5 ms·

Irritating to me that we live in a system that rewards irresponsible spending and debt accumulation - both on the individual level and on the corporate level.

tempsy 4y ago
how are individuals rewarded for this?
- alldayeveryday 4y ago
  Examples: buying a much larger house than you need, taking out mortgages on several homes, debt arbitrage (taking out loans and then investing the money in vehicles with higher returns than your interest on the loan). Examples where taking on debt results in rewards. Have you not been paying attention to the economy for the last decade? Zero or low interest loans have created a perverse incentive to accumulate debt and burn cash.
  - tempsy 4y ago
    I wouldn’t consider being able to take out a big mortgage a reward, it’s just a thing that is possible to do.
    - alldayeveryday 4y ago
      10% equity in a house that is 200k, vs 10% equity in a house that is 500k. Which is bigger?
      - tempsy 4y ago
        What does this have to do with being rewarded in the same way a corporation was being rewarded for irresponsible levels of spending and cash burn in low rate environments which is what you saw with Shop and others? Using cheap money to buy appreciating assets is a good use of debt. Using cheap money to spend extravagantly on headcount and perks is not.
        alldayeveryday 4y ago
        > Using cheap money to buy appreciating assets is a good use of debt. Yeah, right up until the point that those assets suddenly diminish in value. > Using cheap money to spend extravagantly on headcount and perks is not. The financial system seemed to disagree and rewarded the behavior, ala stock price increases for extended period of time, up until the point where it didn't. See the similarity now? You are merely saying that "good use" of debt is when you are winning in the game, and "bad use" is when you are losing. The financial system has for too long rewarded speculative gambling rather than value generation.
        tempsy 4y ago
        you’re trying to frame taking out a standard mortgage on a house as irresponsible gambling so no don’t see how that’s similar to a corporation who burned billions using cheap money and ended up trashing their company
        alldayeveryday 4y ago
        No, re-read my comments. I said taking a mortgage on a much larger home than you need, or taking out multiple mortgages, or doing debt arbitrage (all, risky moves). You threw in the word "standard" as a means to misrepresent my argument.
        MisterMower 4y ago
        Many people are buying homes exclusively for the price appreciation. They are using leverage to turn a $50k down payment on a $400k house into a capital gain of $200k when the price of that house rises to $600k. In the process, no actual value has been created. But the gambler, er homeowner comes out way ahead. Someday interest rates will return to historical norms, and these folks will get crushed. They partied hard, and the hangover will be epic. Financial prudence, scorned for the past 20+ years, will be back in style again.
      - deleted 4y ago
        [deleted]
nh23423fefe 4y ago
Seems like you are just improperly reifying everything to create a locus of accountability. Isn't this really just expressing outrage, not actually describe the world as it is?

tempsy 4y ago

how are individuals rewarded for this?

alldayeveryday 4y ago
Examples: buying a much larger house than you need, taking out mortgages on several homes, debt arbitrage (taking out loans and then investing the money in vehicles with higher returns than your interest on the loan). Examples where taking on debt results in rewards. Have you not been paying attention to the economy for the last decade? Zero or low interest loans have created a perverse incentive to accumulate debt and burn cash.
- tempsy 4y ago
  I wouldn’t consider being able to take out a big mortgage a reward, it’s just a thing that is possible to do.
  - alldayeveryday 4y ago
    10% equity in a house that is 200k, vs 10% equity in a house that is 500k. Which is bigger?
    - tempsy 4y ago
      What does this have to do with being rewarded in the same way a corporation was being rewarded for irresponsible levels of spending and cash burn in low rate environments which is what you saw with Shop and others? Using cheap money to buy appreciating assets is a good use of debt. Using cheap money to spend extravagantly on headcount and perks is not.
      - alldayeveryday 4y ago
        > Using cheap money to buy appreciating assets is a good use of debt. Yeah, right up until the point that those assets suddenly diminish in value. > Using cheap money to spend extravagantly on headcount and perks is not. The financial system seemed to disagree and rewarded the behavior, ala stock price increases for extended period of time, up until the point where it didn't. See the similarity now? You are merely saying that "good use" of debt is when you are winning in the game, and "bad use" is when you are losing. The financial system has for too long rewarded speculative gambling rather than value generation.
        tempsy 4y ago
        you’re trying to frame taking out a standard mortgage on a house as irresponsible gambling so no don’t see how that’s similar to a corporation who burned billions using cheap money and ended up trashing their company
        alldayeveryday 4y ago
        No, re-read my comments. I said taking a mortgage on a much larger home than you need, or taking out multiple mortgages, or doing debt arbitrage (all, risky moves). You threw in the word "standard" as a means to misrepresent my argument.
        MisterMower 4y ago
        Many people are buying homes exclusively for the price appreciation. They are using leverage to turn a $50k down payment on a $400k house into a capital gain of $200k when the price of that house rises to $600k. In the process, no actual value has been created. But the gambler, er homeowner comes out way ahead. Someday interest rates will return to historical norms, and these folks will get crushed. They partied hard, and the hangover will be epic. Financial prudence, scorned for the past 20+ years, will be back in style again.
    - deleted 4y ago
      [deleted]

nh23423fefe 4y ago

Seems like you are just improperly reifying everything to create a locus of accountability. Isn't this really just expressing outrage, not actually describe the world as it is?