Sign in to follow this  
Followers 0
bmf

Ft Article On The Virtues Of Debt

27 posts in this topic

So Bernie Madoff changed his name to Chris Giles and now writes for the FT. Strange world, innit.

We could write for ages on earnings vs inflation, the exponential function, production vs consumption, debt saturation and so on. But it wouldnt be worth it. The article is laughable.

Share this post


Link to post
Share on other sites

I mean, outright lies like this...

( i darent copy the whole sentence, as the FT has a very sinister sounding T&C disclaimer), but the line that starts with "In 1995 household debt"

Argues that its OK because 'wealth' has outstripped debt.

Except it hasnt, because debt is actual debts incurred, whereas value/wealth is a market wide assumption based on a small transaction volume at a specific point in time.

There was lots of alledged Dotcom wealth, for a time. Then we found out it didnt actually exist. The same goes for housing 'wealth'.

Edited by Executive Sadman

Share this post


Link to post
Share on other sites

I mean, outright lies like this...

( i darent copy the whole sentence, as the FT has a very sinister sounding T&C disclaimer), but the line that starts with "In 1995 household debt"

Argues that its OK because 'wealth' has outstripped debt.

Except it hasnt, because debt is actual debts incurred, whereas value/wealth is a market wide assumption based on a small transaction volume at a specific point in time.

There was lots of alledged Dotcom wealth, for a time. Then we found out it didnt actually exist. The same goes for housing.

if the wealth existed, then the banks could lend against it.

Much of the debt that has been lent is based on assets that are themselves derived from debt....so yes, in theory, one home borrower could be supporting many millions of debt....in other words, the wealth that a home and shelter for a family, is the wealth covering many millions of debt.

that 1995 home is exactly the same home in 2012....the debt is many many times larger than it was in 1995.

Share this post


Link to post
Share on other sites

if the wealth existed, then the banks could lend against it.

Much of the debt that has been lent is based on assets that are themselves derived from debt....so yes, in theory, one home borrower could be supporting many millions of debt....in other words, the wealth that a home and shelter for a family, is the wealth covering many millions of debt.

that 1995 home is exactly the same home in 2012....the debt is many many times larger than it was in 1995.

Because people are being asked to pledge more of their future earnings to buy the same asset.

The (older) seller realises the profit at the moment of sale. The buyer pledges to pay off 6 times wages (or more) over a painful 25 years.

This is simply pulling demand forward from the future in order to allow the continuation of unsustainable lifestyles of the boomers.

Having now reached the point of debt saturation where people cannot pledge to work for longer than they will live the wheels have come off.

Share this post


Link to post
Share on other sites

Because people are being asked to pledge more of their future earnings to buy the same asset.

The (older) seller realises the profit at the moment of sale. The buyer pledges to pay off 6 times wages (or more) over a painful 25 years.

This is simply pulling demand forward from the future in order to allow the continuation of unsustainable lifestyles of the boomers.

Having now reached the point of debt saturation where people cannot pledge to work for longer than they will live the wheels have come off.

No, we will have intergenerational mortgages. What is the problem with that?

Share this post


Link to post
Share on other sites

No, we will have intergenerational mortgages. What is the problem with that?

That's the kind of creativity we need! Will you accept an X on the contract from my son? He's only 3 but wants his own bedroom.

Share this post


Link to post
Share on other sites

Because people are being asked to pledge more of their future earnings to buy the same asset.

The (older) seller realises the profit at the moment of sale. The buyer pledges to pay off 6 times wages (or more) over a painful 25 years.

This is simply pulling demand forward from the future in order to allow the continuation of unsustainable lifestyles of the boomers.

Having now reached the point of debt saturation where people cannot pledge to work for longer than they will live the wheels have come off.

just wondering why it takes the wealth of a second generation to buy what the previous gen could buy with 3 years wages.

Is it because its all being stolen....

Share this post


Link to post
Share on other sites

So Bernie Madoff changed his name to Chris Giles and now writes for the FT. Strange world, innit.

We could write for ages on earnings vs inflation, the exponential function, production vs consumption, debt saturation and so on. But it wouldnt be worth it. The article is laughable.

It so reminded me of the day I drove past an Abbey National branch and saw the advert in the window display bragging

in huge red letters 6 X SALARY - and afterwards lenders mortgage multiples got even worse and that was quite a few years before the UK's economic collapse due to the crazy debt.

Edited by billybong

Share this post


Link to post
Share on other sites

No, we will have intergenerational mortgages. What is the problem with that?

Yay! Freedom through Debt! Debt is good. More debt can fix a debt problem. :lol:

Edited by Errol

Share this post


Link to post
Share on other sites

No, we will have intergenerational mortgages. What is the problem with that?

It's easy to fix isn't it people just aren't trying hard enough.

In fact we can rapidly expand the economy by increasing the price of TV, PC's etc... so it takes you 10 or 20 years to pay of the purchase. We can ramp the economy like never before...

Share this post


Link to post
Share on other sites

No, we will have intergenerational mortgages. What is the problem with that?

I don't think that could work. A debt cannot be passed onto an offspring, or left in a will to someone else, surely. If it could, I know a few people I would like to leave debts to.

Share this post


Link to post
Share on other sites

just wondering why it takes the wealth of a second generation to buy what the previous gen could buy with 3 years wages.

Is it because its all being stolen....

If by stolen you mean kept by prior generations, then yes, it's being stolen.

How, when housing is exempt from capital gains, is the money stolen from someone who paid 80K for a house they sell for 600K? They might loose some due to inflation, but this applies to all generations. They might loose some in fees if they go to invest in via the city. But I'd say the one party that are getting utterly shafted is the person buying at greater than 6x wages.

Share this post


Link to post
Share on other sites

It so reminded me of the day I drove past an Abbey National branch and saw the advert in the window display bragging

in huge red letters 6 X SALARY - and afterwards lenders mortgage multiples got even worse and that was quite a few years before the UK's economic collapse due to the crazy debt.

i.e. TOXIC PREDATORY LIAR LOANS

Share this post


Link to post
Share on other sites

No, we will have intergenerational mortgages. What is the problem with that?

What if you don't intend to have children?

Share this post


Link to post
Share on other sites

What if you don't intend to have children?

Debt and inflation together works in our benefit though as assets we purchased in previous years gets paid off quicker......i.e. houses

I mean wage inflation but with wage inflation you also get asset inflation...is wage inflation necessary? I would say so, because no one would like to work on the same money for their whole life...it's a motivator that increases productivity and part of the sociological environment we live in....inflation is necessary for productivity (wage inflation) and therefore debt could be a good thing as it would erode faster and would be more beneficial to the economy as whole instead of deferred consumption where the asset cost is higher................

Share this post


Link to post
Share on other sites

Debt and inflation together works in our benefit though as assets we purchased in previous years gets paid off quicker......i.e. houses

I mean wage inflation but with wage inflation you also get asset inflation...is wage inflation necessary? I would say so, because no one would like to work on the same money for their whole life...it's a motivator that increases productivity and part of the sociological environment we live in....inflation is necessary for productivity (wage inflation) and therefore debt could be a good thing as it would erode faster and would be more beneficial to the economy as whole instead of deferred consumption where the asset cost is higher................

dumbest post of the year?

Share this post


Link to post
Share on other sites

I don't bother even trying to read or link ft articles any more, they are generally shite.

I think it's mixed. Sometimes you get a great article but far too often it's crap. Overall I no longer purchase the ft.

Share this post


Link to post
Share on other sites

I generally like Chris Giles comments but this was bizarre.

Left my comment.

I'm really disappointed in that piece Chris. You have clearly come at it from a detached, technocratic economic stance and reached the conclusions you want that would support the actions you want to take in your personal life. It is what I call a 'moneyist' approach. Where credit is matched by assets and the economy can be kept chugging by tinkering with rates and the money supply. This always works short term. Of course nominal gdp can be kept aloft with increases in debt denominated in its own currency.

What it fails to look at is the 'quality' of gdp. And the quality of purpose for which increases in debt are assumed. We have had too much 'increase consumption to increase gdp by increasing debt'. We now need to change course entirely and make sure debts assumed generate more income than they cost. This is the route to a sustainable growth in our living standards.

The housing market is of course at the epicentre of debts and the money supply. It has to be the greatest malinvestment of monies this country (and others) have ever witnessed outside of wasteful war, as increases in house prices have leaked into an ever worsenng trade balance.

Share this post


Link to post
Share on other sites

It's all very well for the Government to chastise banks "for not lending enough", but it seems to me that individuals, and business have lost their appetite for debt, as we all got into it once, and it wasn't nice! :huh:

Share this post


Link to post
Share on other sites

It's all very well for the Government to chastise banks "for not lending enough", but it seems to me that individuals, and business have lost their appetite for debt, as we all got into it once, and it wasn't nice! :huh:

Yup. The torrent of "credit" [debt] poured into the economy is inflationary. Massively so. It's the Moneylenders' Great Con.

Edited by eric pebble

Share this post


Link to post
Share on other sites

dumbest post of the year?

Bit harsh I have read some absolute drivel spouted by some of you losers on here........

End of the day as much as you fantasise about what the government or the large multi-national companies may do.....one simple fact will never change and that is you will helpless to change any of it...............get on with your life and enjoys the good things that the world has to offer

I made a couple of points on here and you call me dumb and retarded.......when I have seen such stupidity written by some of you lot!

99% of the world populations' lives are governed by emotions, whether it 's the feeling you want to eat, feeliing you want to feel healthier, feeling you want a better life...governments prey on this emotion...........

All I was saying was debt is a necessary factor of life......we all need debt as it creates productivity i.e. the man with the fishing rod who lent his fish to his other inhabitants so they to could make their own fishing rod....

The thing about inflation & debt is that it works in our economic favour as we can make purchases now that are paid of more easily as our wages rise, without debt that would not be possible. We have more disposable income, with gives us greater consumption, better health facilities etc etc...what was a good thing we let run out of control but I think the method is the correct and debt is necessary........as look at today's lifestyles compared to those 50 years ago

Share this post


Link to post
Share on other sites

Bit harsh I have read some absolute drivel spouted by some of you losers on here........

End of the day as much as you fantasise about what the government or the large multi-national companies may do.....one simple fact will never change and that is you will helpless to change any of it...............get on with your life and enjoys the good things that the world has to offer

I made a couple of points on here and you call me dumb and retarded.......when I have seen such stupidity written by some of you lot!

99% of the world populations' lives are governed by emotions, whether it 's the feeling you want to eat, feeliing you want to feel healthier, feeling you want a better life...governments prey on this emotion...........

All I was saying was debt is a necessary factor of life......we all need debt as it creates productivity i.e. the man with the fishing rod who lent his fish to his other inhabitants so they to could make their own fishing rod....

The thing about inflation & debt is that it works in our economic favour as we can make purchases now that are paid of more easily as our wages rise, without debt that would not be possible. We have more disposable income, with gives us greater consumption, better health facilities etc etc...what was a good thing we let run out of control but I think the method is the correct and debt is necessary........as look at today's lifestyles compared to those 50 years ago

For me this is just a nothing statement. Everything has it's place in moderation when applied correctly. That's simply a truism.

Debt is being abused. That's the point of this post and the reason why people are criticising the article.

Your post is the equivalent of posting "a pat on the head is quite nice" about an article describing how someone had their brains bashed in with a mallet.

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!


Register a new account

Sign in

Already have an account? Sign in here.


Sign In Now
Sign in to follow this  
Followers 0

  • Recently Browsing   0 members

    No registered users viewing this page.