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Dagnabit · 02-09-2001, 01:33 PM

You're looking at real productivity growth numbers there, not monetary rates of return. Apples/Oranges.

The whole idea behind borrowing money (except when the government does it) is that you can use that money to build something more useful. The whole idea about the private money world is that people who can't leverage money well give money to people who can.

To put it into the realm of the personal as you have done. I can't afford a car if I start at zero. Now I have two choices. I can borrow the money at - let's say your 12% - and pay an extra $1000 for that car today, so that I can buy it with money I'll have tomorrow. OR, I can save up the money I get today because the car will cost $1000 less by the time I can actually afford it.

If you can afford it, you shouldn't take out that car loan. But if you can't afford it, it's not THAT expense to finance it - $1000 isn't exactly the difference between rich and poor. And the biggest difference is that you will have the car NOW, instead of four years from now when you can afford it. To be carless for four years just so I can afford to buy a car and save $1000? What, are you out of your mind?

In many people's cases, they won't be able to have a job and afford that car in four years... unless they have a car to use to get to the job!

Furthermore, a solid marketplace in consumer debt with the backing of a tangible asset, ie a CAR, has made those loans very cheap indeed.

So. If I have the working capital today, I can get a much better rate of return than the government. I could become a leasing company and give out my cash for other tangible assets. I could become a loan company and give out loans on cars. I could put my money in the stock market and expect a long-term rate of return better than the treasury. But none of my own personal rates of return is tied indefinitely to the rates of productivity growth.

I agree that it would be a smart thing to do to reduce the overall government debt. And I agree that the government pays too much for its money, just as it pays too much for almost everything that it does. Frankly a bad ROR on government loans is better (IMO) than a bad ROR on DOD toilet seats, and if it's going to buy money rather than toilet seats, let it buy money.

02-09-2001, 01:33 PM	#18
Dagnabit High Propagandist Join Date: Jan 2001 Posts: 115	You're looking at real productivity growth numbers there, not monetary rates of return. Apples/Oranges. The whole idea behind borrowing money (except when the government does it) is that you can use that money to build something more useful. The whole idea about the private money world is that people who can't leverage money well give money to people who can. To put it into the realm of the personal as you have done. I can't afford a car if I start at zero. Now I have two choices. I can borrow the money at - let's say your 12% - and pay an extra $1000 for that car today, so that I can buy it with money I'll have tomorrow. OR, I can save up the money I get today because the car will cost $1000 less by the time I can actually afford it. If you can afford it, you shouldn't take out that car loan. But if you can't afford it, it's not THAT expense to finance it - $1000 isn't exactly the difference between rich and poor. And the biggest difference is that you will have the car NOW, instead of four years from now when you can afford it. To be carless for four years just so I can afford to buy a car and save $1000? What, are you out of your mind? In many people's cases, they won't be able to have a job and afford that car in four years... unless they have a car to use to get to the job! Furthermore, a solid marketplace in consumer debt with the backing of a tangible asset, ie a CAR, has made those loans very cheap indeed. So. If I have the working capital today, I can get a much better rate of return than the government. I could become a leasing company and give out my cash for other tangible assets. I could become a loan company and give out loans on cars. I could put my money in the stock market and expect a long-term rate of return better than the treasury. But none of my own personal rates of return is tied indefinitely to the rates of productivity growth. I agree that it would be a smart thing to do to reduce the overall government debt. And I agree that the government pays too much for its money, just as it pays too much for almost everything that it does. Frankly a bad ROR on government loans is better (IMO) than a bad ROR on DOD toilet seats, and if it's going to buy money rather than toilet seats, let it buy money.