2000 years of progress

[MickeyFinn]

Forwarded emails suck but my father sends them all the time. I thought this one was worth mentioning,


"The budget should be balanced, the Treasury should be refilled.
Public debt should be reduced. The arrogance of officialdom should be
Tempered and controlled. The assistance to foreign lands should
Be curtailed lest Rome become bankrupt. People must again learn to
Work, instead of living on public assistance."

- Cicero - 55 BC



I don't agree with the balanced budget part, but it appears that we haven't learned much since ancient Rome

[Tammarion]

"The Earth is degenerating today.
Bribery and corruption abound.
Children no longer obey their parents,
every man wants to write a book, and
it is evident that the end of the world is fast approaching."

Assyrian Tablet
c. 2800 BC [also attributed to Socrates]

[Noleader]

How can you not agree with the balanced budget part?

[MickeyFinn]

Because there are times during a recession where spending to help reduce the impact of said recession is an intelligent choice. Do not interpret that as more than it is, though. I don't think we should spend nearly as much as we do, I'm angry that we don't recoup those losses during times of economic growth, and I absolutely don't agree with how much money we spend as a nation on the whole.

[Noleader]

You can't spend your way via a government printing press out of a recession... all you are doing is delaying the pain for a few years and making it worse when it all does come apart.

There is a reason why the world markets are in a tailspin and we are seeing a 'jobless recovery.' When the government spends money it does not have to boost up malinvestment all it does is pass that malinvestment on to other parties. All those toxic assests still exist and they sit on the books at the Federal Reserve. Of which the Federal Reserve will need to unload to pull liquidity out of the market place in the event of high inflation. The problem is all those assests do not actually come to the value of all the currency they dumped into the market place. As such they have no tools to extract currency in the market place that would lead to the inflation. All they are hoping for is that as a recovery shows they will be able to keep the banks from dumping that liquidity into the market place and cause extremely high inflation.

Now Keynes might think government spending can restart an economy but his track record is kind of shitty. So far Friedrich Hayek and Ludwig von Mises seem to be better at predicting what will happen based on the policies we have taken.

[MickeyFinn]

That's an opinion, not a fact. Agree or not, the vast majority of economists are against a balanced annual budget.

[Noleader]

Funny those are the same economists that get there funding from the people that don't know when to quit spending.

[MickeyFinn]

Your argument on a small scale would be not to get a mortgage for a home; a ridiculous theory. The problem is that the people who decide how to spend the money don't invest it into something that makes the "mortgage interest" a profitable decision.

Oh- and they usually spend far, far too much to force the pendulum to swing the other way. That works best for the gentlemen of means, since they're able to cash in for double the profit when the market comes back AND it's bumped to an inflated status.

[Tammarion]

The problem is you're talking capital expenditure and for the most part government doesn't work that way. Spend 20 mil on a bridge one year, and they expect to spend another 20 mil the next, never mind that you didn't need a 2nd bridge.

If you don't, that would mean you'd have some guy you hired to manage 20 mil of stuff in bridge planning doing nothing, and you can't get rid of him because its a government post and hes unionized...

[Noleader]

Your argument on a small scale would be not to get a mortgage for a home; a ridiculous theory. The problem is that the people who decide how to spend the money don't invest it into something that makes the "mortgage interest" a profitable decision.

I never claimed there was anything wrong with getting a mortgage and not really quite sure were you got that form. I do think that one would work to pay off the mortgage as quickly as possible though so they no longer have debt. One can still have a balanced budget when they have a mortgage, they just need to plan for payment of said debt.

Debt is not the same thing as Defict.

Also I welcome you to read this quick intro into the Austrian School: http://en.wikipedia.org/wiki/Austrian_School

[Post]

I was under the impression a balanced budget, at least in terms of government spending, meant its income matched its spending.

[Noleader]

I was under the impression a balanced budget, at least in terms of government spending, meant its income matched its spending.

For government that is the case... For a private person that is not the case.

[Post]

You have Tamm's described issue when you have a government balanced budget, though. There are big things that government does (roads, schools, whatever), that would be ridiculous to tax in a really short time and are needed sooner than stretching tax payments out to realistic terms.

Let's take a bridge for example. If some hurricane took it out, and the bridge is needed right away, there are three possible things that could be done:

1) put a huge tax burden on the people right away.
2) wait to build the bridge until a small tax burden can pay for it over years.
3) have a budget deficit.

The reason I used a hurricane is because it doesn't place fault on people. The reality of the situation is, people could allow that bridge to collapse from negligence, not plan for the future, etc. All of which have nothing to do with balancing a budget.

I realize you didn't state you CAN'T have a non-balanced budget, and you'll probably fall back to a lesser of evils doesn't mean you don't strive for it.... It's just that I use an example of a bridge, when in reality, that's everything that government does. Any kind of growth, disaster failure, even maintenance cannot be expected to consistently match income. You have to err one way or the other, and I think there's plenty to support erring on the side of deficit over surplus.

[Noleader]

Its one thing for a local or state government to sell a limited amount of bonds for a project so they can maintain their normal tax rates while doing large projects... then it is something completely different to sell bonds so you can just spend while never planning on addressing the budget obligation of said bonds.

Keynes claimed that government spending money during a downturn would basically be a wash since it would also cause an increase in tax revenue.... still waiting to see that.

When Keynes theories fail to explain something it is just because of the complexity... when Austrian's get it right and predict an outcome those same Keynesians, who were wrong, claim it is just luck because Austrain's beleive that human nature can't be broken down to a mathematical calculation.

Oh btw Axe just because a large number of government ecomomists are Keynesians it does not mean it is right... Majority opinion never made anything fact before.

[MickeyFinn]

Yeah, popular opinion among the educated members of a subject is crazy. Sounds just like Rooster's opinion on global climate change; why listen to the vast majority of people who have spent their life studying the entire history of economics when you can just 'be right' :|

Balanced budgets strangle governments. And just as I said before, it's how they spend the deficit money that matters; we do that very poorly in this country.

[Post]

"Its one thing for a local or state government to sell a limited amount of bonds for a project so they can maintain their normal tax rates while doing large projects... then it is something completely different to sell bonds so you can just spend while never planning on addressing the budget obligation of said bonds."

Realize, though, that the broad paintbrush of anything short of a balanced budget is a bad thing, covers both of those instances.

"Oh btw Axe just because a large number of government ecomomists are Keynesians it does not mean it is right... Majority opinion never made anything fact before."

Let's make a difference between general population majority and expert majority. Furthermore, let's concede that there really isn't any "right" answer here. These are conclusions based upon fact and opinion, and in terms of the "best" conclusion, expert opinion absolutely does add merit.

If you were to point out biases of them or reasons why they're wrong, ok, but I don't want to set a precedent that EXPERT opinion is automatically thrown out simply because it's opinion.

[Slicks]

I have always noticed that you never state who the educated members of a subject are. I am just curious if you even have anything to back it up or are just talking out of what you heard on the most reliable network of MSNBC?


/rant off
/disappears from Politics forum never to return again

[Noleader]

"Its one thing for a local or state government to sell a limited amount of bonds for a project so they can maintain their normal tax rates while doing large projects... then it is something completely different to sell bonds so you can just spend while never planning on addressing the budget obligation of said bonds."

Realize, though, that the broad paintbrush of anything short of a balanced budget is a bad thing, covers both of those instances.


True and I think in my own way that is what I was saying. To say government spending during a recession is great just because you read it in a book somewhere, or heard it on the news, does not make it right. Items need to be addressed on a point by point basis and that is best done by the government officials closest to the people.

"Oh btw Axe just because a large number of government ecomomists are Keynesians it does not mean it is right... Majority opinion never made anything fact before."

Let's make a difference between general population majority and expert majority. Furthermore, let's concede that there really isn't any "right" answer here. These are conclusions based upon fact and opinion, and in terms of the "best" conclusion, expert opinion absolutely does add merit.

If you were to point out biases of them or reasons why they're wrong, ok, but I don't want to set a precedent that EXPERT opinion is automatically thrown out simply because it's opinion.

Post everything I post is not just my opinion but that of people I spend A LOT of time reading works of. These people are ivy league educated people that have spent years working in the field of study. I do not just drop my two cents into a topic without being very aware of the topic. If you have not noticed I will, in topics I don't know much about, disclose such to ensure people understand it is just my own take.

I am not discounting their theories in hand because of a political or social view, but because I have spent time reading up on many schools of thought and settled with the one that could best explain what happened and how we should get out of it.

What wears on me though when people can't shake the stuff they learned in some professors classroom and do their own research. Schools are a product of the state and as such they will teach you the way the state wants. To be free one must be willing to leave the comfort of what they were told and find the information for themselves... atleast thats how I view the world.

[Noleader]

Let me put this simple and see who can give me the Keynes answer to this theoretical issue:

We fall into a recession because of our debt, public and private, and all our malinvestment what should we do?

Now to put it into axes example:

You are buried in debt and your investments are going belly up. You have more maxed credit cards then hairs on your head... What do you do to get out of this mess?

The Austrian's answer to both questions is a simple one, and it is logical to boot: Liquidate the debt you can and pay down the debt you can't. You might not be able to go out to dinner with the wife for a while but once you clear up all the debt you will start out at a clean slate again.

[Post]

"Items need to be addressed on a point by point basis and that is best done by the government officials closest to the people."

Well, first of all, that's very different from thinking that a balanced budget is a universal solution. I know you didn't directly state that, but that what I got from asking how can one not agree with a budget should be balanced. That sounds pretty absolute. If we agree that it isn't absolute, great.

Secondly, while it isn't really the topic of this thread, a lot of the times I find myself in disagreement with you pertain with the idea of how far up the government chain a particular role should be taken to. For example, it appears from past debates we've had, that you actually didn't have an issue with government doing lots of things I think it should do as well, you just disagree on it being taken to the federal level.

In my opinion, I feel that it's harder to apply those roles so locally anymore. Since that methodology was originally crafted, EVERYTHING is easier to cross state (and federal) bounds. You can work in one state, live in another, bank in a third, and vacation out of the country really easy now. I know you know that, but it also means that the jurisdiction boundaries when those rules were originally put together just won't work anymore. Not nearly as smoothly, at least.

I hope you see that there's merit to that ideology, even if you don't agree with it. Yes, I know it's a scary and slippery slope. I hope you'll also agree that the federal government's job has to be larger than it was when that ideology of localized power was put together, even if we disagree on where it should be today.

Honestly, I don't know where our budget "should" be. I see merits to both sides, and I also know that government will push for more power / money / whatever than it needs. So I'm sure you can come up with plenty of examples where government screwed up by not pursuing a balanced budget as much as it should; I just disagree with the notion that "the budget should be balanced" as if it's automatically wrong to have plan that involves a deficit.

[Post]

Oh, and...

"I am not discounting their theories in hand because of a political or social view, but because I have spent time reading up on many schools of thought and settled with the one that could best explain what happened and how we should get out of it."

See, when you state "...just because a large number of government ecomomists are Keynesians it does not mean it is right... Majority opinion never made anything fact before." You're indirectly stating that its merit is that it's popular and not that it's an expert opinion. Of course if it's popular doesn't mean it's right. Heck, it doesn't mean it's right even if it's the expert opinion. It's just that normally, when someone belittles majority opinion, it's because the majority is uninformed. That's not the case with expert opinion.

[MickeyFinn]

I have always noticed that you never state who are. I am just curious if you even have anything to back it up or are just talking out of what you heard on the most reliable network of MSNBC?


/rant off
/disappears from Politics forum never to return again


Every *single* macroeconomics text book in the United States. As much as NL would like to make it sound debatable (much like BP argues global climate change), it isn't something that this country's most educated people are divided on. As smart as NL is, he is admittedly not a man who has taken a college economics course. And although I have taken many of them, I am not an expert; I have just learned enough to understand that they know what they're talking about. Pick your university, go to their book store. Open the book and find the chapter on deficit and surplus spending. It is not a debated subject.


Every Nobel Prize winner in economics (none of which are of "austrian" ideology, by the way):


Jan Tinbergen (can't find the university)

Paul A. Samuelson (M.I.T.)

Simon Kuznets (Columbia)

John C. Harsanyi (UC Berkeley)

Friedrich von Hayek (U. Chicago / Vienna)

Milton Friedman (Columbia - the most famous economist to ever live)

James Tobin (Harvard)

Edmund S. Phelps (Yale)

Theodore W. Schultz (Wisconsin)

Robert E. Lucas Jr. (U. Chicago)

Lawrence R. Klein (UC Berkeley)


Please visit any of these universities' web sites, the text book information is provided. Each of these people have published plenty of writings to go through as well, and although they don't agree on anything completely, they all concede that deficit spending is a necessary option.

[MickeyFinn]

I'd like to address NL's post about paying off your home as quickly as possible. The idea of paying off your mortgage is downright foolish. The only debt you pay off is that which has a higher rate than your investments. Car loans, for example, are often at 8-10%. That's tough to match in the stock market safely. The more intelligent option is the same one the above listed economists apply to deficit spending on a major scale:


1) Borrow money for something that appreciates faster than the interest rate you're paying. Real estate is the most obvious example.

2) Never borrow for something that depreciates if you do not have to. A vehicle falls into this category. Credit cards, too.


No man with experience in accounting, banking, mathematics, economics, or any variation in between would pay off his fixed rate mortgage unless he thought the world was coming to an end. It is wasted capital. Just ask Warren Buffett how he made 47 billion dollars doing exactly what the above two rules state.

I dare say that from your statements about personal investment that I can understand why your "balanced budget" theory is so enticing. It's simple, it's easy, it makes sense if you stay skin deep. Surely you must concede that Stanford, Yale, Chicago, Berkeley, Harvard, Princeton, and even Wisconsin all know something you don't- and the fact that every single one of them is in agreement should give you pause to admit you do not have a strong grasp on investment.

As a normal guy who knows how to use the money he was blessed to start off with, your statements make even me shake my head. Paying off your house instead of putting that in a mutual fund? Jesus, why not just light the money on fire?

[Hollus]

"People must again learn to
Work, instead of living on public assistance."

I like that part

[Hollus]

"No man with experience in accounting, banking, mathematics, economics, or any variation in between would pay off his fixed rate mortgage unless he thought the world was coming to an end. It is wasted capital. Just ask Warren Buffett how he made 47 billion dollars doing exactly what the above two rules state."

That statement just seems silly to me.

I have a fixed rate mortgage of 5.75% on my 89k house. If going by my payments for 360 months, my 89k house will pull a total of 234k out of my pocket.

Now, say that I pay an extra 2 payments a year, by my math, that will cancel out around 2.5 years of payment and interest/charges.

Can you please explain why that wouldn't be a good thing to pay off my house early. I mean this sincerely as I'm trying to understand why less money put into something isn't better?

[Post]

Because a decent investment will have more than 5.75% growth, meaning if you put those two extra payments into said investment, you would have more money than the worth of those 2.5 years of house payments.

Don't get me wrong, I pay extra on my house payments, too. It's because I'm financially lazy, though. I'd make more money by investing it if I was willing to bother with the upkeep and pay attention to the flexibility of my house's property taxes.

[Hollus]

That makes sense. I guess I have trouble seeing my house sell for 234k...not that I plan to be around in 27 years...but ya know.

Now, that works for long term, how about short term?

[Noleader]

Well, first of all, that's very different from thinking that a balanced budget is a universal solution. I know you didn't directly state that, but that what I got from asking how can one not agree with a budget should be balanced. That sounds pretty absolute. If we agree that it isn't absolute, great.

Items occur that result in governments needing to get a short term loan via bond measures... One claiming there is never a reason for the government to do so would be a liar.

Secondly, while it isn't really the topic of this thread, a lot of the times I find myself in disagreement with you pertain with the idea of how far up the government chain a particular role should be taken to. For example, it appears from past debates we've had, that you actually didn't have an issue with government doing lots of things I think it should do as well, you just disagree on it being taken to the federal level.

In my opinion, I feel that it's harder to apply those roles so locally anymore. Since that methodology was originally crafted, EVERYTHING is easier to cross state (and federal) bounds. You can work in one state, live in another, bank in a third, and vacation out of the country really easy now. I know you know that, but it also means that the jurisdiction boundaries when those rules were originally put together just won't work anymore. Not nearly as smoothly, at least.

I hope you see that there's merit to that ideology, even if you don't agree with it. Yes, I know it's a scary and slippery slope. I hope you'll also agree that the federal government's job has to be larger than it was when that ideology of localized power was put together, even if we disagree on where it should be today.

I never claimed there was not merit to the idea but it also is not compatible with our Constitution. Just because we might think it easier it does not mean we can set aside the rule of law. Also one can't discount the unintended consequence of making changes to our form of government.

If you disagree with the Constitutional role of the federal government then by all means try to get the support together and pass an amendment. Just ignoring it because you think the federal government should do more today then it was designed to is unacceptable.

Outside of what you might think Post the localization of power is not some 1700's old way of doing things. The centralization of power is the old way of doing things. Localization is a means to defuse power and thus reduce the risk to liberity. You are arguing in support of nothing more then the failed concepts of government from the past.

Honestly, I don't know where our budget "should" be. I see merits to both sides, and I also know that government will push for more power / money / whatever than it needs. So I'm sure you can come up with plenty of examples where government screwed up by not pursuing a balanced budget as much as it should; I just disagree with the notion that "the budget should be balanced" as if it's automatically wrong to have plan that involves a deficit.

This paragraph does not sit well with all the other ones you typed. You concede that government by nature will seek more power/money/whatever yet you see not issue with surrendering local power to federal overlords for expediency.

[Post]

"Now, that works for long term, how about short term?"

Yeah, but at some point, your time is worth more than the extra money you'd get by investing it. Trying to upkeep a 1k investment for 3 months... Feh, I'm just too lazy to mess around with that, especially considering even at 20% growth a year (which would be amazing), you're talking about $50 ignoring all of the scaled growth jargon. IMO, it's worth more just to keep it liquid or to pay off the 1k debt for peace of mind.

[Noleader]

Every *single* macroeconomics text book in the United States. As much as NL would like to make it sound debatable (much like BP argues global climate change), it isn't something that this country's most educated people are divided on. As smart as NL is, he is admittedly not a man who has taken a college economics course. And although I have taken many of them, I am not an expert; I have just learned enough to understand that they know what they're talking about. Pick your university, go to their book store. Open the book and find the chapter on deficit and surplus spending. It is not a debated subject.


Every Nobel Prize winner in economics (none of which are of "austrian" ideology, by the way):


Jan Tinbergen (can't find the university)

Paul A. Samuelson (M.I.T.)

Simon Kuznets (Columbia)

John C. Harsanyi (UC Berkeley)

Friedrich von Hayek (U. Chicago / Vienna) (Austrian School, Student to Ludwig von Mises)

Milton Friedman (Columbia - the most famous economist to ever live)

James Tobin (Harvard)

Edmund S. Phelps (Yale)

Theodore W. Schultz (Wisconsin)

Robert E. Lucas Jr. (U. Chicago)

Lawrence R. Klein (UC Berkeley)


Please visit any of these universities' web sites, the text book information is provided. Each of these people have published plenty of writings to go through as well, and although they don't agree on anything completely, they all concede that deficit spending is a necessary option.

Appearently you just did a quick look at what schools they taught at and did not really do any real reseach into their works.. because had you done so you would see that Friedrich von Hayek was an austrian.

Because of you blatant attempt to shutdown debate on the topic by comparing to the oil spill and throwing out names without doing your own research I must ask the simple question: Do you know what you are talking about?

[Noleader]

1) Borrow money for something that appreciates faster than the interest rate you're paying. Real estate is the most obvious example.

Tell that to the people that lost their asses the last 4 years. You assume real estate by nature appreciates which is a logic flaw. You are discounting the fact that in a fiat money system the real estate by nature is not gaining value, the money is actually losing value.

Real estate can gain value but not just for existing... if that was the case then there would have never been a bubble in the housing market.

2) Never borrow for something that depreciates if you do not have to. A vehicle falls into this category. Credit cards, too.

That example is faulty to. In a inflationary period you could actually borrow more valuable money today and pay it back with devalued money later. Thus actually paying a loan back with less value then you borrowed at the start of the term.

While you examples may be good guides you should consider aspects of the economy that are not taught in your lecture hall.

No man with experience in accounting, banking, mathematics, economics, or any variation in between would pay off his fixed rate mortgage unless he thought the world was coming to an end. It is wasted capital. Just ask Warren Buffett how he made 47 billion dollars doing exactly what the above two rules state.

If you are starting a business then it pays to be a speculator and play the markets. If you are talking about your own home that is a different story altogether. For the record Warren Buffett owns his home free and clear and has since the late 50's. I can't cite anything that claims he does but I did hear him speak of it in an interview about 8 or 10 months back.

I dare say that from your statements about personal investment that I can understand why your "balanced budget" theory is so enticing. It's simple, it's easy, it makes sense if you stay skin deep. Surely you must concede that Stanford, Yale, Chicago, Berkeley, Harvard, Princeton, and even Wisconsin all know something you don't- and the fact that every single one of them is in agreement should give you pause to admit you do not have a strong grasp on investment.

Again your failure for reseach is showing. All those schools of econmoics all have their own degree they think the government should be involved. For example please read up on the Chicago School a bit: http://en.wikipedia.org/wiki/Chicago_school_of_economics

As a normal guy who knows how to use the money he was blessed to start off with, your statements make even me shake my head. Paying off your house instead of putting that in a mutual fund? Jesus, why not just light the money on fire?

Paying off your house turns your house from a libility to capital. It gives you some security for the future in the event some unforseen event occurs. Putting the money into the market can net a positive or negative return and thus is not a secure investment. To make statements to the effect that only a idiot pays off a house is tantamount to claiming rent-a-center is the best place to shop.

[Noleader]

Because a decent investment will have more than 5.75% growth, meaning if you put those two extra payments into said investment, you would have more money than the worth of those 2.5 years of house payments.

But if you figure in an inflation rate of 3%-5% you end up with almost no return in value. Assets actually retain value while fiat money is devalued at the behest of the Federal Reserve.

Edit: It is a double edge sword though since you will actually be paying off your house with cheaper money in the future. What is the tipping point is the asset you gain by paying it off and future security.

[Post]

"I never claimed there was not merit to the idea but it also is not compatible with our Constitution. Just because we might think it easier it does not mean we can set aside the rule of law. Also one can't discount the unintended consequence of making changes to our form of government."

Well, I think the Constitution is much more flexible in terms of explicit an implicit meaning. Obviously, the Second Amendment doesn't allow nuclear weapons to be held by civilians, for example. It can, though, depending on where you place the marker on that implicit / explicit scale.

I do agree, though, that the Constitution shouldn't be ignored and on things we agree upon that don't adhere to it should be either changed or the Constitution amended.

"Outside of what you might think Post the localization of power is not some 1700's old way of doing things. The centralization of power is the old way of doing things. Localization is a means to defuse power and thus reduce the risk to liberity. You are arguing in support of nothing more then the failed concepts of government from the past."

Well, I think it's unfair to make a pure comparison between past government and today's. Sure, you can look at past civilizations and point to too much centralization, and it's possible that could be happening today. As I stated, though, centralization (ie, globalization) is already occurring with the rest of society whether government does it or not. That level of centralization with the rest of society was different from those past failures, so the level of centralization of our government has to be at least more than theirs for the "perfect" level, if not as far as it is today.

"You concede that government by nature will seek more power/money/whatever yet you see not issue with surrendering local power to federal overlords for expediency."

As I stated, it's a scary and slippery slope. I know there's issues to it. There are benefits, too, though, and there are more benefits than there used to be. I mean, if we extend the line far enough, there are issues with any type of government short of absolute individualism (anarchy). We just feel the benefits of socialistic rules outweigh the issues. There's ones we all agree with, like you can't kill a guy over a disagreement, and there's ones we don't all agree with, like public health care.

Yes, I do believe more issues crop up the more we centralize government. I believe there are benefits, too, though, and the key is finding the right balance. We disagree on where that balance is, but it isn't in conflict of my past statements that I feel it should be more centralized.

[MickeyFinn]

To address Hollus:

The last time I borrowed was in 2006. With my last mortgage I borrowed $400,000 to purchase a duplex in King County, Washington. I paid 15% down outright, which is $60,000. That money came from refinancing another property, almost nothing out of pocket. I pay the absolute minimum, and here's how it now looks.

2009 count assessment: $437,090.80

This is almost exactly a 3% per year increase. 3% Fuck that's horrible! It is a recession after all, so I won't complain as long as it goes up. You can do 3% in the stock market no problem, but here's how Warren Buffet got rich, my friend. I didn't pay $400,000 for that property, I paid $60,000. My return in three years is $37,090.80 on an initial $60,000. That is a 62% return. When I refinance in 2011 (rates are already looking fucking awesome) I'll have another $40,000 to put into yet another property. And until I choose not to re-invest the money, I don't have to pay taxes on it. And if Noleader wants to make a claim about inflation, fiat currency, or any other terminology he doesn't truly understand he's welcome to show me how my not making money has ended up in owning more property, or how it even comes close to my 60% return in three years.


That's the first (and sweetest) part. Now, on to why you should not pay more than the minimum payment:

You already own the house. Any equity you gain through appreciation is yours, no matter how much of the home the bank 'actually' owns. As such, any money you put into your mortgage has absolutely 0% return. A savings account will net you more. The argument that you save on your mortgage interest is moot, because at 6% interest on your mortgage you can both depreciate your house to recoup that money on your tax return, and make a higher percentage than that in many perfectly stable mutual funds.





"Tell that to the people that lost their asses the last 4 years."

I didn't lose mine. Do you know why? Because I understood what an inflated market is, and that is why (at age 26) the four houses I own are all on a fixed APR. The only people in danger chose an adjustable rate, which went up to 15%. No smart investment will match that, and as such it tanked! APR is a scam to entice the poor, just like many credit cards. Ironically, I live in an apartment just to be near my station and ASU campus because owning residentially zoned land near the airport in Phoenix is just stupid.

In fact, I was able to depreciate my properties and receive federal money, which in theory is supposed to be paid back during capital gains... But GWB passed a nifty law that says as long as it isn't worth 500k or more I don't have to.

Nole, call every one of those colleges. No man alive has the audacity to challenge all of them, sans a few islamic radicals who were educated by them hehe. Oh, and Jerry Falwell.



Paying off your house turns your house from a libility to capital.

No. Paying off your house turns it into equity, not capital. There is a big, big difference. Homes are not ever a liability, unless you signed up for the APR scam. Notice that my equity is only liquidated to acquire more- I don't refinance and buy a new car. I live on hardly a thousand a month, actually. Quite meager. The goal is to live off the interest, but I'm a long way away from that being a possibility yet, especially since I keep going back to school. Fifteen years at the least.


Real estate can gain value but not just for existing... if that was the case then there would have never been a bubble in the housing market.

Really? Are you sure the bubble wasn't due to deregulation of the financial institutions that lend money to banks? Are you sure we can't thank GWB for gutting a stable market? Let's have a look at the last seventy years:

http://img717.imageshack.us/img717/6462/62188773.gif

Hmm. Seems to me like the single safest, steadiest trend in the last century. That bubble began the very same year we decided that big lenders like Mae didn't have to require upwards of 20% down, and then made APR a plausible alternative. A trap for the poor.


That example is faulty to. In a inflationary period you could actually borrow more valuable money today and pay it back with devalued money later.

This is so scary to state. Inflation or not, you still have X number of dollars. What each one is "worth" doesn't change your contract, and certainly doesn't change your bank account. The comparison of the dollar to the Euro doesn't mean two shits if you receive dollars now and pay them back later. Some people actually do borrow money, exchange it for another currency, then exchange it back years later for a profit. That's no different than investing in any other asset. All loans incorporate expected inflation; one of the very few things the federal government still requires.



For the record Warren Buffett owns his home free and clear and has since the late 50's.

Yes, his parents paid the house off after over twenty years. He grew up there, and hasn't left.


Again your failure for reseach is showing. All those schools of econmoics all have their own degree they think the government should be involved.

Failure for research? Call Chicago, they're close to you. Try not to get mad when they laugh on the other end of the phone when you suggest a balanced budget is absolutely the best policy. Make sure you hang up before they ask for your credentials.

I did not say the government should have some big massive sway over its people. I said the opposite, actually. They almost always overspend. But that's a completely different argument than whether or not a deficit budget can be a smart plan.

[Noleader]

Nole, call every one of those colleges. No man alive has the audacity to challenge all of them, sans a few islamic radicals who were educated by them hehe.

I already pointed out that disagree with eachother, that you misrepersented their stance, and that your list of noble winners was a misrepersentation. I think it is your turn to do some real research and not push the work off on other people.

[Hollus]

" To make statements to the effect that only a idiot pays off a house is tantamount to claiming rent-a-center is the best place to shop"

I'm tempted to make that my sig...

[Noleader]

To address Hollus:

The last time I borrowed was in 2006. With my last mortgage I borrowed $400,000 to purchase a duplex in King County, Washington. I paid 15% down outright, which is $60,000. That money came from refinancing another property, almost nothing out of pocket. I pay the absolute minimum, and here's how it now looks.

2009 count assessment: $437,090.80

This is almost exactly a 3% per year increase. 3% Fuck that's horrible! It is a recession after all, so I won't complain as long as it goes up. You can do 3% in the stock market no problem, but here's how Warren Buffet got rich, my friend. I didn't pay $400,000 for that property, I paid $60,000. My return in three years is $37,090.80 on an initial $60,000. That is a 62% return. When I refinance in 2011 (rates are already looking fucking awesome) I'll have another $40,000 to put into yet another property. And until I choose not to re-invest the money, I don't have to pay taxes on it. And if Noleader wants to make a claim about inflation, fiat currency, or any other terminology he doesn't truly understand he's welcome to show me how my not making money has ended up in owning more property, or how it even comes close to my 60% return in three years.

I could use my own portfolio, and business, as a basis to support my views... The problem with that is you are forced to take my word for it. Sorry but that is not how debates are run; offer verifiable fact.

Also coupled with the fact that you completely ignored everything I posted as of now that is factual and verifiable, for which I can only assume is due to your lack of knowledge on the subject.

[Noleader]

Using the government data (which has been called into question a number of times because of lack of transperancy in the Federal Reserve) one can see why nominal value of a item can go up while that does not actually tie to real value: http://www.infoplease.com/ipa/A0001519.html

[MickeyFinn]

Nothing, and I mean nothing in this thread was about inflation until I started using double digit numbers that must have confused you. No man here can control inflation, and its use here is completely irrelevant.

Fuck it, if a guy doesn't want to believe math let him live with his sister forever. The level of denial almost reaches the evangelical christian insanity. I understand that not everybody here has a degree in math, but I bet my ass that Hollus understands how I make 60% over three years repeatedly. It isn't by being a genius.

I guess if everybody understood basic calculus and that the law is made by landowners, I wouldn't be making nearly as much money doing it. What a waste. I thank God that at eight years old I had an open mind when my father explained basic math to me. Adults never want to learn a damned thing.

[Noleader]

Hmm. Seems to me like the single safest, steadiest trend in the last century. That bubble began the very same year we decided that big lenders like Mae didn't have to require upwards of 20% down, and then made APR a plausible alternative. A trap for the poor.


Charts can be misleading as they measure nominal value: http://www.infoplease.com/ipa/A0001519.html


This is so scary to state. Inflation or not, you still have X number of dollars. What each one is "worth" doesn't change your contract, and certainly doesn't change your bank account. The comparison of the dollar to the Euro doesn't mean two shits if you receive dollars now and pay them back later. Some people actually do borrow money, exchange it for another currency, then exchange it back years later for a profit. That's no different than investing in any other asset. All loans incorporate expected inflation; one of the very few things the federal government still requires.

Norminal value does not change but real value does. This is not debated and is considered fact by all schools. (Real = Worth, Nominal = What is printed on it).

To correct you all loans set nominal values and terms assigned to those values. Real value is not considered in a loan only nominal. I borrow 100,000.00 today and I have to pay it back over 15 years with a 4% interest payment. If inflation were to go up by a measured amount I would still only be required to pay the 100,000.00 + Interest. The fact that 100,000.00 is not worth the same value means nothing. Please review the link I included above for a little detail.


Failure for research? Call Chicago, they're close to you. Try not to get mad when they laugh on the other end of the phone when you suggest a balanced budget is absolutely the best policy. Make sure you hang up before they ask for your credentials.

This is the last time I do research for you: http://en.wikipedia.org/wiki/Freshwater_school_(economics)

[MickeyFinn]

You're ignoring that you only pay 10% of the actual value of the real estate, but recoup 100% of the appreciation Nole. That's how buffet made 47 billion dollars, and how I'm nearing two million in equity already. It's simple reinvestment.

You know what, I want to post one last thing. Nole, I apologize for being an asshole. I get very mad when people I care about can't see what seems so very obvious to me, it gives me a helpless feeling. Maybe it's me; I miss obvious stuff all the time. You always have the common good at heart, I can't always claim the same. So, yeah. Sorry for my "famous mouth".

[Noleader]

Nothing, and I mean nothing in this thread was about inflation until I started using double digit numbers that must have confused you. No man here can control inflation, and its use here is completely irrelevant.

Maybe you don't understand how it all comes together. If you have a 5% return per year on a investment yet inflation is 5% that year you ended with a net return in value of 0%.

Fuck it, if a guy doesn't want to believe math let him live with his sister forever. The level of denial almost reaches the evangelical christian insanity. I understand that not everybody here has a degree in math, but I bet my ass that Hollus understands how I make 60% over three years repeatedly. It isn't by being a genius.

Prove it. My business has grown by 40% each year since I formed it but that means nothing to anyone here. I can put out some big numbers but it des not mean shit again because I could be fudging the numbers or just outright making them up.

I do find it interesting that a 22-23 year old that only had a firemans salary and was attending school was extended credit during the biggest credit contraction in US History... maybe I am just off base though.

I guess if everybody understood basic calculus and that the law is made by landowners, I wouldn't be making nearly as much money doing it. What a waste. I thank God that at eight years old I had an open mind when my father explained basic math to me. Adults never want to learn a damned thing.

Same can be said about college students I guess. You are taught to think one way and nothing can be said or proof offered that will allow you to open your eyes different ideas.

Yet again you offer personal stories and nothing more then rants to support your argument. Please do some research you might even stumble on the fact that even the Chairman of the Federal Reserve can't explain the price of gold right now... to claim you know all the answers and that all we are discussing is settled fact is something even Ben Bernanke would not do.

[Noleader]

You're ignoring that you only pay 10% of the actual value of the real estate, but recoup 100% of the appreciation Nole. That's how buffet made 47 billion dollars, and how I'm nearing two million in equity already. It's simple reinvestment.

Actually he made his 47 billion by investing in businesses and basically taking them over. He may have started in housing but that is not how he made the lions share of his money.

Also again you talk about appreciation yet you will not consider the fact that inflation HAS to be factored into it. You might own a home worth 100,000.00 today but just because it is worth 120,000.00 tomorrow does not mean that you have a 20,000.00 gain in real value. Nominal value and real value are different things.

I am not claiming you can't make money in real estate... but it is not as simple as 10% down and you are 90% richer. Also you are banking on the hope that the housing market has bottomed out.

[Hollus]

One thing to take into consideration about investments and property. Most people don't by the house to make a profit. They buy it for shelter and a place to call home. Very few people buy them to flip in 2-3 years. Some do, but most do not.

Essentially, you are talking investment property for business reasons, not habitat and living situations. There is a monstrous difference.


And a perfect example of inflation and how it factors into profit from habitat.

I buy my house for 90k. I sell it for 100k in 10 years. After equity and what not, I come away with 10,000.

I'm looking to relocate to another city, which is the reason I sold. I find a comparable house in a different city. Same size, features, lot, etc...

And it's on the market for 100,000 due to the market going up. I've gained nothing and am in the same situation all over again.

If you are talking investment mortgages, then yes, it is far more profitable to pay them slowly. Owning a duplex that you pay 800 a month for but charging double tenants a combined 1200, profit.

However, me in my house where I work a job to pay for it, it's far better for me to pay it off early and live to the end of my days in a house that's paid for (For less than what I owe the bank). If i'm not planning on selling but leaving to my children, it's a better option...but that could be like Post and just being lazy.

[Hollus]

Also, some where in there has to be factored in cost of living (inflation).

I'm not sure if Nole's point is being read appropriately by me, but I'm going to dumb it down to Joe Average level.


The average price of gasoline in 2000 was 1.52. 10 years later, the price is 2.76.

That is a 55% jump over a 10 year period.

That's one example. Inflation skewed profit of investments.

To keep terms simple, you buy some property in 2000 for 100k. You can now sell it for 150k due to appreciation...it being realty and all.

However, the value of the dollar has decreased, you have to have more of it to purchase something. the 150k you've made 10 years later is now equivalent of the 100k you spent 10 years ago...but you've still spent 50k over the course of 10 years in interest.

I think there is some confusion over investment properties, which give an immediate profit as opposed to a long term investment which gives no profit...you just break even or lose a little in the long run.

That's why people try to pay their 5.75% mortgages off early. We're not running them as an investment or business...we're just trying to make do with what we have.

In a nutshell, if your appreciation doesn't exceed inflation, you've gained nothing.

[Post]

It would be irregular for an investment the size of a house payment to not profit more than 5.75% + inflation.

[Hollus]

I will disagree. I could be horribly wrong, but I really don't see my house bringing in anywhere close to a quarter of a million. I don't think the market will grow that big, and people's pay checks won't grow that big.

Salary growth percentages decline as time goes on.

[Post]

In 27 years, it almost absolutely will go for much more than that as long as the area doesn't go to hell. I bought the house I live in for ~145k in 2001. Before the crash, it was valued at 240k. Right now, it's ~190k. I'm literally 99%+ sure that, unless there's some huge catastrophe-level happening in my state to drive the people out, it will be worth 500k+ in 20 years if I sit on it that long.

More importantly, that's not optimistic at all. Most places in the US, as long as the state has had population growth for the past 20 years, the housing investments has gone up more than that.

And you know what? This is all ignoring writing off interest on your taxes. Take that quarter of a million, add inflation, and then take off the taxes you would have paid if you didn't write off the interest. Remember, 150k or so of that quarter of a million you pay is a tax write-off, so even if you gain an equal return (which is a very low estimate), you'll still come out ahead even counting inflation.

[MickeyFinn]

Inflation is still a completely moot point.


Money under your mattress is subject to inflation. Money in your savings account is subject to inflation. Money in the stock market, a CD, a mortgage, or in a treasure chest is subject to inflation. Your choice on how to invest your money has absolutely no sway by inflation.

No matter what your dollar is worth on a global scale, your 6% return is not actually a 6% return. You did not pay the full price for your home, you paid 20% down (if you are smart). That 6% is on the full value of the home- not what you paid for it. I don't know how to make it more clear than that.


To answer the question about a line of credit, I started with a home that was my grandfather's. He was killed in the line of duty, the insurance and other death-related compensation was enough to get started on the right foot. That was a "lucky" thing to have happen financially, not so much in reality.