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Old 09-29-2008, 03:48 PM
 
Location: The Woods
16,458 posts, read 21,505,798 times
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Quote:
Originally Posted by Mircea View Post
Not necessarily, the cost of housing is ruled by supply and demand, what the market bears.
If there were no mortgages making it possible for a person making, say, 75,000 a year, to buy a house for a couple hundred thousand or more, the number of buyers will drop significantly forcing prices to drop to levels at which people could manage to save up cash to buy outright.
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Old 09-29-2008, 09:26 PM
 
Location: The Netherlands
8,567 posts, read 14,533,442 times
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Originally Posted by saganista
Quote:
Gold, meanwhile, is about as valuable as wampum.
Which proves my point that things only become valuable when we give it value.
In short money only has value because we believe it has value.
In the desert I rather have bottled water than $1000.000,- because money will not lessen my thirst nor will it solve my need for water.

Quote:
But they are rarely caught unprepared to deal with the implications of their aging.
Only if they have accepted death.
There are people who are unprepared for death because they simply don't want to be confronted with the fact that they are mortal.
I guess denial is a common human trait.


Originally Posted by Mircea
Quote:
The developed nations cannot survive without credit.
Funny I would call developed nations only technologically advanced.
I don't find the people in the developed country developed at all.
In fact I often find them less socially aware than the people who live in 'primitive' communal tribes.
Just take a look at the American Insurance Co, I wouldn’t call them socially aware because profit is more important to them than actually helping people.

Last edited by Tricky D; 09-29-2008 at 10:20 PM.. Reason: clarification
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Old 09-30-2008, 10:58 AM
 
3,751 posts, read 10,229,734 times
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Quote:
Originally Posted by arctichomesteader View Post
If there were no mortgages making it possible for a person making, say, 75,000 a year, to buy a house for a couple hundred thousand or more, the number of buyers will drop significantly forcing prices to drop to levels at which people could manage to save up cash to buy outright.
Yes. Except of course that the person who now has to sell their house for a $200,000 loss will stop buying anything. ANYTHING. Water and Raman noodles as they live in their refrigerator box in the park. So the person who buys their house - who is a "real" person (not some namby pamby makin 75K a year) and makes $35,000 a year ($18/hour) assembling washing machines, will no longer have a job - because no one will be buying washing machines.

Or - better yet - in order to sell washing machines, the prices will drop (just like houses), so now washing machines will sell for like $50.00. Of course, that means that the people who MAKE washing machines (the person buying the greatly reduced in price house) will now make $2.00/hour, because otherwise the business will have no profit.

If middle and upper middle class people have no money, then the consumer economy (cars/appliances/computers/nail salons/hair salons/doctors/EVERYONE) will crash.

So, as long as your source of income/wealth doesn't depend on somebody buying something - you should be fine.

But otherwise, hoping that a house valued at $250K, whom a person with an income of $75K could have bought under normal mortgage circumstances, will be devalued to the point that a "regular" American could afford it is ludicrous.

I would like to be able to afford a mansion, if only to throw a really awesome party once in my life ... but that doesn't mean that I think that mansions should come down in price until someone at my income can afford them! That's crazy.

And... I do realize real estate goes up and down. I did not expect housing to go up forever. But neither do I think its appropriate that it devalues to the point where a cashier at Walmart making $7.50 an hour should be able to afford a 5 bdrm, 3 bath home on a 1/2 acre. No. At that point the system would have crashed long before that and Walmart would have closed because instead of a penny or two profit per item there would be NONE.
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Old 09-30-2008, 08:59 PM
 
Location: The Woods
16,458 posts, read 21,505,798 times
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Quote:
Originally Posted by Briolat21 View Post
Yes. Except of course that the person who now has to sell their house for a $200,000 loss will stop buying anything. ANYTHING. Water and Raman noodles as they live in their refrigerator box in the park. So the person who buys their house - who is a "real" person (not some namby pamby makin 75K a year) and makes $35,000 a year ($18/hour) assembling washing machines, will no longer have a job - because no one will be buying washing machines.

Or - better yet - in order to sell washing machines, the prices will drop (just like houses), so now washing machines will sell for like $50.00. Of course, that means that the people who MAKE washing machines (the person buying the greatly reduced in price house) will now make $2.00/hour, because otherwise the business will have no profit.

If middle and upper middle class people have no money, then the consumer economy (cars/appliances/computers/nail salons/hair salons/doctors/EVERYONE) will crash.

So, as long as your source of income/wealth doesn't depend on somebody buying something - you should be fine.

But otherwise, hoping that a house valued at $250K, whom a person with an income of $75K could have bought under normal mortgage circumstances, will be devalued to the point that a "regular" American could afford it is ludicrous.

I would like to be able to afford a mansion, if only to throw a really awesome party once in my life ... but that doesn't mean that I think that mansions should come down in price until someone at my income can afford them! That's crazy.

And... I do realize real estate goes up and down. I did not expect housing to go up forever. But neither do I think its appropriate that it devalues to the point where a cashier at Walmart making $7.50 an hour should be able to afford a 5 bdrm, 3 bath home on a 1/2 acre. No. At that point the system would have crashed long before that and Walmart would have closed because instead of a penny or two profit per item there would be NONE.
People who paid those prices during an obvious bubble were foolish and now they and their lenders are reaping what they have sown. Short term loss perhaps but long term gain in bringing prices down to reasonable levels and ending the ridiculous use of credit. In the mid to late 19th century it wasn't unusual for a middle class individual's (remember only one person, the male, working) income in a year to be about what their house cost or more. Even a working class individual could make in a year what a small, inexpensive home might cost. Things have gone way out of whack in the 20th century.
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Old 10-01-2008, 06:21 AM
 
19,183 posts, read 27,769,472 times
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Quote:
Originally Posted by arctichomesteader View Post
Things have gone way out of whack in the 20th century.
Indeed! Those 20th century types just went soft. Electricty...indoor plumbing...central heating and air conditioning...refrigerators...washer-driers...microwaves, for crying out loud. You wouldn't have found any of those things in a good, solid, 19th century slum tenement, and people back then got by just fine for all 49 years or so that was their life expectancy at the time...
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Old 10-01-2008, 08:33 AM
 
3,751 posts, read 10,229,734 times
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Right on Saganista ... I'd give you reps, but I'm repped out on you right now!
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Old 10-01-2008, 09:41 AM
 
Location: The Woods
16,458 posts, read 21,505,798 times
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Quote:
Originally Posted by saganista View Post
Indeed! Those 20th century types just went soft. Electricty...indoor plumbing...central heating and air conditioning...refrigerators...washer-driers...microwaves, for crying out loud. You wouldn't have found any of those things in a good, solid, 19th century slum tenement, and people back then got by just fine for all 49 years or so that was their life expectancy at the time...
Electric light, indoor plumbing, central heating, was all invented in the 19th century (or in some cases, like central heating, re-invented). Even before electric lighting there was gas lighting (actually more expensive to install than electric these days because of the price of steel pipe), they had washing machiens though not like today, clotheslines worked fine for drying things. Microwaves are not necessities. None of this stuff is or was responsible for changing things as far as price/income. What I said about the price of a home versus income was true even into the early 20th century. The life expectancy stats of 40-50 years old are not correct at all because the high rate of infant mortality skewed things. Those who survived the first few years generally lived to their 70's or so. Most of those childhood diseases began to be conquered with vaccines in the late 19th century but it took years to beat them all, until anti-biotics were invented, for example.
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Old 10-01-2008, 01:16 PM
 
Location: Atlanta, GA
2,290 posts, read 4,952,392 times
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Quote:
Originally Posted by tallrick View Post
We can see what happens to a system with a banking elite, it eventually fails. However, many argue that credit is necessary for survival. My view is that credit is beneficial only when the capital is used to manufacture value added items. If all banks failed today, would people continue to produce goods and trade, or would the whole system end? When people secure a loan, it is with strings attatched. They agree to pay it back, along with interest to pay for renting the money. Would it not be more reasonable to simply save the money used to pay for a loan for a period of time then spend it? Would a new business be able to be financed by many people simply investing directly in an enterprise?
You ask an excellent question!

In my view, our economy is no longer one that is based on liquidity and savings. Rather, we have become almost wholly dependent upon credit. To hear media tell it, if we don't rescue the lenders, then our economy won't survive.

We've built an entirely new society, where our social station in life is based upon our FICO score rather than disciplined saving, and good sound financial decisions.
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Old 10-01-2008, 08:08 PM
 
3,751 posts, read 10,229,734 times
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Does anyone remember the good old days, when a local bar would "run a tab" for you?

Or before store credit cards - when the local mercantile would put it "on account"?

Credit, of this rudimentary kind, has been around forever. Credit, used wisely, is not the major enemy here.

Over consumption, I can agree that that has had negative consequences on our country, including an abysmally small savings rate (negative, currently - I believe).

However, over consumption still does not explain this odd sense that people want some odd sort of french-revolution justice ... "OFF WITH THEIR HEADS" - for those people who make good salaries, and have not been afraid of spending 3x their salary (via mortgage) for a house.

There is no entitlement to housing in this country. There is nothing to say that everyone should own a house.

And for all those that tout that back in the 19th century home ownership was simple (you do realize that 19th century = 1800's right? 20th century = 1900's, etc..) -- according to statistics, actually it was most recently (prior to the bubble) that home ownership was at an all time high.

In the 1800's (19th century) - a lot of families shared homes, if they had them at all. Or they built themselves a shack. Or if they were from a wealthy or merchant family, they might have paid someone to build it for them. But the "average" person - dock worker, child in a fabric shop slum - did live in tenements. Only people of means - meaning possessing money - owned homes.

I think we've come a long way since then. And I think a judicious use of credit has helped with that. After all - a house is of most value early in life, especially for a couple with children... so what sense does it make to make someone who has good earning potential wait until they're middle aged to buy a house for cash? By then their kids are gone and they do not need a house.

Yes, there are a lot of things wrong with the current system - unbridled greed on the part of investors, a glut of capital worldwide, and bizarrely complicated financial instruments that few understand.

But loaning a certain amount of money, backed by the physical object itself, to a buyer of reputable credit character on terms that statistically should profit the lending institution...

That is not what is wrong. That is a mutually beneficial relationship for all concerned.
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Old 10-01-2008, 09:26 PM
 
Location: The Woods
16,458 posts, read 21,505,798 times
Reputation: 8417
America was mostly rural in the 1800's. It was impossible for the majority to live in tenements. The middle class was growing and home ownership was quite manageable for the typical middle class American. Still, what I said holds true: the price of homes has gone way out of whack. The prices must drop, significantly, and will if the government doesn't try to prop the house of cards up.

I don't think we'll have something like the French Revolution happen but as I've said elsewhere, I wouldn't want to be a CEO the next few years if things get ugly. I see a lot of anger building up around me even in people who pay little attention to these things usually. I could see random lashing out at CEO's happening but I doubt something like the French Revolution would happen.
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