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.

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 »

Sultanas (by alaric)

THE SCENE: Jean is eating a chelsea bun.

JEAN: "I don't like sultanas."

ALARIC: "They're... really sad to hear that. They say they tried as hard as they could to be tasty for you."

JEAN: "I absolutely hate them."

ALARIC: "Oh no! Some of them are crying now!"

JEAN: "Well, I'm eating them anyway."

ALARIC: "Ah, that's cheered them up a bit!"

JEAN: "What, even though I'm killing them?"

ALARIC: "Oh, you're not killing them, you're liberating their trapped souls."

JEAN: "Really? Well, they'll just be 'tanas' then, without their 'souls'."

Day 4 of making the ladder (by alaric)

I wasn't scheduled another project day until later in the month, but I had some spare time and the opportunity to grab a volunteer (my father in law, Len) to help, so yesterday I mounted the ladder on the wall!

(Background: Days 1, 2 and 3).

The first step was drilling the holes. I held the ladder up against the wall, and checked it with a spirit level, while Len pencilled the holes in.

Then it was time to drill. I'm very fond of my SDS+ drill (as I have mentioned previously) so it was good to have an excuse to get Vera out again:

Without further ado, I started to drill:

However, disaster struck on one of the holes - the bit suddenly went sideways, into some kind of void inside the concrete blocks of the wall. Doh! I fitted a smaller drill bit and managed to drill back into the route the hole was supposed to take, then drill that out so the bolt could go in straight, but now it was in the middle of a much larger hole than intended so it would just rattle around and not hold anything.

Thankfully, I over-engineered the design so that it had far more mountings to the wall than it really needed, so none of them were all that critical. What I did was to jam a piece of wooden dowel into the misaligned part of the hole to fill much of the space, then squirt a load of fine mortar (2 parts sand to 1 part cement) into the rest. More on that later.

With that done, I could fit the anchor bolts to the ladder. The anchor bolts consist of a normal-seeming bolt that goes through the ladder, into a sleeve that goes into the wall. The sleeve is a metal tube, but at the far end is a conical nut that the bolt screws into. When the bolt is tightened the conical nut is pulled into the metal sleeve, forcing it to expand to tightly squeeze against the surrounding masonry.

So to start with, I put all the bolts through the ladder and screwed the sleeves on a few turns to hold them in place:

Then we lifted it up and guided the bolts into the holes and wiggled it into place. Of course, as it's nearly impossible to drill holes into masonry accurately, the holes were a few millimetres out from where the holes in the ladder are, so beyond a certain point the bolts started to chafe against the masonry and had to be tapped into place with a mallet:

All except the hole packed with mortar, of course, which the bolt just slid into squelchily.

Then we tightened the bolts - all except the one in the wet mortar; I'm going to give that a few days for the mortar to cure before I tighten it, otherwise there's no resistance to the expanding sleeve and it'll just squeeze the mortar out.

And then it was time for a test.

After gingerly doing a few pull-ups on the ladder, I climbed onto it. And then to check it's really secure, I put as much strain on it as I could by stretching myself out to get the maximum torque:

This failed to tear it out of the wall, so the next step was to actually climb up to the roof:

See how the top rung protects the gutter? That's careful design, that is! 🙂

However, it was cold, damp, and slimy up there, so I climbed back down and had some lunch. After lunch, I put some sealant around the edges of the mounting flanges, to prevent water getting in behind them where it might soak into the wall through the bolt hole, or lurk around and make the flanges rust. Also, I like sealant and will use it whenever I can:

This stuff is "frame sealant", which is specifically designed to join metal, wood and masonry outdoors, as opposed to the stuff you use in your bathroom. It's extra sticky to bond to awkward surfaces and extra stretchy to account for thermal expansion differences.

I also cut some small cubes of wood and pressed them into the open ends at the top of the ladder, packed with plenty of sealant. I tapped them in with a hammer to about a centimetre below the open end and squeezed more sealant in on top, and domed it slightly to keep rain from pooling.

Now that ladder is done, as soon as I get some time I'm going up there to secure part of the plastic sheet that's flapping up, and have a general poke around to see if I can find any holes to seal. With more sealant! Yay!

Also, I need to touch up the paint on the ladder in a few spots where I dinged it moving it around. Whoops!

Day 3 of making the ladder (by alaric)

Well, after two days of prior work on the ladder, yesterday I settled down to another day.

I started by welding together the second side of the ladder, to match the first. With that done, I now had the two sides of the ladder, ready to join them together with the rungs:

With that done, I carefully aligned everything on the welding bench and ground the welds on the inward sides down so that the rungs could fit on nicely:

I set the rungs back half a centimetre where they were attached at the same point as a spacer, so they were welded both to the uprights and to the spacers, as I felt this would be stronger. The pieces of wood you can see under the rungs are maintaining that spacing.

Now, as I mentioned before, I'm not very good at welding; I can make things structurally sound, but not pretty, because my welds often go wrong and I have to go over them again. This usually leads to big, messy, welds, and on a couple of occasions with this job, I actually melted a hole in the metal and had to patch it up. Here's one particularly terrible weld:

I ground the lumps around the edge of the hole down:

Then welded a metal plate over it:

This, in contrast, is I think the neatest weld I've ever made:

With all that done, the ladder was actually a ladder:

I sanded it down to get the weld gunk off, then washed it thoroughly in white spirit to remove the grease the metal came covered in, and laid it out in the kitchen to paint:

Then I gave it a priming coat and left it to dry overnight (I did it in the kitchen so it would be warm and dry overnight, rather than the cold and damp of the workshop):

It'll need another couple of coats of paint, and I need to cap the open ends of the uprights at the top, then I can mount it on the wall.

Part of welding that I always find quite profound is the way that a bunch of bits of metal, initially held together with clamps, and gingerly handled in case it comes undone, slowly transforms into a structure made of solid steel. This was driven home with the ladder project when, finishing the welds on the rungs, I found the best way was to lay it on its back like in the last photos and sit on it so the welds were flat (the best orientation, as molten metal likes to run away when the weld is vertical) and comfortable to reach; it didn't even flex!

I can't wait to be using it to get up on the roof. There's a flap of plastic sheeting lifting up in the wind and letting rain in, and I can't reach it in any other way...

Continue to day 4...