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This is from Ludwig von Miser at the FAX board at www.investorvillage.com.
There are some great discussion there. You should check it out:
Leverage
is what forces those who would like to live responsibly to have to take the
risk of paying too much for a place to live because they must compete with a
sea of fools who are happy to borrow money without realizing the risk they
are taking.
Leverage
is what makes the excess of production over consumption go into interest
payments to bankers rather than into savings that could fund investment in
productivity improving areas.
Leverage
is what eats up farm land and wood lots and causes houses to be built too far
apart on too large lots in areas that should not be built on.
Leverage
is what makes it possible for too few people to live in a house, forcing them
top have to spend too much on child care, transportation, elder care, and
separating the generations and neighbors who have not even met the people who
live a few houses away.
Leverage
is what keeps the masses in slavery to their jobs, as the mortgage payment
must be met or they risk being homeless, and they think they are building
wealth based on the increasing price of and equity in the house that they
"own".
People
lived in houses they owned before either 30 year mortgages or interest-only,
teaser rate, liar loan, pay-option 125% mortgages were available, and they
will live in houses after money to buy a house can no longer be borrowed
without a large down payment, a high interest rate, a verified secure ability
to pay, and a short term for pay off. It's just that the houses will be
different, and not necessarily in a way that is all bad.
Fake Ben
Bernanke
FakeBen.com
FakeBen is a blog to
monitor the Fed and its actions and encourage community participation. At
FakeBen, we believe that the Fed policy of the last two decades has created a
credit bubble as large as that created in the 1920s. This bubble will lead to
either inflation, a recession, or both.
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