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Houses are many hundreds of thousands of dollars, and not infrequently $1M or more. A big flatscreen is maybe a couple $k. We're talking orders and orders of ma
by FooBarBizBazz 3y ago
Houses are many hundreds of thousands of dollars, and not infrequently $1M or more. A big flatscreen is maybe a couple $k. We're talking orders and orders of magnitude difference. I feel this goes together with "cut back on Starbucks" type advice. These things are just rounding errors.
- bumby 3y agoBut home equity loans are often up to 85% of home equity. The point is inflated home prices allow people to inflate their lifestyle, regardless of what they’re spending it on. It’s about the system of revolving debt being propped up by inflated home values, not necessarily about what the debt is spent on.
- FooBarBizBazz 3y agoI see, you're saying the loan is never paid back. Or is paid back only through more debt rolled over from something else. Ugh. I guess that's exactly how governments fund themselves. I don't see how a responsible person can even compete in that environment. It's like joining a sport where everyone's doping.
- bumby 3y agoIn this case, I don't think the revolving debt goes to governments because it's typically serviced by private entities. Rather, it's how people maintain an inflated lifestyle predicated on inflated home values.
- FooBarBizBazz 3y agoSure, I was only making an analogy -- people refinancing over and over, vaguely like governments pay T-bill interest by issuing more T-bills, where there's no expectation that the principal can ever really get paid back. I was about to mention Fannie and Freddie as a footnote about how the government might be involved in all this, but didn't think it was a big deal. Yet Google tells me they end up buying 70% of mortgages. So there's some flow here that I'd do well to understand.