Quote:
Originally Posted by InformedConsent
That's why you need to read The Millionaire Next Door. It explains the strategies people who've gotten their hands on money used to do so. 80% earned/accumulated their own wealth. Learn how they did it.
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Quote:
Originally Posted by InformedConsent
What is the bottom doing wrong? Making bad decisions and acting on them. Read The Millionaire Next Door.
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What you refuse you recognize is that the processes which allow people to get wealthy, are not the natural outcome of a free market. Rather, they are completely manipulated in almost all aspects, and that the primary source of this manipulation is the Federal Reserve.
Look at a couple things this guy said so I can explain.
Quote:
Originally Posted by ContrarianEcon
If they require a 50% ratio of good loans to bad ones, then yes. They should have been sold loans that were 100% good loans. Or as close to that as is normally possible to achieve. The same ration of good to bad loans in the underprivileged as in the more normal market. The banks didn't have to commit fraud, sell fraudulently written loans, etc.
Save up and buy a house with cash.
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The idea that one should buy a house with cash is simply a bad idea. Look at it like this, most people buy homes on a 15 or 30 year note.
Thirty years ago a dollar was worth about ~2.28 times what it is today.
CPI Inflation Calculator
The median price of a new house in 1984 was ~$80,000. Today the median price is ~$300,000.
https://www.census.gov/construction/...uspricemon.pdf
To save $80,000 over 30 years, you would need to save $2667 a year. But the first year's $2667 savings in cash would only be worth $1170 today. That means from the first year alone, you would have lost roughly $1500 after thirty years just to inflation.
Now, the total loss to inflation will be less and less the closer the time is to the present. So in saving $80,000 over the course of thirty years, the last year's loss to inflation for $2667 in savings, would only be ~$43.
If you were to save $2667 every year for 30 years from 1984 till 2014. After thirty years you would have lost the equivalent of $23,460 to inflation. If there hadn't been inflation, and you had saved $2667 a year from 1984 till 2014, the $80,000 you saved would be worth $119,990.
Basically, had you tried to save $2667 from 1984 till 2014, you would have actually lost $40,000. But even if you had the full $119,990 of value in your savings, you still wouldn't be able to buy a house. Since the median new house price rose from $80,000 to $300,000.
Lets look at it another way. If we consider again the 2.28 to 1 inflation loss since 1984. Lets pretend we had taken out a loan in 1984 for $80,000 to buy the house. How much would we pay for the house in total? More importantly, what would be the break even point for the loan's interest rate?
If you borrowed at a 6.5% interest rate on a 30-year note, the total cost of that loan would be 2.28 times the original loan. Basically, anyone who could get a loan at an interest rate of 6.5% or less would have beat inflation.
Calculate the true cost of a loan
But if there hadn't been any inflation at all, then having to pay any interest rate whatsoever would have been a loss.
Now, I know that you'll want to take this information and just proclaim, "See, the poor only need to purchase a home, and pay their bills, and they can also have wealth." And you'll probably even find something from that Millionaire next door book you like so much too reinforce your point-of-view.
With that said, if this scenario was completely "natural", you would hear no objection from me.
The problem of course is that the economic reality that we see all around is not natural at all. It is completely manipulated and artificial.
First, inflation is not caused by natural forces, it is caused by government. Or more specifically, it is caused by the actions of the Federal Reserve, through the creation of money.
And what is more important, is that the creation of money comes directly through debt. In a fixed-currency system, debt is always limited by savings. But in a fiat currency, there can be effectively unlimited debt.
What that means in practice, is that in a fixed-currency system, it is very difficult to "bid up" the value of anything. Because to bid up the price of something, you need an increasing amount of either capital, or availability of capital through debt. Since capital is limited by savings, then when demand for capital goes up, the cost of the debt goes up(IE interest rates). This means that without the Federal Reserve, not only would there be effectively no inflation. But the value of all assets would largely remain constant.
In a fiat system, there is basically no limit to the price of any asset. The demand for capital is not inhibited in any way by savings. It is moderated by the interest rates set by the Federal Reserve.
CHART: Inflation Since 1775 - Business Insider
So not only have the value of assets been artificially boosted by the existence of the Federal Reserve. But what is more important, is in who is most affected, or more specifically, who is "most positively affected" by the existence of the Federal Reserve.
For one, we know that the banks benefit, because they have access to practically unlimited capital at what would ordinarily be "below-market" interest rates, to loan out at interest. In some cases, the banks get this money at nearly 0% interest rates. And most of this goes on completely behind the scenes. You should watch this video.
America's Next TARP Model - The Daily Show - Video Clip | Comedy Central
Imagine what you would do if you had effectively unlimited access to near 0% interest rate money?
More importantly, imagine if you had nearly unlimited access to near 0% interest rate money, and where inflation ravages real savings, forcing people to buy assets or investments or lose their money. Then the government guarantees this money through bailouts and other special privileges, while pushing people to buy increasingly more expensive homes that they can't afford(and later lose).
Equally understand that, this money enters into the economy primarily through the actions of "investors". Which is just another word for "speculators". What that means in practice, is that speculators get first access to money, before its been inflated. While "the common people" have to pay what many people will refer to as the "inflation tax".
Even more importantly, the system effectively forces people to borrow money or lose it. But since a lot of people don't have incomes which allow them to borrow money at the lowest interest rates. This system further disadvantages those who are least advantaged, to the benefit of those who are most advantaged.
But what really bothers me is two things. First, that the wealth being created through this system is not real wealth, it is merely "wealth on paper". The vast majority of these bankers/investors/speculators and mutual-fund/hedge-fund managers are not really producing anything. They are merely pushing money around. Yet, they are treated like some kind of savior of capitalism. Like they are the superior men of the world, who have earned everything they have.
Secondly, what these so-called Christians never seem to notice, is that this is effectively a system of usury. They go along with it because they are a bunch of hypocrites.
And just because you've learned how to make the best of an exploitative and corrupt system, doesn't mean you earned absolutely anything.
I'm tired of supposedly good people defending our morally bankrupt system. It always amazes me how few people even support an "audit of the fed". On what planet do these idiotic people come from?
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