Subject:
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Re: A hypothetical economics question...
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Newsgroups:
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lugnet.off-topic.debate
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Date:
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Thu, 28 Feb 2002 22:48:20 GMT
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Viewed:
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438 times
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In lugnet.off-topic.debate, Richard Marchetti writes:
> In lugnet.off-topic.debate, Frank Filz writes:
<Snipped>
> > Take a young family, who has been in the workforce for just a few years.
> > They would like to acquire a house.
>
> Okay, let's. Let's say to make things easy they are going to acquire a
> house worth $100K for 7 percent over 30 years. A handy mortgage
> calculator I found online suggests that they will pay $665.30 a month,
> for a total of $239,508. Making round numbers -- that's almost 140%
> again the amount that they borrowed. Let's say that instead of taking
> the house on time the same couple decides to save for it instead -- so
> for now, they pocket the 10% down they intended to use to secure the
> loan. Together they make $50K a year. By living frugally they are able
> to save $15K a year. In 6 years, they can likely buy the house outright!
You are assuming housing costs would not fluctuate in the 6 years in study,
right? I mean, by the time they reach 100k the house cost a tad more... and
in the meanwhile, they may have been experiencing other possible
difficulties that are originated by not owning the house (evictions, rent
increase...)
> Now the above wouldn't work for you where I live, not with those specific
> numbers, but the idea is similar. The desirability of one plan over the
> other depends on one's priorities I guess.
>
> Can you argue in favor of accepting the 30 year loan over the 6 year plan?
> Did I miss any major points?
Do you want to pay more to live better earlier? As simple as that: extra
money buys extra time to enjoy possession.
> It seems to me that to argue in favor of the 30 loan is to argue in favor
> of consumer debt -- a game in which those that die the deepest in debt win.
> They lived well and didn't have to pay for it. In the real world, such
> losses are spread amongst the living in various ways. I don't care for
> this scheme very much.
Usually, relatives pay. At least where I live. So the bank never loses.
Anyway, those who end up paying for the loan have also acquired rights over
the possession (the house, in the last example). They can just sell it to
pay the missing portion, and even end up winning some $ (€?)...
> Some of the rationales I can see in defense of the 140% profit from the
> $100k loan over 30 years have to do with the risk over that LONG period of
> time and the devaluation of the basic means of exchange -- specifically,
> U.S. dollars. When the buying power of the dollar is always going slowly,
> steadily downwards it might seem fair to collect HUGE sums of interest to
> balance things out. 30 years down the road it might take twice as much
> to buy the same thing one could previously purchase for the original
> amount of the loan. But the REAL problem is the devaluation of the dollar
> and not really a justification for the collection of a crazy rate of
> compounded interest.
So, in REAL terms, from the "theoretical" 140%, if you include the factors
"inflation/devaluation" and "pay raise" (c'mon, it's bound to happen!),
maybe you end up with a fairer "actual" rate. Am I right?
> My means of defeating the devaluation of the dollar under our current
> system is what is enumerated in the U.S. Constitution -- making only gold
> and silver legal tender in payment of debt.
Then immagine the rest of the world decides they don't need Gold, or that
Gold has a lesser value to them than to the American Government - then what?
Besides, I think every issued banknote must have a correspondent amount of
"metal" in the Federal Reserve. At least I hope so!
> So, who owns Manhattan? Those that undestand how to make compound interest
> work for them and against those that do not understand it. Stealing
> the moments of a person's life by bleeding them for their wealth, usually
> gained by them by exchanging labor and time for wages, is a kind of murder
> in my book.
That is the center of all my philosophic, existential questions: "Why work,
if I won't be able to use the money I earn doing what I would like to do?"
(i.e., by the time I will have saved enough to travel round the Globe, I'll
be too old to do it...)
Troubling. Such is the price to live in a thriving society, as paradoxal as
it may seem.
Pedro
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Message has 1 Reply:
 | | Re: A hypothetical economics question...
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| (...) I hate to be overly harsh -- but you have no idea what you are talking about. The corresponding amount of paper money to precious metals is by definition in U.S. federal law supposed to be .999 fine 1 oz. silver for a dollar (it is essentially (...) (23 years ago, 1-Mar-02, to lugnet.off-topic.debate)
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Message is in Reply To:
| | Re: A hypothetical economics question...
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| (...) I thought you were always off to church and such...my mistake. (...) Why not? I am trying to suggest we give those under the thumb of the world be given a clean slate. Anything they do from this moment forward can bring them whatever wealth (...) (23 years ago, 28-Feb-02, to lugnet.off-topic.debate)
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