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> How does one acquire the necessary funds for larger projects when one does not personally have the funds to do so? Good point. As a thought experiment, can y

by NTDF9 7y ago

> How does one acquire the necessary funds for larger projects when one does not personally have the funds to do so? Good point. As a thought experiment, can you answer why the larger project costs more that what an average person can already afford?

rubyskills 7y ago
Great question! As it applies to new real estate specifically, you have a lot of materials, labor taxes etc to deal with. These are the most common sorts of business debts that I've been exposed to. For existing real estate, I see value of things going up in value largely due to population increase in a certain area combined with the fed printing money (which it claims to do so constantly because the population will always be increasing?). I also see values wildly inflated due to foreign investment. A big issue in general is also due to the banking sector. I think the US government allows banks to go a little crazy with lending to everyone on anything without recourse. That being said, I personally benefit from the system allowing me to borrow money so cheaply. Sorry if this post was a bit disorganized. I have a lot of thoughts on it and it is a great thought experiment. :)
- NTDF9 7y ago
  Good answer! Now imagine if there was a society where money supply did not increase because of more loans, but by something more of a function of labor. What do you think would happen to the prices of materials, labor etc? Do you think tying money supply as a function of labor would make cost of necessities close to the median?
  - rubyskills 7y ago
    I think you may be referring to the Labor Theory of Value (LTV)? Certainly, early versions of currencies were created to streamline the bartering process between different kinds of labor and store that value for future purposes. I'm not sure what attempting to remove debt from a market would look like in the modem world as I only have the current context to compare to (for better or worse). What do you propose as an alternative?
    - NTDF9 7y ago
      I don't have any alternatives without rough edges. THat's for overpaid economists to figure out ;) However, I'm thinking more along the lines of production. So if an individual/company produces more units of something, the FED could print that much money and put it into their accounts directly. With expanding society, more money will be brought into circulation. With lesser production, lesser money will be matched and produced by the FED. The consequence of this would be that there is incentive to produce more with less. There will be more value for physical labor and that the rich would suffer as much as the poor. Hoarding money at the top will just result in lesser and lesser money being produced for the rich to earn. Now you could go and take a loan if you wanted to. But not from a bank. Take it from any other party. It's between the two of you and you both go bust if the loan fails. There are caveats here but what it removes is the creation of money by debt. Thus, to be richer as a civilization, we don't need more debt as a society. We need to produce more goods and services that are actually desired by others.
      - rubyskills 7y ago
        So basically make corporations banks and eliminate banking as as a function? How does the FED determine the value to give each corporation relative to other services provided to the market? It's an interesting idea if that's what you're thinking, though I foresee a lot more government overhead. Correct me if I'm misinterpeting. I think I might be.
        NTDF9 7y ago
        No. More like a FED sponsored 401k match for wages. If a company thinks it can earn more by producing more goods, it will hire more people and give them wages. The FED will match it, effectively bringing money into circulation. As company gets more and more efficient, they wouldn't need employees. But this would cause lesser money to be brought into circulation, thus eating up the companies earnings itself. If the company wants more debt, they can go borrow from others (rich institutions, individuals etc) but this activity will not create new money. Thus, total money in circulation remains the same. If an individual wants to buy a house, the house price will effectively be closer to the median affordable income of population. Thus, it will incentivize individual to produce more goods and services to reach median income at least. The only way to become richer is to produce more.The rich can try to buy more houses but it wouldn't be possible as much since leverage and speculation is much harder.
thrower123 7y ago
Capital costs blow out everything when you are in tangible industries. Try buying a piece of heavy equipment that costs a quarter to half a million dollars. Every logging contractor or construction outfit I know is mortgaged to the hilt, one or two steps ahead of their payments
harryh 7y ago
Because the amount of goods and labor required to build a house (that can be lived in for decades) is typically a lot more than what an individual can save up for in any reasonable amount of time. You're missing the forrest for the trees with all your handwaving about the money supply. Houses are big and expensive and sit on land that is in finite supply (especially in high demand areas). People are generally a lot better off if they can pay this purchase off over time while living in it rather than saving up to pay for the whole thing all at once while also paying to live somewhere else.
- tonyedgecombe 7y ago
  >Because the amount of goods and labor required to build a house (that can be lived in for decades) is typically a lot more than what an individual can save up for in any reasonable amount of time That works both ways though, the reason housing is so expensive is because borrowing is so cheap and easy. The cost of land, materials and regulation has expanded to match the available funds.
  - harryh 7y ago
    The available funds is irrelevant to my point because costs increase in proportion everywhere. If we 2x the amount of money in the system a house will cost twice as much...but so will the cost of a person's labor. But the ratio of the cost of a house to a person's labor will stay constant.
    - tonyedgecombe 7y ago
      Not if the supply of housing is constrained but Labor isn’t.

by NTDF9 7y ago

rubyskills 7y ago

Great question! As it applies to new real estate specifically, you have a lot of materials, labor taxes etc to deal with. These are the most common sorts of business debts that I've been exposed to. For existing real estate, I see value of things going up in value largely due to population increase in a certain area combined with the fed printing money (which it claims to do so constantly because the population will always be increasing?). I also see values wildly inflated due to foreign investment. A big issue in general is also due to the banking sector. I think the US government allows banks to go a little crazy with lending to everyone on anything without recourse. That being said, I personally benefit from the system allowing me to borrow money so cheaply. Sorry if this post was a bit disorganized. I have a lot of thoughts on it and it is a great thought experiment. :)

NTDF9 7y ago
Good answer! Now imagine if there was a society where money supply did not increase because of more loans, but by something more of a function of labor. What do you think would happen to the prices of materials, labor etc? Do you think tying money supply as a function of labor would make cost of necessities close to the median?
- rubyskills 7y ago
  I think you may be referring to the Labor Theory of Value (LTV)? Certainly, early versions of currencies were created to streamline the bartering process between different kinds of labor and store that value for future purposes. I'm not sure what attempting to remove debt from a market would look like in the modem world as I only have the current context to compare to (for better or worse). What do you propose as an alternative?
  - NTDF9 7y ago
    I don't have any alternatives without rough edges. THat's for overpaid economists to figure out ;) However, I'm thinking more along the lines of production. So if an individual/company produces more units of something, the FED could print that much money and put it into their accounts directly. With expanding society, more money will be brought into circulation. With lesser production, lesser money will be matched and produced by the FED. The consequence of this would be that there is incentive to produce more with less. There will be more value for physical labor and that the rich would suffer as much as the poor. Hoarding money at the top will just result in lesser and lesser money being produced for the rich to earn. Now you could go and take a loan if you wanted to. But not from a bank. Take it from any other party. It's between the two of you and you both go bust if the loan fails. There are caveats here but what it removes is the creation of money by debt. Thus, to be richer as a civilization, we don't need more debt as a society. We need to produce more goods and services that are actually desired by others.
    - rubyskills 7y ago
      So basically make corporations banks and eliminate banking as as a function? How does the FED determine the value to give each corporation relative to other services provided to the market? It's an interesting idea if that's what you're thinking, though I foresee a lot more government overhead. Correct me if I'm misinterpeting. I think I might be.
      - NTDF9 7y ago
        No. More like a FED sponsored 401k match for wages. If a company thinks it can earn more by producing more goods, it will hire more people and give them wages. The FED will match it, effectively bringing money into circulation. As company gets more and more efficient, they wouldn't need employees. But this would cause lesser money to be brought into circulation, thus eating up the companies earnings itself. If the company wants more debt, they can go borrow from others (rich institutions, individuals etc) but this activity will not create new money. Thus, total money in circulation remains the same. If an individual wants to buy a house, the house price will effectively be closer to the median affordable income of population. Thus, it will incentivize individual to produce more goods and services to reach median income at least. The only way to become richer is to produce more.The rich can try to buy more houses but it wouldn't be possible as much since leverage and speculation is much harder.

thrower123 7y ago

Capital costs blow out everything when you are in tangible industries. Try buying a piece of heavy equipment that costs a quarter to half a million dollars. Every logging contractor or construction outfit I know is mortgaged to the hilt, one or two steps ahead of their payments

harryh 7y ago

Because the amount of goods and labor required to build a house (that can be lived in for decades) is typically a lot more than what an individual can save up for in any reasonable amount of time. You're missing the forrest for the trees with all your handwaving about the money supply. Houses are big and expensive and sit on land that is in finite supply (especially in high demand areas). People are generally a lot better off if they can pay this purchase off over time while living in it rather than saving up to pay for the whole thing all at once while also paying to live somewhere else.

tonyedgecombe 7y ago
>Because the amount of goods and labor required to build a house (that can be lived in for decades) is typically a lot more than what an individual can save up for in any reasonable amount of time That works both ways though, the reason housing is so expensive is because borrowing is so cheap and easy. The cost of land, materials and regulation has expanded to match the available funds.
- harryh 7y ago
  The available funds is irrelevant to my point because costs increase in proportion everywhere. If we 2x the amount of money in the system a house will cost twice as much...but so will the cost of a person's labor. But the ratio of the cost of a house to a person's labor will stay constant.
  - tonyedgecombe 7y ago
    Not if the supply of housing is constrained but Labor isn’t.