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Old 02-11-2012, 04:00 PM  
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Originally Posted by rivalarrival View Post
Could be. Show me where I've ignored your arguments and we'll talk about them.
With the same words again?
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Old 02-12-2012, 01:21 PM  
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Originally Posted by Eddie_T View Post
With the same words again?
just keep evading the questions eddie, I have tried to force you to defend your positions and you use this tactic, please try to have a meaningful discussion here instead of this jump, throw some arguments around and then not defending them when someone clearly points out they are wrong/illogical. It gets old.
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Old 02-12-2012, 02:51 PM  
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Originally Posted by RedJeepXJ

just keep evading the questions eddie, I have tried to force you to defend your positions and you use this tactic, please try to have a meaningful discussion here instead of this jump, throw some arguments around and then not defending them when someone clearly points out they are wrong/illogical. It gets old.
Blaming liberals for refusing to accept the unsubstatiated claims of a conservative tends to support the claims of the OP.
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Old 02-13-2012, 06:31 AM  
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Well guys, I don't blame one party over the other on this one. I blame the federal government as a whole.... And as far as it being a tax on "money stuffed under a mattress"... That is true... It is also true that most folks think that "evil businesses" are increasing prices... Really alot of it is the declining of the dollar. Also, if inflation is 2.5% in a year and I get a 3% "raise" I KNOW I'm only getting a .5% raise (in my ACTUAL spending power).. Many people don't realize this. That is why I don't like it. It is devious and leads the people to hate business and think the government is doing them favors (aka buying votes). It is manipulation for the benefit of the government. You are right, the system encourages spending money. How do you think we got into this mess??? The so called "booming economy" that we had for so long was all artificial. If people are buying a bunch of junk on credit it is truly artificial. The amound of average household debt had been steadily rising up until the collapse in 2008.

Also, what "assets" are you saying people should buy instead of saving money?? A system that punishes saving is doomed to failure.

I heard a report on average household debt before the collapse happened and was amazed at the consumer debt. I knew we were in an artificial boom and it wouldn't last.
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Old 02-13-2012, 09:22 AM  
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Originally Posted by YelloJeep View Post

Also, what "assets" are you saying people should buy instead of saving money?? A system that punishes saving is doomed to failure.
No, a good system *will* punish those who "save" and will reward those who "invest".

A system that encourages people to hoard money is a system that is doomed to failure. You have pointed out several times what happens when the government "prints money", floods the economy with paper.

Suppose the economy encourages "saving" - stuffing money in a mattress instead of investing. As soon as we experience a "rainy day" - like we did in 2008/2009, everyone in the nation brings their money out of savings, the market sees more dollars chasing fewer products, and inflation spirals out of control. Similarly, when the economy grows, people take their money back out, putting it into savings. The value of the dollar rapidly increases, further encouraging savings, With this economy, boom/bust cycles are accentuated. The economy you are suggesting is highly volatile. The value of the dollar moves rapidly.

An economy that encourages investment is preferable to one that encourages saving. In such an economy, the individual is motivated to put their money to work: To purchase gold, to purchase shares of stock, to lend and borrow money. With this economy, wealth is held in assets and promises and transferred in dollars. People value dollars only for their ability to transfer wealth, not to store it. With this economy, boom/bust cycles are moderated. The value of a dollar in this system will continuously, but steadily decrease - its value at any particular point in time is very predictable.


Quote:

I heard a report on average household debt before the collapse happened and was amazed at the consumer debt. I knew we were in an artificial boom and it wouldn't last.
For every debit, there is an equal and opposite credit. One man's debt is another man's investment. Literally.
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Old 02-13-2012, 09:56 AM  
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Originally Posted by rivalarrival View Post
For every debit, there is an equal and opposite credit. One man's debt is another man's investment. Literally.
I don't know about that.... If that is true, then why is it that debt was super accellerated prior to the collapse? Coincidence? I doubt it.

Also, I was thinking the other day about my mortgage. My interest rate is about 3.25% and I have been paying extra toward it every month to pay it off. I started to think that I could take the extra I had been applying to the loan and invest it yielding a higher interest rate and be better off (I am no investing expert so my line of thinking may have been incorrect).... Now, if that is in fact the case, couldn't you almost say that means that if interest rates remain low and inflation high, then people who are in debt actually end up winning out?? This is the line of thought of the folks who says our national debt benefits us.
To me, the borrower is slave to the lender, so being in debt should not be the preferred method to do anything. This type of system in my opinion is not healthy. In fact, it seems that it perverts an otherwise fairly simple system.
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Old 02-13-2012, 11:43 AM  
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Originally Posted by YelloJeep View Post
I don't know about that.... If that is true, then why is it that debt was super accellerated prior to the collapse? Coincidence? I doubt it.
EVERY man's debt is another man's investment. To find the investor, ask "To whom is the debt owed?" That doesn't mean that the investment will turn a profit, but it is an investment.
Quote:

Also, I was thinking the other day about my mortgage. My interest rate is about 3.25% and I have been paying extra toward it every month to pay it off. I started to think that I could take the extra I had been applying to the loan and invest it yielding a higher interest rate and be better off (I am no investing expert so my line of thinking may have been incorrect).... Now, if that is in fact the case, couldn't you almost say that means that if interest rates remain low and inflation high, then people who are in debt actually end up winning out?? This is the line of thought of the folks who says our national debt benefits us.
Yes, if interest rates remain low and inflation goes high, borrowers benefit. This is one of many risks that lenders take. As far as whether or not you should invest the extra money, you are correct: if you can guarantee a return greater than your mortgage payment, the interest you pay on the extra principal of your mortgage will be less than your earnings from the extra investment. The net effect of those two would be a lower, potentially negative interest rate on your mortgage. The key - and this is VERY important - is the "guaranteed greater return". The risk of the investment needs to be considered. If the return does not exceed your mortgage rate, you will lose money. Whether that risk justifies the potential rewards is what YOU have to decide.


Gold today is valued at 1724/ounce. If I borrow $1724 from you today, I can buy an ounce of gold. If you charge me 2% interest and inflation moves the value of gold up 3%, I can sell my gold for 1775.72 and retire the loan by paying you 1758.48. The money I pay you - with interest - is not enough for you to purchase an ounce of gold. Even though you have more money now than you did then, you can't purchase as much now as you did then. Having borrowed that money at that rate, my purchasing power is greater now than it was then. The lender in this case has lost, and the borrower has gained.

Normally, consumers can't reliably get this sort of loan - would YOU want to lend money at those rates? But this is basically what the government is able to do. The government's interest rate in the long-term is very very close to the inflation rate over the long term. People are willing to lend to the government at these rates for stability. Government debt is as close to guaranteed to maintain its real value as anything can be. You won't gain much, but you won't lose much either.



Quote:

To me, the borrower is slave to the lender, so being in debt should not be the preferred method to do anything. This type of system in my opinion is not healthy. In fact, it seems that it perverts an otherwise fairly simple system.
I would say that this is a problem with your perception. I'm going to give you 4 lending situations, you tell me which ones are "slavery" and which ones are not.

First, you have a nice $300 drainage pump you purchased when your basement flooded. You repaired your basement, and the pump is in storage. You aren't using it right now. Suppose my basement floods and I need a pump. Obviously, we can work out a deal for me to use your pump now and return it to you later, along with $30.

Second, suppose you *don't* have a pump, but you've always wanted one, and you have the $300 available. I need the pump now. So, you give me the money, obligating me to provide you with a pump and $30.

Third, suppose you don't have the pump, don't particularly need one, but have the money to buy it. You lend me the money, and offer to accept either the pump and $30 or $330 at the end of the month.

Fourth, you don't have a pump, don't want a pump, but have the money. You offer to give me the money now, and accept $330 at the end of the month.

In each transaction, you end up with what you started with (Either $300 or a pump valued at $300) plus a net gain of $30 (But, you didn't have use of your pump or your money while I was using it, which you value at $30).

I have either $300 or a $300 pump, and a net loss of $30. (But, I have a drained basement, which I value at $30.)

#3 is a secured loan, much like your mortgage. The lender will accept either payment or property to retire the loan.
#4 is an unsecured loan - the lender will accept only the payment.

The fact is that *every* contract creates a debt - an obligation with a specific financial value - on each party to the contract. If I hire you to build a fence and agree to pay you $1000, you are obligated to work, I'm obligated to pay.
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Old 02-13-2012, 11:58 AM  
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Originally Posted by rivalarrival View Post
EVERY man's debt is another man's investment. To find the investor, ask "To whom is the debt owed?" That doesn't mean that the investment will turn a profit, but it is an investment.

Yes, if interest rates remain low and inflation goes high, borrowers benefit. This is one of many risks that lenders take.

Gold today is valued at 1724/ounce. If I borrow $1724 from you today, I can buy an ounce of gold. If you charge me 2% interest and inflation moves the value of gold up 3%, I can sell my gold for 1775.72 and retire the loan by paying you 1758.48. The money I pay you - with interest - is not enough for you to purchase an ounce of gold. Even though you have more money now than you did then, you can't purchase as much now as you did then. Having borrowed that money at that rate, my purchasing power is greater now than it was then.

Normally, consumers can't get this sort of loan - would YOU want to lend money at those rates? But this is basically what the government is able to do. The government's interest rate in the long-term is very very close to the inflation rate over the long term.


I would say that this is a problem with your perception. I'm going to give you 4 lending situations, you tell me which ones are "slavery" and which ones are not.

First, you have a nice $300 drainage pump you purchased when your basement flooded. You repaired your basement, and the pump is in storage. You aren't using it right now. Suppose my basement floods and I need a pump. Obviously, we can work out a deal for me to use your pump now and return it to you later, along with $30.

Second, suppose you *don't* have a pump, but you've always wanted one, and you have the $300 available. I need the pump now. So, you give me the money, obligating me to provide you with a pump and $30.

Third, suppose you don't have the pump, don't particularly need one, but have the money to buy it. You lend me the money, and offer to accept either the pump and $30 or $330 at the end of the month.

Fourth, you don't have a pump, don't want a pump, but have the money. You offer to give me the money now, and accept $330 at the end of the month.

In each transaction, you end up with what you started with (Either $300 or a pump valued at $300) plus a net gain of $30 (But, you didn't have use of your pump or your money while I was using it, which you value at $30).

I have either $300 or a $300 pump, and a net loss of $30. (But, I have a drained basement, which I value at $30.)

#3 is a secured loan, much like your mortgage. The lender will accept either payment or property to retire the loan.
#4 is an unsecured loan - the lender will accept only the payment.

The fact is that *every* contract creates a debt - an obligation with a specific financial value - on each party to the contract. If I hire you to build a fence and agree to pay you $1000, you are obligated to work, I'm obligated to pay.
Eh, Okay whatever. I don't think your scenarios reflects the way lending usually works. Your examples are a wne time loan, one time payment. That is a little easier to swallow than the mess people get into today with loans. The problem (my perception anyway) is that when making large purchases, many folks don't look at the total cost, they are mainly concerned with the monthly payment. To me, that is foolish. Many people hate the wealthy because they are wealthy, and the hater is not. People don't become wealthy by only worrying about the monthly payment. People who stay poor, generally only look at the monthly payment. There is a mentality where people just think that having a car equals a car payment, and usiing credit cards is just the way people spend. Those are risky behaviors.
I don't want to owe people money and I think that owing people money is foolish unless you absolutely have to. Many just do it because they have to have everything "now" and can't wait until they save up for stuff..

Man, the conversation sort of evolved... Sorry about that.
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Old 02-13-2012, 12:34 PM  
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Originally Posted by YelloJeep View Post
Eh, Okay whatever. I don't think your scenarios reflects the way lending usually works. Your examples are a wne time loan, one time payment. That is a little easier to swallow than the mess people get into today with loans.
No, my examples do not involve compounding interest or periodic payment. We're discussing the very fundamentals of lending and borrowing, and at this level, compounding interest and periodic payments just serves as a distraction. What I am talking about is paying someone for the privilege of spending their money now and paying them back in the future. Whether that is a lump-sum payment of all the principal and interest accrued at the end of the loan, or whether that is small, periodic payments of principal and interest is is irrelevant to the fundamentals of lending.

Quote:
I don't want to owe people money and I think that owing people money is foolish unless you absolutely have to. Many just do it because they have to have everything "now" and can't wait until they save up for stuff..
And yet, in your last post, you described a situation where the more "foolish" decision was to get yourself out of debt sooner! You have paradoxically recognized a potential benefit of taking on debt, while suggested that debt has no benefit! I love a paradox. Niehs Bohr explains:

Quote:
Originally Posted by Niels Bohr
How wonderful that we have met with a paradox. Now we have some hope of making progress.
Suppose you owed $100,000 on your house at 3.25%, you have an investment opportunity that you are absolutely sure will net you 7%, and you just received an inheritance of $100,000. Putting that money into the investment, you'll net 3.75%; paying of your mortgage, you'll net 0%. Do you keep the "foolish" debt, and keep paying it off as you have been, or do you pay it off now?

Believe me, I understand where you're coming from. I don't want to owe money to someone either. I agree, it's fairly easy to take on a foolish debt - buying a $8000 TV on credit seems pretty stupid to me. But debt itself is not inherently foolish. A sports bar might find that TV is worth every last bit of that $8000 + interest in increased revenue from keeping its customers happy. A television aficionado might think that TV is worth every last penny just in the enjoyment he gets from it. I don't think either of us would agree!

But, that TV guy might not appreciate ownership of a Jeep like we do. You had an option of a Jeep or a more fuel-efficient vehicle; why did you choose the Jeep?

Quote:

Man, the conversation sort of evolved... Sorry about that.
It's cool. Discussion is supposed to evolve. As Eddie_T has suggested, it's stagnating conversation that makes everyone involved look ignorant.
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Old 02-13-2012, 03:18 PM  
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Originally Posted by rivalarrival View Post
No, my examples do not involve compounding interest or periodic payment. We're discussing the very fundamentals of lending and borrowing, and at this level, compounding interest and periodic payments just serves as a distraction. .
Well, I think it is a very relevant part of the issue. That "distraction" is the part that people often overlook thus resulting in (basically) uninformed poor decisions.


Quote:
And yet, in your last post, you described a situation where the more "foolish" decision was to get yourself out of debt sooner! .
Yes, I acknowledge the "benefits". Also, I say it results in unhealthy financial decision making by MANY. Basically, I somewhat understand how the "game" works but I also know MANY are very bad at it and we all pay the price.

Quote:
Suppose you owed $100,000 on your house at 3.25%, you have an investment opportunity that you are absolutely sure will net you 7%, and you just received an inheritance of $100,000. Putting that money into the investment, you'll net 3.75%; paying of your mortgage, you'll net 0%. Do you keep the "foolish" debt, and keep paying it off as you have been, or do you pay it off now?.
Yeah, I pretty much already described that scenario!

Quote:
......You had an option of a Jeep or a more fuel-efficient vehicle; why did you choose the Jeep?.
Because it isn't my primary vehicle.

Really, the summary of it all (to me) is that most people don't understand how it works. When that is happening several things go on:

1. Gov't takes advantage and uses this "steath tax" (you cannot deny that because most probably don't realize it.).

2. People make poor decisions and get themselves into financial trouble.

3. People claim "they were taken advantage of."

4. Blame is placed incorrectly. (again, used by the gov't as political tool)

5. "We" are made to be sympethetic to those who were "taken advantage of" and we all pay. (again, used by gov't officials to buy votes)

And the circle continues. To put it plainly, it is used to manipulate the countries finances. Yeah, I am aware it can be played to your advantage. Careful though, if you are too successful at it then you are the "evil" 1%!
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