This is a financially naive and reductionist take, approaching financial illiteracy. Applied correctly, financing allows you to preserve liquidity while still leaving funds in accounts with higher returns. Financing also provides a hedge against inflation, e.g. real estate.
Financing also literally causes or just is monetary inflation, in a debt-based fiat currency system.
Those with access to credit leverage it and prosper roughly proportional to their level of credit access, those without access to it pay the inflation tax and suffer.
This is why capitalism has bubble/pop cycles, inherently, systemically, unavoidably.
When your home is functionally your own personal bank, you want home values to keep going up… which necessarily causes less people to be able to afford homes, and in a society based on access to credit being necessary to ‘buy’ a home, this creates and exacerbates a class divide.
(You really haven’t ‘bought’ your home untill you’ve fully paid off the mortgage, untill then you’re more or less doing a complex rent-to-own from the bank.)
Its also why you get ‘too big to fail’ banks and other entities… they have a bunch of bad debt, and if they are forced to actually account for it, well that would mean so many write offs that it would massively decrease the money supply, which is a recession/depression.
The same dynamic is at play with college costs.
More financialized, more loans? Prices go up. Less people can afford college, or in our lovely system where student loans are not dischargeable in bankruptcy, more people become literal debt slaves.
Same dynamic is also at play with vehicles, cars.
… real estate is only a hedge against inflation in a society that is stratifying, becoming more inequitable.
If that’s your inflation hedge strategy, you must understand that mass broad usage of this strategy actively causes the impoverishment of those who can’t afford super-inflating home prices.
Super-inflating home values is the Boomers climbing a ladder, and then once they’re on top of it, constantly pulling that ladder higher, further and further away from the ground, from all their kids.
I completely agree with everything you said, both in this response and your response to Scrubbles. I also appreciate your long-form responses in both.
This is, however, the system in which we live. There is no ethical consumption under capitalism. Choosing to pay cash for big ticket items, real estate, and durable goods when other accounts/portfolios earn more interest than the financing… that’s just throwing money away. If your laddered certificates accounts earn >3.5% and you can get 0% or 1% automobile financing (and you need a vehicle where you live), I don’t think anyone would choose to burn that much liquidity.
You really haven’t ‘bought’ your home untill you’ve fully paid off the mortgage, untill then you’re more or less doing a complex rent-to-own from the bank.
Agreed. My options where I live are primarily rent or mortgage; there are intentional communities with equitable arrangements, but the waitlist is 5 to 10 years. And with rents here going up at about 8% to 12% per year, I chose the 3.7% mortgage. FWIW, most home sales in my area are industrial investors or second homes, which absolutely underscore your points regarding livability, financial violence, and <waving around> all this shit in which we live.
real estate is only a hedge against inflation in a society that is stratifying, becoming more inequitable
Again, fully agreed. Inflation is here. None of us are going to wish away inflation or predatory lending, because primate brain and “they” have our number. If one has interest rate arbitrage available, using it prudently leaves more disposable income, and therefore more time to strive for more equitable systems. For example, I am the treasurer for my regional timebank, and among my offered services are financial literacy, budgeting, and household bookkeeping. This won’t surprise you at all: it’s my most used offer (>100 hours used) and the number of people lacking these skills… it’s almost like this system is designed for a certain scope and scale of financial ignorance.
If that’s your inflation hedge strategy, you must understand that mass broad usage of this strategy actively causes the impoverishment of those who can’t afford super-inflating home prices.
And yet an individual has to “play the game” to avoid falling into poverty. I’m not sure what else could be done here. Anyway, privilege begets privilege beyond all else, and at the end it’s mostly luck of the draw.
This is a financially naive and reductionist take, approaching financial illiteracy. Applied correctly, financing allows you to preserve liquidity while still leaving funds in accounts with higher returns. Financing also provides a hedge against inflation, e.g. real estate.
Financing also literally causes or just is monetary inflation, in a debt-based fiat currency system.
Those with access to credit leverage it and prosper roughly proportional to their level of credit access, those without access to it pay the inflation tax and suffer.
This is why capitalism has bubble/pop cycles, inherently, systemically, unavoidably.
When your home is functionally your own personal bank, you want home values to keep going up… which necessarily causes less people to be able to afford homes, and in a society based on access to credit being necessary to ‘buy’ a home, this creates and exacerbates a class divide.
(You really haven’t ‘bought’ your home untill you’ve fully paid off the mortgage, untill then you’re more or less doing a complex rent-to-own from the bank.)
Its also why you get ‘too big to fail’ banks and other entities… they have a bunch of bad debt, and if they are forced to actually account for it, well that would mean so many write offs that it would massively decrease the money supply, which is a recession/depression.
The same dynamic is at play with college costs.
More financialized, more loans? Prices go up. Less people can afford college, or in our lovely system where student loans are not dischargeable in bankruptcy, more people become literal debt slaves.
Same dynamic is also at play with vehicles, cars.
… real estate is only a hedge against inflation in a society that is stratifying, becoming more inequitable.
If that’s your inflation hedge strategy, you must understand that mass broad usage of this strategy actively causes the impoverishment of those who can’t afford super-inflating home prices.
Super-inflating home values is the Boomers climbing a ladder, and then once they’re on top of it, constantly pulling that ladder higher, further and further away from the ground, from all their kids.
I completely agree with everything you said, both in this response and your response to Scrubbles. I also appreciate your long-form responses in both.
This is, however, the system in which we live. There is no ethical consumption under capitalism. Choosing to pay cash for big ticket items, real estate, and durable goods when other accounts/portfolios earn more interest than the financing… that’s just throwing money away. If your laddered certificates accounts earn >3.5% and you can get 0% or 1% automobile financing (and you need a vehicle where you live), I don’t think anyone would choose to burn that much liquidity.
Agreed. My options where I live are primarily rent or mortgage; there are intentional communities with equitable arrangements, but the waitlist is 5 to 10 years. And with rents here going up at about 8% to 12% per year, I chose the 3.7% mortgage. FWIW, most home sales in my area are industrial investors or second homes, which absolutely underscore your points regarding livability, financial violence, and <waving around> all this shit in which we live.
Again, fully agreed. Inflation is here. None of us are going to wish away inflation or predatory lending, because primate brain and “they” have our number. If one has interest rate arbitrage available, using it prudently leaves more disposable income, and therefore more time to strive for more equitable systems. For example, I am the treasurer for my regional timebank, and among my offered services are financial literacy, budgeting, and household bookkeeping. This won’t surprise you at all: it’s my most used offer (>100 hours used) and the number of people lacking these skills… it’s almost like this system is designed for a certain scope and scale of financial ignorance.
And yet an individual has to “play the game” to avoid falling into poverty. I’m not sure what else could be done here. Anyway, privilege begets privilege beyond all else, and at the end it’s mostly luck of the draw.