Debt (by alaric)

At the time of writing, there is talk that the Cypriot banking system will "collapse under a mountain of debt" unless Something Is Done. In general, many financial institutions, governments, and people seem to be struggling to meet their debt repayments.

So I thought I'd talk a bit about what debt really means.

I assume we all know what debt is, but just to be sure, if you obtain something (such as money) in exchange for a promise that you'll give something back in future, then you're "in debt". Usually, you will agree to give more back than you gave, to make it worth while for the lender to do this; this is called interest.

This can be good news for the lender - if they had money lying around and didn't really want to spend it on anything, then rather than leaving it in a pile, they can lend it to somebody and get more back, by charging interest.

This can be bad news for the lender - you might disappear and not pay them back. Part of the interest they charge is to cover that risk. If you are a lender who makes millions of loans (such as a bank), some fraction of them won't pay you back; so you make sure you make enough on interest from those that do, to cover those losses, and still earn you a profit.

This can be bad news for you, too, as many people seem to be finding. You may find that you can't afford to repay your debt. Failing to repay usually has some negative consequences; you may be blacklisted from borrowing for some time, or your local legal system may offer a way for the lender to send people into your house to take your possessions to try and recoup their losses, or maybe even kick you out of your house so they can sell it. Or, in order to avoid those woes, you might repay the debt even though this leaves you too short of money to feed your family.

But let's not forget that it can be good news for you, too. Much has been said about how we've all ended up with too much debt, and it's probably true. But debt isn't just about greedy people wanting things now and not properly considering the consequences of those future repayments.

Debt is a form of time travel. If I have ten pounds spare a month, but want to buy something that costs a hundred pounds, I can wait ten months to save up the hundred pounds and then buy it.

But if I borrow a hundred pounds, in exchange for paying back ten pounds a month for ELEVEN months (the extra month being to pay interest on the loan), I can have that thing now. The difference is an extra month of not having my ten pounds to spend on anything else (which isn't a huge deal), but having my new thing now rather than in ten months (which is a big deal). By using debt, I'm teleporting the hundred pounds backwards in time by ten months. That's not just convenient and immediately gratifying - it can save me a tremendous amount of money.

What if the thing I want to spend a hundred pounds on is a tool, required for me to do my work and earn the money that covers my ten pounds a month spare in the first place?

If I don't have the tool, then I can't save up ten pounds a month to buy it.

What if it's to be spent on a domestic appliance such as a washing machine? If I don't have a washing machine, I'll have to go to a laundrette to clean my clothes, which will cost me more each month than the running costs of a washing machine. Buying the washing machine with borrowed money will cost me a bit of interest, but I will save more than that by not having to use a laundrette for the lifetime of the washing machine.

What if it's to be spent buying a house? If I have to rent while saving up to buy a house outright, then lots of my money will go on rent, and I won't have much to save up, so it'll take me longer to save up than I'm likely to live for. If I buy a house with a loan (that's what a mortgage is), then I'm spending money repaying that loan plus interest, and not having to pay rent. In twenty-five years I will have repaid that debt; I'd still be saving up by then if I was paying rent as well.

Now, I have a personal love/hate relationship with debt.

Once upon a time I had savings sufficient to pay the bills for several months, even if I wasn't working. This was great. But then we got married, funded partly from savings and partly from taking out a loan (as I wanted to keep some ready savings on hand). Then we had to move house in a hurry at the same time as we were expecting our first child, and then my wife was sick for the last third of the pregnancy and nearly died in labour, and I had to look after her and the new baby while setting up the new home; and as we were getting on top of recovering from all that, our house was catastrophically flooded and we had to find other places to live and work for nearly a year before it was habitable again.

This meant lots of extra expenses, and lots of time when I couldn't work for one reason or another. So the savings disappeared pretty quickly, and in order to keep my family fed, warm and dry, I had to borrow money in the form of buying things with credit cards. That's a terrible form of debt that charges lots of interest, but it was easy during a very hectic period of life. I never realised just how much I'd be needing to borrow; I somehow managed to delude myself that things would be back to normal soon, and it was only in hindsight that I realised I really should have just taken out a bank loan for ten thousand pounds or so up front. I converted the credit card debt to a straight loan once I'd taken stock, but by then I'd rattled up much more debt due to the interest payments.

I'll have finished paying that debt off at the end of this year, about eight years since it all started Going Pear Shaped. The amount I've been repaying has varied across that period, but it's currently five hundred pounds a month, and has been nearly a thousand pounds a month at times, during a horrid period when I was only just covering the minimum credit card payments, along with the payments on the loans we already had, but no banks wanted to lend any more to somebody in as risky a financial position as we were so I couldn't convert the credit card debt.

So I have suffered under the burden of debt, and cursed it, for nearly a decade. And yet, without it, I'd have had to go bankrupt (or something similar). To be honest, I'm still not sure if that might have been for the better in the long run - at the time, having my home ransacked by bailiffs and being largely blacklisted for credit would have been harrowing, but it would all have been water under the bridge by now. At each of the myriad financial crisis points during those years, taking on a little more debt to tide us over rather than facing that was always a rational-seeming choice; it's only when I can consider trading all of those for a single shot of financial distress that it looks irrational. But it's only with hindsight that I know how many things were going to go wrong in that period! At the time, we always seemed to be just about coping with what had gone wrong so far, and could only hope that things would be a bit less bizarrely unlucky going forward. The run of bad luck finally ended a few years ago, and we've been steadily paying everything off while living frugally.

So I can't really say for sure whether taking the debt route rather than the bankruptcy route was good or bad for us - but it might have been the right thing, and it certainly would have been the right thing if the run of bad luck hadn't been so long and deep. So it's certainly the right option for many people.

Therefore, I assert that debt is a powerful tool; useful in many situations, downright lifesaving in some, but it has to be used wisely and with consideration - because it can be terrible if abused.

An Artsy Cheltenham (by sarah)

Yesterday I went into Cheltenham to meet with one of the directors of the Cheltenham Poetry Festival to sort out what I was doing for the festival. I was already doing the Slam but I'd suggested I could take some photos of the events with my new camera.

They loved the idea and I have scored my first ever press pass. Last year with the old camera I took photos of events I happened to be at and some of the artists then used the photos I had taken for their websites and profile pics and what have you so this seemed a logical step forward. I may also be performing at a couple of other events at the festival.

I am also working on a new novel project so spent the afternoon working on that resulting in only 10 pages being written - I think I am out of practice!

I then wondered around in the twilight looking for low light level type photos to take 🙂

I really like the way this one above came out 🙂 I sort of want to draw him now.

I love stone statues in strange lighting.

There is a sad manic-ness in these horses again they make me want to draw them.

Today is also the last day of the Science-Art Gallery at Centre Arts so I shall be in there from 12:30 till 5 pm so if you're kicking about do pop in. It is the arts cafe and there is tea and cake 🙂

Bitcoin: better than a Euro bank? (by alaric)

Ah, Bitcoin. I've written about its security and regulation mechanisms before, invested in it just before the June 2011 bubble; as the bubble peaked I sold enough at the higher price to cover my meagre initial investment, so didn't feel too worried when the bubble burst - the bitcoins I held were, essentially, free.

I could have made more money if I'd known when it would burst (indeed, at the time, I wasn't sure if it would ever burst; that ramp could have been the start of a worldwide shift to bitcoin as the de-facto international currency, for all we knew); I could have sold all my bitcoins right before the drop, then used the proceeds of that to buy back at the very depths of the crash, and netted myself a heap of bitcoins that would be worth an astronomical amount right now.

Hindsight, eh? Read more »

We Love Sugru (by sarah)

We love Sugru which is a putty like stuff that you can form into shapes, sticks to just about everything and is flexible - it is basically a funky silicon rubber from my understanding. When we first heard about it we couldn't get hold of any and so had to wait as they had sold out but the wait was worth it!

Since then we have used it for tonnes of things from embedding electronics in hair pieces, making creatures for the visually impaired, fixing fridges, shoes, adding little feet and buffers to all things electronic, fixing broken mugs and making jewellery. I plan to fix my electric guitar with it though need to see how it reacts to having glitter added to it!

But it is more important to me than it's usefulness. To me Sugru represented something more, when it appeared I was struggling with both scientists and artists telling me that there was no cross over between the two areas. My tag line o twitter is that I am The Artist Scientist or Artistic Scientist and to see this product - the result of something an artist (ok design student) had produced, being so wonderful for science/tech and artistic endevours.

This was the sort of fusion of art and science that I was sure should exist but was being told didn't and my examples of how the modle builders of film dinosaurs had ended up solving the mystery of joints and movement that paleaontologists has been struggling with was falling on deaf ears.

So I turned up at The Cheltenham Science Festival debate on science verses art that year with my sugru bracelet and my ESA t-shirt I'd won for Celestial Montage and found that people didn't seem to really cae on either side of the divide, they have their opinions of the others and that is that. Stuck in the middle as all ways I gritted my teeth and looked for more science-art related things and found it under the title science communication.

Recently Sugru posted their life story so far and asked what inspired others, so I told them - they inspired me! They provided the evidence I needed that science and art can create wonderful productive and helpful things by learning from each other, they are an example of a dream that was followed and they provided the very material I had been trying to work out how to make myself - I was mucking around with resins casting, silicon mould making and fimo in order to get something like sugru and I was failing and could not make the projects I wanted. I hadn't even thought of applications beyond my own ends and there WOP! appeared sugru ready to go and so I went and so did Al and he has even written up one of his repairs/hacks for their website!

Molecular Knits (by sarah)

As part of the Science-Art Exhibition and to celebrate National Science and Engineering Week I wrote up the pattern to my knitted Bucky Ball. I illustrated it with photographs of the process and took them into the weekly Knit and Natter group that meets at Centre Arts in Cheltenham every Wednesday.

This resulted in a triumph for Science Communication - I ended up explaining what atoms and molecules were to a lady who did not know. And on top of this I now have a pattern written up 🙂 I want to add in some Bucky Ball facts and then release it on Etsy and possibly in other places too (it is already 4 pages long! Though that is with instructions on how to knit oxygen and hydrogen atoms too).

Centre Arts is also knitting a poem for The Cheltenham Poetry Festival which I've been too busy to knit any of. I got to see the title line whilst I was there 🙂