the worst happened and I did lose my job I also have a bough savings to service my outgoings for 6 months at least. I also am not the kind of person hung up on a job status.

If I was unemployed, I would work at McDonald's selling Mcst Burgers as long as it paid.

[turbobloke]

TTmonkey said:

turbobloke said:

First line of a 2010 paper by Manos Matsaganis and Maria Flevotomou titled 'Distributional Implications of Tax Evasion in Greece':

"The shadow economy and tax evasion are both widespread in Greece."

Headlines from that source and others cited in it include placing the shadow economy at 30% to 37% of GDP, tax evasion at 15% of GDP, self-employed under-reporting of income at 53% of filed returns, aggregate rate of income under-reporting for the purpose of tax evasion at 10% resulting in a 26% shortfall in tax receipts.

The Inspectorate Service of the Social Insurance Foundation IKA estimated that 27% of all workers were/are in 'informal' unregistered jobs.

Plenty of Stavros Averageopouloses worked the system.

Whatever the tax avoidance in Greece is, its still peanuts compared to their deficit and debts and would make neigh on negligable difference.

Really? Given the figures above, how does that work?

In 2010 Greece's deficit was 10.5% of GDP. Tax evasion is 15% of GDP.

Since 1981 when Greece joined the EU, the shadow economy operating over 31 years has accounted for well over Greece's debt which is still less than 200% of GDP iirc.

TTmonkey said:

Even Christine LeGarde recognises this. Its a minor factor in their problem.

Where has she recognised this?

[Big E 118]

housen said:

Big E 118 said:

But you wouldn't be paying tax on the £40k investment.

arr yes ...free money then for sure

I'm presuming sarcasm there!

My point is that there are people that get into debt because they want to spend beyond their means and there are others who get into debt because it can suit their circumstances financially and the risk is non existent because it's an easily covered repayment. So there's responsible debt and irresponsible debt.

[superkartracer]

Eric Mc said:

Count me as a lucky one too then.

Or is it good financial management and realistic expectations rather than luck?

No the fact you're 95 i guess?

[superkartracer]

Out of interest, what is *debt* is that owing ££ without an asset to cover the debt?, i have loads of debt but own far more than the debts owed.

So is what is debt?, 10k with fookall to show for it?

Debt used well can actually make you ££ btw.

Edited by superkartracer on Thursday 31st May 11:58

[mattnunn]

Isn't our whole economy predicated on people having these sort of levels of personal debt.

Those who have none are effectively unpatriotic - your country needs you, your banking system, which is state owned, is relying on your missus buying us out of recession. I imagine if you looked back to 2006/2007 it would have been much higher.

[Eric Mc]

superkartracer said:

Eric Mc said:

Count me as a lucky one too then.

Or is it good financial management and realistic expectations rather than luck?

No the fact you're 95 i guess?

How do you work that out then?

[TTmonkey]

turbobloke said:

TTmonkey said:

turbobloke said:

First line of a 2010 paper by Manos Matsaganis and Maria Flevotomou titled 'Distributional Implications of Tax Evasion in Greece':

"The shadow economy and tax evasion are both widespread in Greece."

Headlines from that source and others cited in it include placing the shadow economy at 30% to 37% of GDP, tax evasion at 15% of GDP, self-employed under-reporting of income at 53% of filed returns, aggregate rate of income under-reporting for the purpose of tax evasion at 10% resulting in a 26% shortfall in tax receipts.

The Inspectorate Service of the Social Insurance Foundation IKA estimated that 27% of all workers were/are in 'informal' unregistered jobs.

Plenty of Stavros Averageopouloses worked the system.

Whatever the tax avoidance in Greece is, its still peanuts compared to their deficit and debts and would make neigh on negligable difference.

Really? Given the figures above, how does that work?

In 2010 Greece's deficit was 10.5% of GDP. Tax evasion is 15% of GDP.

Since 1981 when Greece joined the EU, the shadow economy operating over 31 years has accounted for well over Greece's debt which is still less than 200% of GDP iirc.

TTmonkey said:

Even Christine LeGarde recognises this. Its a minor factor in their problem.

Where has she recognised this?

Thats not how I understand their finacial problems....

wiki said:

On 15 November 2010 the EU's statistics body Eurostat revised the public finance and debt figure for Greece following an excessive deficit procedure methodological mission in Athens, and put Greece's 2009 government deficit at 15.4% of GDP and public debt at 126.8% of GDP making it the biggest deficit (as a percentage of GDP) amongst the EU member nations (although some have speculated that Ireland's in 2010 may prove to be worse).

They are running their economy by borrowing, every year, 15% more than their GDP. Thats their deficit.

They also owe (and have to service) Debt at 126% of GDP.

And these figures are out of date and they are probably worse, although some of that debt was written off recently.

Their debt is growing yearly, and its only their deficit between income and expendature that they are trying to reduce.

I'm not saying they shouldnt evade (or, aggressivly avoid) taxes, but it happens accross Europe, including here.

[turbobloke]

TTmonkey said:

turbobloke said:

TTmonkey said:

turbobloke said:

First line of a 2010 paper by Manos Matsaganis and Maria Flevotomou titled 'Distributional Implications of Tax Evasion in Greece':

"The shadow economy and tax evasion are both widespread in Greece."

Headlines from that source and others cited in it include placing the shadow economy at 30% to 37% of GDP, tax evasion at 15% of GDP, self-employed under-reporting of income at 53% of filed returns, aggregate rate of income under-reporting for the purpose of tax evasion at 10% resulting in a 26% shortfall in tax receipts.

The Inspectorate Service of the Social Insurance Foundation IKA estimated that 27% of all workers were/are in 'informal' unregistered jobs.

Plenty of Stavros Averageopouloses worked the system.

Whatever the tax avoidance in Greece is, its still peanuts compared to their deficit and debts and would make neigh on negligable difference.

Really? Given the figures above, how does that work?

In 2010 Greece's deficit was 10.5% of GDP. Tax evasion is 15% of GDP.

Since 1981 when Greece joined the EU, the shadow economy operating over 31 years has accounted for well over Greece's debt which is still less than 200% of GDP iirc.

TTmonkey said:

Even Christine LeGarde recognises this. Its a minor factor in their problem.

Where has she recognised this?

Thats not how I understand their finacial problems....

wiki said:

On 15 November 2010 the EU's statistics body Eurostat revised the public finance and debt figure for Greece following an excessive deficit procedure methodological mission in Athens, and put Greece's 2009 government deficit at 15.4% of GDP and public debt at 126.8% of GDP making it the biggest deficit (as a percentage of GDP) amongst the EU member nations (although some have speculated that Ireland's in 2010 may prove to be worse).

They are running their economy by borrowing, every year, 15% more than their GDP. Thats their deficit.

They also owe (and have to service) Debt at 126% of GDP.

And these figures are out of date and they are probably worse, although some of that debt was written off recently.

Their debt is growing yearly, and its only their deficit between income and expendature that they are trying to reduce.

The wiki figures you quoted say basically the same thing as mine but yes they differ by date. I said debt was less than 200% GDP, your wiki quote says 126% GDP i.e. in agreement but I thought it was higher than that. Your wiki quote gives the deficit at 15% GDP well OK taking it at that level, do explain how tax evasion at 15% GDP isn't relevant. It clearly is.

Nothing in your post shows how running a shadow economy equivalent to one-third of GDP each year over 30 years can't get a country into trouble or, if it hadn't happened, how the situation wouldn't be vastly different and possibly quite positive.

Merely quoting slightly different figures to mine (which were eurostat data from the news release of April 2011) doesn't change a thing. Over the last thirty year period there has been a major widespread problem with the shadow economy and tax evasion in Greece, which in number terms is of the same gravity as their debt position.

The comment in your post about tax evasion and shadow economy problems being peanuts compared to their deficit and debt was incorrect.

Meanwhile where's the Christine Lagarde comment about shadow economy and tax evasion in Greece not being relevant? Clearly one year of paying more tax won;t solve the issues facing Greece but that wasn't ever claimed, the situation Greece is in can be traced back to the propensity across a significant section of the population over decades to play the system in terms of the shadow economy and tax evasion...which is what we're talking about, not tax avoidance.