who wrote the post with the title "No one is forced to take loans:"
First of all, let me thank you for the time you spent in composing that comment. It's a wonderfully detailed and clear explanation of something which you have obviously studied in detail. As I noted above, I have to insist that I believe that the debtor is providing a service, rather than asking for one. The whole situation becomes a lot clearer if you turn it around like that. The bank is paying a one-time upfront fee in return for thirty years of monthly payments from the debtor. And now that I'm looking at things this way, one thing that jumps out at me right away is that nowhere else in the business world does a customer have the right to alter the terms of an agreement halfway through. The seller or service provider always is given the right to set the terms of the contract. So adjustable rate loans would be at least unusual, and might even be found to be unlawful, if one found a judge who understood all of these concepts.
You say:
In the world you propose, this farmer has no option but to save for years — even though he could be earning 5x as much right now!
Hmmm... I think that easy credit might lead to inflation of the prices of equipment which the farmer is trying to buy. We certainly saw this with housing over the past decade and two, didn't we?
And in conclusion you say:
If all banks went away and stopped offering mortgages, would the people you know have saved up cash to buy their homes instead? Would they really be better off?
I say they would be better off... because the price of homes would fall drastically, and builders would find ways of making homes more inexpensively. And all in all, I have many ideas of how this would be a really good thing for a community, even though it might be painful in the short term for people who actually end up paying for the construction costs of the home they bought, without being able to pass that on to the next buyer.
The biggest conclusion I reached over the last couple of days - which I wrote extensively about in a conversation with folks over at reddit under my nickname "mistyriver" - was embodied with an anachronism "You can't squeeze blood out of a turnip." The reason the investment markets just crashed so spectacularly in 2008, is because the investors were focusing so heavily on home loans... and they were hoping to make a bigger profit than is reasonable to expect when you are being paid with the life's blood - the monthly salary - of a person working a forty hour a week job.
I introduced my essay here with a story about two friends - one who is rich and one who is poor. Is it fair if the rich one helps the poor one buy a house for the first time, in return for the favor of making the rich person richer than he was before?
Another version of the story could go as follows: There are two friends, a rich one and a poor one. The poor man has invented something really astounding, and wants his rich friend to help him set up a factory so he can start a business. Well, in that case, the poor gentleman might easily become as well-monied someday as his aquaintance... and certainly in that case it would be ethical for the money lender to ask for usury on the loan (or even a share in the profits).
As Bill Clinton suggested in this interview, I think that it would have been a lot more profitable for investors to have put their money into green technologies - electric cars, solar thermal power plants, liquid hydrogen powered planes, and into research and development of all kinds of assorted alternative energy technologies. These will be real industries, with real ongoing profits... and in fact, I believe that they will be the next blue chip stocks. In every decade, it is businesses using cutting edge technologies and who have the good business plans, which are the best investments. General Motors was a great stock to own in the latter part of the 1900s. Google's stock does well in this first decade. Why? Well, in a roundabout way, because those companies were and are making real money. If investors had actually turned their interest towards helping the usa produce new and important technologies, that would certainly had helped to even out the trade deficit too.
who wrote the post with the title "No one is forced to take loans:"
First of all, let me thank you for the time you spent in composing that comment. It's a wonderfully detailed and clear explanation of something which you have obviously studied in detail. As I noted above, I have to insist that I believe that the debtor is providing a service, rather than asking for one. The whole situation becomes a lot clearer if you turn it around like that. The bank is paying a one-time upfront fee in return for thirty years of monthly payments from the debtor. And now that I'm looking at things this way, one thing that jumps out at me right away is that nowhere else in the business world does a customer have the right to alter the terms of an agreement halfway through. The seller or service provider always is given the right to set the terms of the contract. So adjustable rate loans would be at least unusual, and might even be found to be unlawful, if one found a judge who understood all of these concepts.
You say:
Hmmm... I think that easy credit might lead to inflation of the prices of equipment which the farmer is trying to buy. We certainly saw this with housing over the past decade and two, didn't we?
And in conclusion you say:
I say they would be better off... because the price of homes would fall drastically, and builders would find ways of making homes more inexpensively. And all in all, I have many ideas of how this would be a really good thing for a community, even though it might be painful in the short term for people who actually end up paying for the construction costs of the home they bought, without being able to pass that on to the next buyer.
The biggest conclusion I reached over the last couple of days - which I wrote extensively about in a conversation with folks over at reddit under my nickname "mistyriver" - was embodied with an anachronism "You can't squeeze blood out of a turnip." The reason the investment markets just crashed so spectacularly in 2008, is because the investors were focusing so heavily on home loans... and they were hoping to make a bigger profit than is reasonable to expect when you are being paid with the life's blood - the monthly salary - of a person working a forty hour a week job.
I introduced my essay here with a story about two friends - one who is rich and one who is poor. Is it fair if the rich one helps the poor one buy a house for the first time, in return for the favor of making the rich person richer than he was before?
Another version of the story could go as follows: There are two friends, a rich one and a poor one. The poor man has invented something really astounding, and wants his rich friend to help him set up a factory so he can start a business. Well, in that case, the poor gentleman might easily become as well-monied someday as his aquaintance... and certainly in that case it would be ethical for the money lender to ask for usury on the loan (or even a share in the profits).
As Bill Clinton suggested in this interview, I think that it would have been a lot more profitable for investors to have put their money into green technologies - electric cars, solar thermal power plants, liquid hydrogen powered planes, and into research and development of all kinds of assorted alternative energy technologies. These will be real industries, with real ongoing profits... and in fact, I believe that they will be the next blue chip stocks. In every decade, it is businesses using cutting edge technologies and who have the good business plans, which are the best investments. General Motors was a great stock to own in the latter part of the 1900s. Google's stock does well in this first decade. Why? Well, in a roundabout way, because those companies were and are making real money. If investors had actually turned their interest towards helping the usa produce new and important technologies, that would certainly had helped to even out the trade deficit too.
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