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I think I agree. I fully support using price mechanism as a signalling device, it works and has been shown to work for centuries. I suspect I am upset that deb

I think I agree. I fully support using price mechanism as a signalling device, it works and has been shown to work for centuries. I suspect I am upset that debt has become the way people fill-in for low wages, lack of social support etc. And worse, in say the 1930s, debt was accessible to (some) poor via low cost housing loans (Savings and loans). This seems to have vanished as everyone is now a bank not a mutal. Plus, it is very clear that there is a lot of the lending market actively searching out poor credit risk in order to get them to sign up - they have a win win - the law is on their side to force repayment, or the credit risk makes huge efforts to repay. I don't want to adjust the price - but actively seeking out people who see debt as a simple fix ... knowing its going to hurt them. Yeah its a socially problematic activity. So as you say the solution seems to be - freeze the credit markets at some (arbitrary) level (of x % APR) and start ensuring there are decent wages and decent social safety nets. You can see why price-fixing is so attractive

rsj_hn 6y ago
> I suspect I am upset that debt has become the way people fill-in for low wages, lack of social support etc. Yeah, that's the flip-side of extending credit. It used to be that houses were a smaller multiple of the average salary because only short term (e.g. 3-5 year) loans were available. Of course homeownership rates were lower. Then banks began offering 30 year mortgages and homeownership increased but house prices rocketed up and it became common for working people to carry 30 years of massive debt. Then downpayment requirements were weakened from 20% to 10% to 3.5%. Now you even have interest only loans. So locking people out of certain credit markets, or banning certain lending instruments, certainly has an appeal. I wouldn't mind if the federal government stopped insuring home loans and student loans and we returned to 3-5 year loans for homes and maybe 1-2 year loans for autos. We should not be in the business of subsidizing all this household debt, and we should be discouraging it a bit.
- lifeisstillgood 6y ago
  Interesting - there is a series of lectures (ref to follow) on UK economy - they try to show the biggest component of house prices is land and the biggest contributor to land is people just bid up using mortgage funds. On the other hand why should leverage be freely available to "the rich". I am tempted to solve it on the demand side - I am willing to bet one major difference in money management is just daily awareness of total spend and wealth. Something like Mint for everyone might actually move the needle (it's kind of where the EU / UK open banking is headed)

rsj_hn 6y ago

> I suspect I am upset that debt has become the way people fill-in for low wages, lack of social support etc. Yeah, that's the flip-side of extending credit. It used to be that houses were a smaller multiple of the average salary because only short term (e.g. 3-5 year) loans were available. Of course homeownership rates were lower. Then banks began offering 30 year mortgages and homeownership increased but house prices rocketed up and it became common for working people to carry 30 years of massive debt. Then downpayment requirements were weakened from 20% to 10% to 3.5%. Now you even have interest only loans. So locking people out of certain credit markets, or banning certain lending instruments, certainly has an appeal. I wouldn't mind if the federal government stopped insuring home loans and student loans and we returned to 3-5 year loans for homes and maybe 1-2 year loans for autos. We should not be in the business of subsidizing all this household debt, and we should be discouraging it a bit.

lifeisstillgood 6y ago
Interesting - there is a series of lectures (ref to follow) on UK economy - they try to show the biggest component of house prices is land and the biggest contributor to land is people just bid up using mortgage funds. On the other hand why should leverage be freely available to "the rich". I am tempted to solve it on the demand side - I am willing to bet one major difference in money management is just daily awareness of total spend and wealth. Something like Mint for everyone might actually move the needle (it's kind of where the EU / UK open banking is headed)