Oops! I fixed the comment setting.

The answer completely depends on a) whether you can afford the long-term cashflow of the debt and b) your view on inflation. If you have a 30yr mortgage at 6%, and you think that Bernanke's printing presses will cause an inflation spike, you should not pay down the debt as you will be paying it back with dollars that will be worth far less than what you owe today. On the other hand, if you think the economy will be in a long term recession with deflation as the theme, then you want to pay down the debt, since dollars will be more valuable the longer you wait.

Now, all you have to do is get it right one way or the other on the inflation/deflation question!

We have paid off our mortgage but it is important to remember to save each year for property taxes. We also see is as necessary to 'update' our home in order to insure its essential resale value when we downsize at retirement. Despite these ongoing costs after paying off the mortgage, the value for us of paying off the mortgage is that it has given us better cash flow at a time when the kids are in college.

We have also done some energy improving of our home and, after an energy audit, have some additional goals to meet in this area.

We have never gotten into the other kinds of debt, so we have not thought about them so much. However, we would be more willing than most to walk away from an 'underwater' mortgage as a strategic financial decision. We also fear that, the impending commercial real estate defaults will be much quicker to happen, since businesses do not have the same degree of loyalty to the home that underwater home owners have. Home owners also cannot 'write off' a mortgage as business can mitigate capital investments and expenses with accelerated depreciation. Depending on the mix of high credit borrowing and accelerated depreciation in the preceding 4-5 years, this might actually be a good time for some businesses to go bankrupt.

Debt is a pit that you either fill or dig deeper. It means that someone/thing owes a part of you, and you are beholden until you pay it off. It is debt (financial, environmental, moral) that served as the path to the future we now face. No. 1 - Stay out of debt! If you can't afford to pay for it up front don't buy it. Chances are that you really don't need it anyhow. No. 2 - If you are in debt pay it off! Don't play the game of chance that inflation will somehow reduce the value of your debt. Even if it does your debt reduction will probably balance out somewhere else in your life. Debt is a moral as well as a financial responsibility. Trying to weasel out of it is a sign of weakness and failure. The challenges awaiting just over the horizon will require you to be strong, dependable and trustworthy. Don't give up your claim to those qualities by welching on your debt.

Within the expected part of the decline where our currency retains some value, I'd have to agree with the priority you put on paying off mortgages first, and the value of owning a house free and clear...if it is in an area that you believe to be safe and sustainable in the long-term. My own is in a nice semi-rural community, and I've spent years building up relations, getting it in shape, and building up the soil in a large garden. I plan on staying, so its an advantage to be mortgage-free. In other circumstances a big mortgage and cash-in-pocket would offer the most options and easy mobility.

On other debt, I've gone back and forth...I don't see any feasible way that Weimar-style hyperinflation can be avoided, looking at the big picture in the US, but then again I don't see how it hasn't happened already. The skills of our monetary wizards are beyond me, but I still have little doubt that money will continue, consistently or dramatically, to lose value; as money loses value, so debt loses significance. An example would be my mother's house, purchased in 1973 or so for 28k; by 1982 or so it was valued at 100k, by 2000 it was 400k. That's money losing its value relative to a marketable item, and the debt incurred in its original purchase shrinking (relatively) to insignificance.

I focus on keeping debt payments manageable within the monthly budget, other than that no worries; if procrastination leads to lingering debt but sufficient money in the bank, so much the better, keeping in mind that money is of limited value now, and less later.

We have paid off our mortgage but it is important to remember to save each year for property taxes. We also see it as necessary to 'update' our home in order to insure its essential resale value when we downsize at retirement. Despite these ongoing costs after paying off the mortgage, the value for us of paying off the mortgage is that it has given us better cash flow at a time when the kids are in college.

We have also done some energy improving of our home and, after an energy audit, have some additional goals to meet in this area.

We have never gotten into the other kinds of debt, so we have not thought about them so much. However, we would be more willing than most to walk away from an 'underwater' mortgage as a strategic financial decision. We also fear that, the impending commercial real estate defaults will be much quicker to happen, since businesses do not have the same degree of loyalty to the home that underwater home owners have. Home owners also cannot 'write off' a mortgage as business can mitigate capital investments and expenses with accelerated depreciation. Depending on the mix of high credit borrowing and accelerated depreciation in the preceding 4-5 years, this might actually be a good time for some businesses to go bankrupt.

That means never have credit card debt. I think mortgage debt is a good idea, fixed rate at low interest. Invest the borrowings in natural resources, gold, sliver, platinum, farm land and other hard assets in fixed or declining supply. Returns on timberland have historically been among the highest of any asset class, although this may be giving way to oil.

Drive older, depriated cars that are paid for and inexpensive to insure. Don't get stuck hodling expensive cars when the dollar collapse causes $300 / bbl oil. A new car can last 20 years, but affordable oil won't.

I am not a believer in deflation, except asset deflation. Chronic deflation was a problem under the gold standard during the great productivity revolution of internal combustion, agricultural mechanization, railroads, mass production, and electrification. Chronic inflation is what we have with rising oil imports and oil prices, rising taxes to support Social Security, Medicare and the ageing population.

Housing was an inflated asset, concentrated in the speculative boom areas. Housing prices will return to their long term trend. I can't believe how ignorant buyers were, paying so much over true replacement cost of housing. And where were the regulators who should have known better?

We have national leadership who are clueless in believing we can recklessly tax and spend in a long term economic decline. Add peak oil to the economic stagnation and you have a disaster.

If you need to build your lifeboat on credit so be it. I don't think anyone had to pay their bar tab after the Titanic sank.

Why worry about paying down debt???

What are they going to do? Start sending us to debtors prison?

Start chopping off body parts?

Are they going to start sending thugs after us to rough us up?

Are they going to start targeting innocent family members for the sins of their parents?

I don't think so..., ever heard of the guillotine?

...Own a house free and clear

I live in a Los Angeles Suburb..., what am I supposed to do with a house over here..., live off the fat of the land?

We aren't surrounded by orchards or farms anymore....

I say, continue with BAU..., print money as fast as possible. and continue to borrow and spend like there's no tomorrow.

I bet if I ran on a platform of print more money and borrow and spend like there's no tomorrow..., I'd probably win in a landslide.
Maybe I'd have to tinker with the platform so that it's..., you
CAN have your cake..., and eat it too..., indefinitely!!!

Being a slave to debt is just not something I'm all that worried about right now.

More importantly, don't go into debt! I know, easier said then done. Here are a few simple suggestions:
1) Rent
2) Purchase a used econobox with cash rather than a shiny new Escalade (or Prius) with credit
3) Attend a less expensive local or state college/university, and try as much as possible to pay as you go. If this is not feasible, consider becoming an auto mechanic or farmhand.

I have no suggestions for business debt, and I'll get off my high horse now.

You might be able to show me the effect of a computer virus, but can you show me the virus itself.
How much does it weigh?

Same with Evil.
I cannot show you Old Nick nor can we weigh him but I say he exists.

If He exists then He is the Prince of Illusions.
What could be more illusionary than money when 98% of it is digits on a computer screen?

Remember the Scary Magician in the movie The Yellow Brick Road?
Beware the Prince of Illusions.

I don´t know what will happen in the future.

I´m 25, and owe $70,000 in Private Student Loans and $8,000 on Credit Cards.

I was lucky to get a job with the Census, and my paycheck is about $2,000 a month.

My plan is to pay the minimum on my Student Loan($700) each month and my Credit Cards($300). I'm left with about $1,000 dollars each month, because I am living with my mom now and don't pay rent or food.

I have been investing the monthly $1,000 on the following...

-Gold and Silver Coins
-Garden Supplies and Organic Seeds
-Wind turbines and Solar panels

I have spent a long time thinking about paying my debt, but I realize that everything is not going to be the same in a few years, and I would be better off spending my money on these things.

Any advice would be greatly appreciated, but this is the situation I'm in. I'm always asking my credit cards for the lowest interest rate and my student loans won't give me a forbearance or deferment.

I understand I'm one of many, and I wish luck to everyone. I think now it's very important, to get close with family and make a plan to work together in the future.

Gail and all,

It's a complicated question. My wife and I took out a mortgage last September -- we timed the housing crash pretty closely, and got a very nice older house (with a root cellar already in place!) for a fraction of what it would have cost at the peak of the bubble. This is the first home we've ever been able to buy, and having it is central to our plans for weathering the next round of crisis, so going into debt for that was, for us, the right choice.

On the other hand, we have other debts -- medical, moving costs, and the like. Our goal on those is to zero them out as soon as possible.

Now of course there's a real chance that the US will go into hyperinflation, and all dollar-denominated debts will act like a punctured whoopee cushion. Of course we're aware of that. The problem is that it's impossible to be sure whether than will happen, or when, or under what terms. (Just for starters, I can all too easily imagine Congress passing a bill that allows the banks to redenominate consumer debt, mortgages, etc. in euros or yuan or some other more stable currency.)

Now and again it does happen that somebody is able to borrow money and not pay it back, but it's never safe to assume that you can get away with that. That being the case, I tend to think that it's reasonable to take on a modest amount of debt for very good reasons, and equally reasonable to get those and all other debts paid off as promptly as you can manage.

I agree with most of the other posters, it completely depends on your personal circumstances.

My wife and I have decided to take a multi-pronged approch, a sort of financial buddism - moderation in all things -

We have a 15 yr mortgage that will be paid for in 9 years.
We are not taking on any more consumer debt.
We are paying off our small remaining CC balances and vehicles.
We are stockpiling physical PM each and every month.
We are investing in cash flow positive multi-family residental real estate.
We are purchasing foreign, dividend paying stocks & securities.
Still investing in the 401k for the tax benifit.
Still saving a small amount each month in case of an emergency.
We have a decent sized cache of food and survival supplies in the crawlspace. - more for in the event of a massive natural disaster -

Obviously, I think everyone can agree it is very important to understand that NO ONE can predict the future or time the next 'black swan' event that sets off a system meltdown.

A lot of my friends have a mortgage based on two incomes. They need to work both otherwise there is no money to live. If one out of two loses a job they will have a huge problem, as they will not be able to pay the interest as well as pay for normal daily life. If the economy really goes south there will be a lot of people who will loose their job which they need to pay for all kinds of debts. If there is a huge inflation because of all the funny money floating around big chance that wages / income will not keep up with inflation. Prices for energy and food will rise, but prices for housing will go down.

Result, even if you will have to sell your house you will be left with a debt and the result is poverty. Better to pay of your mortgage.

Further my savings account pays 2% interest, but my mortgage costs 5.5% it's a no brainer for me to pay of now and gain some freedom from the bank.

With regards to other loans, don't start with them ;) But no good reason to have a CC loan against 12%

Banks are in a much better position to get their money back then you in keeping it.

Interesting, all this hyperinflation talk. IMHO, we have to work our way through a potential 10 to 20 year debt deflation / stagflation before there's even a chance of hyperinflation. And by that time, hyperinflation may be the least of our concerns; instead we'll wonder how long the war with Iran is going to last, and if our son is going to return home alive. Of course, we will sure like having that assembly line job building predator drones.

Precious metals should do well either way.

I think it was a good thing to do if possible before 2008 but now I'm not sure. I read about a farmer in the great depression who was paying off more on his mortgage each year than he needed to to clear it then when things got bad and he couldn't make the usual payments the bank repossessed his farm anyway.

What Are The Terms? Back To The Basics

Okay, let's take this from the top. A brief history of debt...which will also explain why it is needed and what it is good for, and why you should reduce it.

-Debt allows two things, but they are very important things:
a. The funding of ideas
b. The use of objects while they are being paid for.

Debt existed long before the birth of the oil age, long before the birth of the fossil fuel era and long before the birth of the industrial age. And we can safely assume that debt in various forms will exist long after the fossil fuel era. When the oil age is considered a historical oddity, debt will remain.

Debt makes ideas applicable and useful. Very rarely does the man who has the idea, whether it be the colonization of the new world or the birth of the railroad, or the gas turbine engine or alternating electric power or large scale concentrating mirror solar plants, also have the money to fund it or build it.

The reason loans are made is because the lender hopes the ideas pan out, and he/she gets more in return than he lended. The people with few ideas lend, the people with ideas borrow. This is the way it has always been, from before Columbus (who borrowed to finance his trip to India but America got in the way) to Frank Whittle with the gas turbine to Steve Jobs with Apple, the people with ideas always borrowed, the ones without ideas but with money lend.

The second point, being able to use an item as it is being paid for, is fundamental to the importance of debt. From sailing ships to trains, from computers to cars, it is non-sensical to attempt to wait for the amount of money required to buy the item to get to use it. Without debt, how fast could the computer industry have grown, or the auto industry or the railroads? It is idiotic to assume that industrialism in all its glory (and all its sins if you view things that way) could have been possible without debt. Debt is as human as thumbs.

This brings us to the central point, that being the difference between productive debt and destructive debt.

-Productive debt is debt used to develop new technology, new ideas, new ways of doing things.

-Destructive debt is debt used for expanding non-productive consumption and luxury for the sake of luxury. It would be best if all non-productive spending could be funded from cash on hand, not on debt obligation. This would be true in a perfect world, but we do not live in a perfect world.

So the first goal at the personal level would be to reduce destructive debt, that is, debt that is for purely luxury spending, to zero. It is possible, but not easy.

The first thing to look at is the terms. Credit card and consumer debt terms are almost always the worst in the credit market place, with very high interest, terms that can be changed with no advance warning and usually used to fund non-productive spending (not always, but usually) It thus follows logic that these debts should be paid off first. Then work to pay off debts that were offered under better terms (converting variable rate mortgages to fixed rate as lower rates become available, then paying off the mortgage itself.

But why do it? Why should the level of debt be reduced at all? The answer is simple, but may sound odd at first:

The goal is to have "opportunity money" available. This is either cash or ready access to credit to be able to take advantage of opportunities that may occur...no, make that WILL occur. Your personal financial future will be decided by whether or not you are in a position to take advantage of these opportunities.

The difference between the rich and the poor is purely in this area: The rich have opportunity money and thus can buy dirt cheap, while the poor must always pay retail price.

Have we not recently seen the single greatest example of this? I beg those reading this post (few they may be) to consider what happened a year ago, almost exactly to the week.

The recent "crash" is right out of the investors handbook. It was a masterpiece to behold, something we should be thankful to have been alive to see. It will serve as a textbook example of the advantages of "opportunity money" in a real world way that no textbook can ever truly capture in the way that living through it does. It was like an economic "Mona Lisa" or "Les Demoiselles d'Avignon", and served to change the perceptions of those who paid proper attention. I am so glad to have been around to see it.

The Dow Jones was at some 6440 points one year ago this week. It is now 10,500. I will use myself as an example...I was able to pour some money into carefully chosen places...and last year was one of the best financial years I have known in my 32 years of adulthood...but not nearly as good as it should have been. Had I had more money available to me, or the credit to borrow more, I could have frankly made a fortune. So could anyone who paid any attention at all. I know people who did. It was one of those grand moments in history where it was a virtually assured bet...IF you had the money or the credit to raise the money (either would have done fine, because at the rate of return possible (probable, almost assured), the interest on the borrowed money would have been marginal, almost invisible).

Think for a moment of the fate of someone who had the opportunity capital, or had access to the credit to borrow it, one year ago today. All they had to do to STEAL the U.S. economy was pay a bit of attention and pour it in.

The principle reason, in fact, the sole reason to keep debt to a minimum or non-existant and on the best possible terms is to have access to opportunity capital when it is needed, and it will be needed. This was true before the oil age, it is true in the finale of the oil age (now), and it will be true long after the oil age. It is a core truth of individual wealth production. Like so many truths, it is much harder to do than to say.

RC

In the UK you take out debt that is either secured or unsecured. Secured debt is basically a mortgage against property, and has lower interest rates. Unsecureed debt has high rates, like credit card debt. You do not put property up as collateral.

However, if you default on debt and are declared backrupt, you can still lose your house even if you you have no debt sucured against it. For a debt of only a few thousand dollars the lending company can, through the courts, evict you from your house and sell it to recover debts and costs.

If you have anything to lose in the UK, pay your debts.

The one thing we do know is PO will impact your personal economy.

Things will be harder to come by, including jobs.

Better own the things you need outright.

And not give the court a reason to auction them off.

I can't really offer much of an opinion because I'm not really an expert in finances or anything, but from a personal perspective the whole debt situation is becoming seriously tiresome.

Until about a year and a half ago, I never personally accumulated any debt, but I rarely had any spare time or money due to working extra hard to pay off my parents' medical debts. Despite years of effort, all I could do is significantly slow down the rate of debt accumulation. My brother makes several times what I do, but he wouldn't help out because he was (and still is) busy saving up money to buy a house in friggin' Japan. Then my computer died and was unrepairable (self-employed, impossible to work without it), my roommate quit her job with no immediate prospects and nothing saved up (and no unemployment benefits due to having quit), and my landlord jacked up the rent in order to pay for "improvements" (which appeared to be largely cosmetic changes meant to attract higher-paying renters), pretty much all at once, so there wasn't much choice but to cut off my parents and get a credit card.

Present day. Cheaper apartment, same roommate, but she's only found a couple of fairly short-lived temp jobs and has been unemployed more than not, so I'm still responsible for most of the household expenses. The credit card debt took awhile to pay off, but it's gone now. My father disappeared, and the collection agencies have been after me for his debts (including unpaid utility bills), but I'm fairly certain that they've all given up now. And by disappeared I mean his apartment was abandoned with all his things still in it and his cats had died of starvation. My mother declared bankruptcy. She's now going to college for the first time, in hopes of being able to land a high-paying job that can cover her medical expenses. She's living off of student loans. Unfortunately, her grades are terrible due to having problems functioning since she can't afford all her medications. I won't be able to help much until my roommate gets a lasting job (who knows when that will be) and my brother still won't do anything.

And of course I'm owed a lot of money too, nearly $80,000 total so far - most of that's my parents, as they both promised to pay it back someday, but my father's probably dead and my mother's probably hopeless. My roommate also, much less but at least there's a chance to recover it there. And I'm also counting $6000 for my mother's ex-boyfriend, even though I'll definitely never get that back due to his having died years ago. And of course I'm dirt poor (or else have been living as if I were due to essentially giving away that money) so $80,000 is hardly a trivial sum.

Assuming things get worse, with rising costs and increasing unemployment, I speculate that we're going to end up with a lot of situations where you have 1 or 2 skilled and able-bodied but mega-stressed breadwinners desperately trying to support a group of 3-8 other people, mostly adults who aren't likely to get hired anywhere in an insanely competitive job market. And if something does happen to the breadwinner(s), which it eventually will, then the entire group is basically screwed. I hope I'm wrong on that.

I'm a little surprised that more has not been said about it, but this is not the first time that people who are "boomer" age or older have had to contemplate the collapse of civilization. We lived under the shadow of the mushroom cloud for decades, especially from the late 50s through the late 80s. There was a while there in the early sixties when it looked like a very real and frightening possibility indeed.

Of course, those who lived in obvious target locations like military bases or the major cities mostly came to divest themselves of any illusions: a nuclear war meant the quick incineration of themselves and everyone and everything around them. While this was frightening, there was a certain perverse comfort in knowing that at least one would be spared from having to live within the terrible aftermath of a suddenly wiped-out civilization.

The thing is, since almost everyone in the media, government, and arts lived in obvious target cities - New York, LA and Washington - they got it in their heads that nuclear war means quick incineration for EVERYONE. That's what it meant for them and their peers, as far as they were concerned that was everyone that mattered. Thus, this is the image that was communicated to the entire nation. The vast majority, including people living nowhere near big cities or military facilities, got it in their heads that if nuclear war came, there would be a flash of light and that would be it - for everybody.

At least a few of us of us who lived in "flyover land", outside the big cities and away from military facilities, knew that this actually wasn't true. The Soviets did have a large, but limited arsenal, and that the vast majority of the US land area would not see any impact from the heat or blast effects of nuclear detonations. A few of us knew that we WOULDN'T be incinerated in a blinding flash. Some of us also knew about fallout, we knew that radiation sickness was a terrible way to die, but that it was avoidable if one sheltered properly and promptly.

This presented the terrible prospect of actually surviving a nuclear holocaust and having to live in its aftermath. Not an attractive thought, to say the least. But it was one that some of us who did manage to actually inform ourselves independently (instead of just accepting uncritically the spoon-fed garbage dished out by the media) had to face.

People living in the target cities knew they didn't need to worry about repaying their loans in the event of a nuclear war. They just kept living their lives, and knew that if the unlikely event of a nuclear war came, in a flash they, their creditors, and the loans would all be gone.

Those of us living well outside of obvious target areas knew that while we might survive, our creditors were all based in the central business districts of large cities, and certainly would not be surviving. Nor would the banking and financial system, nor the legal system, nor would the government (at least to an extent that actually would make any real difference to most survivor's daily lives). Thus, we could safely assume that post-holocaust, all debts would be de facto wiped clean, whether or not they ever were done so on a de jure basis; most likely, there would be nothing about capable of doing de jure. Legal documents written in the past wouldn't matter; what would matter would be whatever actual property was in your physical possession. Possession would be ten tenths of the law, it would be the fact on the ground that actually counted. Thus, we also knew that loan repayment post-holocaust was a non-issue.

All of us also knew, of course, that while the possibility of a nuclear holocaust was a real threat, it was also a low-probability one. We knew that not only ourselves, but also the political and military leaders on both sides, wanted to live. We also knew that even those at the top, even if consumed with lust for power, had to realize that destroying everything would only mean that they would have no real power left - if they even survived. Thus, unless the global situation started to deteriorate alarmingly, it was only sensible to assume that things would continue more or less as "normal", and that we should get on with living our lives. That meant that there was no rational basis for seriously contemplating default on debts that one really could continue to pay. I am guessing, however, that there may have been at least a few people during the Cuban Missile Crisis that at least seriously contemplated skipping their loan payments. I know that there were a few people that skipped the country and headed for "safer" places.

So, how does this all apply to the question at hand in this thread?

What we are facing now is something different that the threat of global thermonuclear war in the past. The present threat is different in two dimensions:

First, while the extent and outcome of a full nuclear exchange was highly predictable (the government and military had a pretty good idea where the Soviet targets would be and the effects of the detonations, and there was enough open source material out there for those with the mental capacity and interest to inform themselves in order to make a pretty good guess), what we are facing in the future is far more uncertain. We have been discussing here a wide range of scenarios. Setting aside the technocopian optimistic scenarios (which really don't apply here - if everything is going to be coming up roses, then why mess up your credit rating by defaulting?), there is a range of scenarios from mild and gentle decline all the way down to a quick catastrophic crash and mass die-off. The latter differs in some important respects from the nuclear war scenario, but maybe not so much in the reality that most people die and civilization is left in shambles. Indeed, a nuclear exchange remains a very real possibility as one of the things that might happen as some of the most pessimistic scenarios play out. Thus, while we KNEW that debt repayment/default would be a non-issue in the aftermath of a nuclear war, we cannot be so sure that would be the case in some of these contingencies, especially with the milder and less pessimistic ones. If the economy is going to simply just keep getting a little worse each year, then that may have different repercussions for an early personal default on one's debt - especially as the legal system remains in place and one's creditors will continue to be very much up and running and interested in tracking you down and pursuing repayment. In other words, the cost/benefit calculus of a personal debt default changes depending upon what scenario is assumed.

Second, the probabilities also differ. Global thermonuclear war was a high-impact but low probability scenario. Now, we are looking at a range of possible scenarios, and we really don't know what probability to assign to any of them. While most technocopians would disagree with me, I think it highly probable (near-certain, actually) that we will have to go through at least some sort of long-term economic decline, but I am not certain as to the exact scenario that will play out. There are others here, "doomers", who seem to be absolutely certain, or nearly so, that the worst-case catastrophic collapse is inevitable and unavoidable.

I suppose that if you are absolutely certain that a fast crash and die-off are what we are going to face, then it would be logical to default on one's debts now, and either try to do what one can to maximize one's chances of survival, or else decide that "survival" after such an event is undesirable - in which case it is "eat, drink and be merry, for tomorrow we die". Of course, there is the little problem: no matter how certain you might feel yourself to be, nobody actually does KNOW the future, and there are intelligent people of sound mind who have looked at the same data and arrived at different conclusions, so you just might possibly be wrong. The legal system is still up and runing, the creditors are still out there and actively going after those who have stiffed them, so you've got to ask yourself the same question that "Dirty Harry" posed: "Do I feel lucky today?" Well, do ya?

You people are missing the whole point. To look at it, make only two distinctions, you and system. You versus the system. The system here means the political, economical and societal system of the country you are living in.

Lets take the case of usa. The system of usa is made by strong people, bankers, politicians and military people. You as an american decided to live in this system as you believe when you were said that your country is best place in world and all other countries are backwards.

Living with the system of usa, the most brutal system in the entire world, you have to be very very careful. The basic thing you should consider in living in usa system is to be as free as you can. You can't win against the big boys being alone and weak. You have to engage with them as little as you can, and if you must engage with them try to fight at grounds where you can have as much advantage as you can muster.

Investing in education is one way of freedom for you. The more educated you are, the high income you get as long as the education field is of value to the corporations the big boys run. Do what jews did in 19th and early 20th century europe, they were hated and they had lacked behind in the development. All the scientific discoveries of european renaissance was by non-jews. What would a jew do in such a situation? He/she can't fight the system. The answer to that is investing in education. Most of world's phds are jews today. They made themselves needed by the system.

If you are too poor, too old or too dump to get a higher degree, by higher degree I ofcourse means higher than a masters, then stay low and maintain your freedom as much as you can. Take as little loan as you can, it is very very important if you are in your late 40s and have little chance to switching to a better career path but its also important if you are indeed in your 20s and can get a better profession.

If you are already loaded with debt then get out of it as soon as you can. You can't afford to be a slave. Remember that the system you are living in is the most brutal system anywhere on planet today. Your body and mind is owned by corporations. You are just a slave to the corporations. You can't fight with corporations, they are too big and too powerful. Your government itself is a puppet and show piece in their hands. Your government will never come to rescue you. Your government has effectively abandoned you and left you in the claws of the corporations.

You are living in a system where there is no safety net at all. The only entity of this world that is willing to help you financially is the banks and you know they take a very very big price for it from you. You can easily be forced out of your house if you lose your job, you can become a beggar very very easily in such a system. Your family and friends are either unwilling or unable to help you, given their own material desires and problems.

The real financial freedom is doing your own business. That way you get yourself out of the slavery of answering to a fat, ugly boss everyday who is much much less productive and intellectual than you but far far more cunning and criminal than you to take control of the system and have far far more friends than you to help him. Once you have your own business you have freedom in time and you usually earn far better than what you can get by serving others. As a matter of fact, if people had not fallen in the trap of flashy advertisements, signboards and lights of departmental stores, food chains and brands the natural way of business called small family businesses would have continued and there would not be large corporations, but people collectively are a bunch of fools, the intellect of a few thinkers is usually outnumbered by the idiotness of others and all together they are very dumb. People whose fathers and grand fathers had established family businesses in small towns and pretty large houses had abandoned their businesses and houses in pursuit of flashy lights of big cities. They ended up as slaves of corporations and now their next generation is bound to continue as slaves. People who did carried out their family businesses faced tough competition by corporations who bombarded the markets with flashy advertisements and unnatural price cuts. Since people are collectively dumb they rushed for the corporate goods and services abandoning small, neighbourhood family businesses. Those businesses saw their sales going down for many years and many had to shut down their businesses and their owners had to go become slaves of the corporations but atleast they fought before giving up.

So, the point is not when to pay the debt. The point is how to get free. There are many levels of freedom. The day to day level is financial freedom. There are two ways to be financially free: do your own business, be highly educated. If you are unwilling or unable to follow any of these two paths then you are just a corporate slave. If you are doing your own business then for the most part you are free. If you are highly educated you can talk in even terms with your corporate boss when it comes to pay raises and you can switch job if he not agree to you. Ofcourse for most of the people the high education option is not there for obvious reasons, so doing your own business is one of the ways. Some people consider a third way of financial freedom too, working for a not-for-profit organization. They make the point that since these organizations are not for profit their bosses don't bleed you dry at work and don't fire you that often and that easily. Such organizations are a good place to work as long as they have an independent source of income other than any donations they get from outside. If an organization is dependent on charity to run its operations then its infact dependent on corporations because normal working class people are not able to give as much charity as large corporations can. Working in such an organization is a risky career path. If the organization has its own source of income, for example its a university and its source of income is its fees then you are in safe ground. Its not necessary ofcourse that you have only one form of income. You can for example do a day job and have some income from there and have some property rented out if you are rich enough to have some income from there too. That second part of your income that comes from rent gives you more financial security than the first part.

The above paragraph is about income security. The other half of financial freedom is expenses security. How much of your expenses are fixed. It includes that interest payments you have to make no matter the level of your income and no matter you have an income or not. Thats the worst loss of freedom when you have to give interest. You know the tension you face all the time. Another fixed expense is your rent, if you are poor enough to not own a place of your own and have to pay somebody are rent just to have a place to sleep then you have lost some freedom there. Its not as bad as the interest payment, where the payment amount is fixed and there is nothing you can do about it, in case of rent you can actually go and live at a worse place at lesser rent incase of an income reduction. Nevertheless rent is a big hole in your freedom and bleed you every month. Your car related expenses including petrol and repairing expenses are also a fixed expense if you are locked in an american suburb. In living at such a place a man without car is a man without legs, unable to go to school, work and market. You have other fixed expenses too, including your insurance payments especially your health insurance payments.

So, what is freedom? Freedom is flexibility. Flexibility is what you need to survive in long term. Flexibility is resiliency. Flexibility is what eastern cultures have and western cultures had let go during industralization and post industralization. Higher the part of your income depends on other people's non-essential choices, higher loss of freedom you have to absorb. By non-essential choices I mean choices that they are not forced to make. For example going to a five star hotel for dinner every weekend is a non-essential choice, it can easily be avoided when going go bad. If you are working in such a place your income and job is highly likely to go down when economy worsens. An essential choice is one where there is little real choice. Keeping a chemical engineer at a chemical factory is an essential choice. Going to a doctor when you have a tooth-ache or car accident is an essential choice. If you are a chemical engineer or a surgeon you are more likely to have your job in future than a waitress or a ticket clerk or a telephone operator. So, there are two decisions to make here. Go in industry where people are forced to buy and be at a position where its very hard for corporation to fire you if you must work for others.

Flexibility is also needed in terms of expenses. Higher the percentage of your income locked in fixed expenses such as interest payments, insurance payments, rent and car expenses the lesser freedom you have and thus lesser ability to manouvre.

When you see a bright future ahead you lose freedom to get higher net gains. In other words, you lose resilience to get higher efficiency. Thats what been happening all through industralization and post industralization. Assembly lines were the first major decision made in this regard where people are made to work on only one part of product, producing more and better of it but losing the flexibility of switching to other jobs. The time we are facing now is imminent losses in economy, incomes have to go down and so do expenses. Without fossil fuels there would be less energy and with loss of energy there would be loss of economic activities and with that comes loss in incomes. So what should a person do? As a basic rule of survival, be flexible. Be as much flexible as you can, in both incomes and expenses.

If you are in debt, get out of the debt as soon as you can. Once you are out of debt you regain some of your financial expenses freedom. If you can educate yourself more, do it. When unemployment increases you would be facing a tougher competition from your fellow unemployed people for a lesser amount of jobs. In such situations a higher degree gives you more freedom. If you have to pay rent, try to move to a smaller, more affordable place with lesser rent. If you have money in pocket then living in a small house you can be more happy than if you are empty pocket but living in a large house.

The last point is, its not necessary to live in western world to be happy. All in all the western world is collapsing. It was the first and foremost to gain by industralization so its as logical that they would be the first and foremost to suffer from de-industralization as the other half of the peak oil graph is by looking at the first half of the graph. Your little net savings, the amount you can muster after selling all your assets and paying of all your liabilities may be little and insignificant to live on in a western country but in east due to exchange rates it can be a very, very large amount. A choice of moving to a less industralized and therefore less vulnerable to energy downfall country can be the best decision you ever made in your life. Not all of the less industralized and therefore "poor" countries are overcomed by crimes and dictators. World is very big and you are very little so you can find a place for yourself.

Remember, happiness is a function of freedom.

I think the greatest problem with this question is that there is too much uncertainty to really say for sure what the winning move is. But for me the object is not to find the winning move, but to not make a losing move.

Some of the doomers argue that if things collapse then we won't have to pay off the debts, but to me it is an unlikely scenario and even if it does come to pass it would be difficult to time properly. There would still be no guarantee that the financial system would still be hobbling along to a degree where someone else could purchase the note and then hire some thugs to throw you out.

I was in a position a year and a half ago where I could pay off our mortgage, so I went ahead and did it. Yeah, I suppose I could have invested the money instead (and watched it wither and then rebound), but just paying it off essentially eliminated uncertainty, and it eliminates stress. If I or my wife lose our job, we won't lose the house (we still have to pay taxes of course - but that's a relatively small fraction of what we were paying on the mortgage).

The absence of a mortgage payment means I can save - I don't have a specific objective in mind, but having the cash on hand gives us the freedom to quickly act in any number of ways should we need to.

I've already made this bet. To the tune of a couple of hundred thousand euros, timed as well as I could for the crash.

Money always inflates. It's a great way for the elites to steal the wealth of the populace. Inflate the money supply, wages increase with CPI if they're lucky, assets increase with the rate of credit inflation. One is 3% the other 9%. There is an effective movement of wealth from the workers to the asset holders. The only way wage earners can keep up is if they change employers every 3 or so years.

If money were still tied to something scarce, I'd be betting deflation. It isn't and i'm not. That isn't to say shit times aren't ahead, but they'll be inflationary shit times.

http://css1971.wikispaces.com/Economy.money

I wrote this several years ago, 06/07 passed it round friends and family, got blank looks and then gave up and posted it on wikispaces couple years ago. The crash was obviously coming.

My, my, my, it looks like dija vu all over again as Yoggi would have said, quick question...should Chinese citizens consider paying down their debt?

http://www.bloomberg.com/apps/news?pid=20601087&sid=aIcTfdm5rWdY&pos=2

"Northwestern’s Shih estimated that borrowing by China’s 8,000 local-government entities may have totaled 11.429 trillion yuan in outstanding debt by the end of last year and they had credit lines with banks for an additional 12.767 trillion yuan. That may result in bad loans of up to 3 trillion yuan.

China’s banks had 497 billion yuan of non-performing loans as of Dec. 31, accounting for 1.58 percent the nation’s total advances, according to the banking regulator."

1.58 percent is not a bad number, but the "trust factor" seems to be fading, and easy money for unfettered growth may become a bit harder to come by...which of course is how the slowdown begins...choking off the money is like choking off the oil or the oxygen...growth begins to stall, and all sorts of oddities suddenly become apparent (wonder who the Chinese Bernie Madoff will be...because you know he is out there!)

RC

In my view, paying off debt is important - and I'd say that the order of priority you have them in is roughly correct also. I'd agree with many of the other commenters that having claims against your 'home' is dangerous in uncertain time. There is a great deal of uncertainty about what time-course the various scenarios of collapse might take. And even more uncertainty on the response of governments (and banks) to such changes. So 'gambling' that a near future exists in which debts will be wiped clean is in my mind highly risky. Of course I may be kicking myslef in a few years when I find that the tens of thousands that I'd paid the bank to get out of debt faster was essentially wasted. Who knows? I'll go and buy a lottery ticket to even up the odds...

I live on a little more than $(usd)8,000 which works out to just barely enough to pay all my taxes and keep the house when my parents die and it passes to me. I am only paying off credit card debt. After the end of this year that will be Zero, and will only if ever be used in an emergancy.

I don't think of myself as poor, though if you use the standards of the day in the USA I guess you'll have to label me thusly. But Poor people in my book, have less than I do, which is a nice warm bed, and shelter out of the rain, and a yard to grow things in.

What might or might have been mentioned above is my debt to Society? How much of my living here on earth is damaging it for the rest of you? I have done those fancy carbon footprint calculations online, and I am sure just because I live in america and have a roof over my head I fail. All I can say in my defense is that I plant as many things as I cut down, have not reproduced. I still drive, just not more than 150 miles total a month, and when I do it is not alone. I still buy things from off ships that bring it 4,000 miles away, that's mostly food items that I'd love to grow in Central Arkansas but can't. Or rather I could just not without a big greenhouse and lots of more energy use than I already use(ie I can't afford).

Yeah I can lower my Debt to everyone else, but guess I'll do that later, so much for being a good treehugger.

Charles
BioWebScape designs for a better future.

Anyone want to join in a Coffee, Vanilla, Tea, Olive Oil plantation in Central Arkansas e.mail me.

Just a note on student loans from someone with a lot of them (~$100K) and some knowledge of the new laws: the recent legislation allows for payment schedules based on your disposable income (much more lenient than previous versions), as well as loan forgiveness for anyone working at non-profit organizations (all levels of government included in the definition) for ten years. In my case, paying on the disposable income-based schedule--even with a good job--and working at a public university for ten years will save around $60K in payments. Taxes in year ten will be problematic (the loan write-off is considered income), but it's still a pretty substantial savings in the long term.

I lived in Southern Italy (Avellino) for a time while I worked on the Autovon System at Mt.Vergine. My Italian friends had no debt ,credit, or "long term obligations". (Local,COMMON Italians) They couldn't borrow, so everything was paid for with cash. If they didn't have it, it wasn't gotten. My friend Sabatino wasn't married until mid30's. Condo paid for, house paid for... NO debt. No property tax. Family was more than socially bound, it was economically bound. All contributed. No pretentious weddings like in U.S. ... Large Gifts, YES, But to pay for Housing or Cars... A debt free society (poor, dark Southern Italy), but Rich in social connections. How different from our "Western Traditions". Pay down Debt? It is simply a contract that true families and societies would never allow. Imagine that. 'Nuff said...

When you have saved for 10-20 years every cent and now have a few hundred thousand on the bank and you want to buy a house and you need to borrow another few hundred thousand to pay it, it feels like a completely different debt then when you buy the house with all borrowed money. I know people who don't have any money but a pretty good income. They live in larger houses then people who have money but a smaller income. Their entire attitude is to come to the month (and a few ahead) and they don't care about what they own or even owe. They only thing that is certain in their lives are themselves. The rest comes and goes.

I myself hate debts, but i am in doubt once in while to take some credit to buy a bigger house. But when i do that i put everything i have at stake and i don't want to do that with all the risk i see from peak oil and even earlier from a financial meltdown. The risk that hyperinflation is NOT the first thing that kicks in from now is just too big. You have to take into account that hyperinflation isn't a good thing for your debts as well when your income can't keep up with the inflation (it will certainly not be very good employment, so the chance of loosing your income increrases). It might turn out good not paying debts, but chances are it's not... We will see! Meanwhile i will make no debts... just to be a little bit more on the save side.

Gail,
Doesn't it seem like the common people tend to do exactly the wrong things, every time? A few years ago, everyone was rushing to buy
real estate for highly inflated prices. And now, everyone is rushing to pay down debts.
Ask yourself two questions:
Does the US government have the motivation to create faster inflation?
Does the US government have the power to create faster inflation?

For many months now, I have been occupied, in somewhat similar
fashion to many other commentators that I see here, in securing more hard goods, such as food, water, lumber, tools, precious metals, and trustworthy friends.
As part of that acquisition process, I am increasing my debts,
responsibly ... as best I can, since most of the banks simply are not
lending anything to anybody these days ... getting long-term, fixed rate loans ...

tx again, chiz

Pay down mortgages? It always seemed sort of dumb to think that house values would continue to increase. Clearly houses are not GM products, but there are really only a very few old houses on the planet. Almost all houses which were ever here are gone, like burned, rotted, decayed. So why don't houses depreciate like all other CAPEX? My take is that it makes sense to invest when such investments increase in value; it makes sense to rent when things are going the other way. Home ownership is a very recent US aspiration. As you know millions of apartments were made into condos and refinanced using individual debt packages. Everyone of those condos is no more valuable than when it was an apartment. My suspicion is that young people today should find better things to invest in than a shoddy built US house. Others, say the Germans, have houses that retain value. Good contemporary homes have triple glazing, super insulation, flexible and expandable wiring, etc. Mandated house quality could come here. But, it seems more likely that the existing housing stock is way overpriced, and now is just a the time to use other people's capital, like rent.