121–130 of 208 posts
Earlier quoted context omitted.
Reducing variance is worth real money to people, since the marginal utility of the first dollar is much higher than the 1000th.
I completely agree. A bird in hand is worth 2 in the bush and all that. However, even today economic theories do not take this into account and assume rationality === choosing the highest expected payoff. I.E. we're all statistical savants
Americans Hold Over $4.1 Trillion in Consumer Debt and Roughly $90.0 Trillion in Asset Wealth doesn't quite have the same ring to it.
Earlier quoted context omitted.
The important thing really is the financial fragility of the American household. Millions of people know that they are one unexpected event away from insolvency. GDP doesn't mean anything to them. Consumer debt just puts them more at risk.
Also, the more indebted the consumer, the higher the impact of rising interest rates on consumer spending. Every time the Fed raises rates by 0.25 percentage points, consumers need to pay an additional $10B in interest per year. Consequently, the rate of interest increasing by 1 percentage point today is not the same as it increasing by 1 percentage point pre-2008 (when total consumer debt was lower).
When I hear about debt that big I wonder if $4.1T even a real thing. I mean is it a tangible number that actually represents something of real substance?
Combine low wages, increasing loan delinquency, and the probable start of trade wars with mexico and china and I can't see how this doesn't turn out to be like 2008 on steroids.
Does America really have low wages? Granted, the lack of a minimum wage is crazy, but the median household income is $56k. Compare that to £23k in the UK.
If there is a question of why, I will explain. It is the same explanation I give to a banking specialist for my refusal to accept a savings account. Take a village of 100 people; the entire village has no money whatsoever, so they cannot trade or buy food or sell goods and services. A rich man lives on the top of a mountain and decides to lend a $100 to the entire village, which is $1/person, at an interest rate of 5%, and the entire debt is to be paid back in exactly 1 year.
For the duration of that year, villagers are beginning to buy and sell, the economy is created and is moving healthily, villagers are working, products and services are being created, sold, and consumed. At the end of the year, $105 need to be paid back, but the entire amount of money in the entire village adds up to just a $100. Where does that $5 come from?
Some villagers will have accumulated more than $1 and they will be able to pay back their debts and have some left over. But then also some villagers will have nothing. What do they lose? How do they fulfill their debts?
The entire system relies on the introduction of additional money from somewhere. If so, then that entity loses money. This system is deeply toxic and works contrary to the one who borrows. And once all is added up, the net result is all money is removed from the system. Losers lose big. Winners hit net zero eventually.
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> convince otherwise rational people to make an irrational decision This is a myth that economics will not let go of. Almost all human decisions are influenced by emotions. Here's two examples: [A] Would you rather receive $49 or have a 50% of receiving $100? - The rational decision would be to choose the 50% chance since your expected value would be $50. Most people go for the $49, humans are irrationally risk-avers…
Reducing variance is worth real money to people, since the marginal utility of the first dollar is much higher than the 1000th.
Earlier quoted context omitted.
Let's say we have two individuals - Alice and Bob - who each own a house. Each house has the same price on the real estate and on the rental markets. If Alice lives in Bob's house and pays rent to Bob and Bob lives in Alice's house and pays rent to Alice, their balance sheets are the same as if Alice lived in her own house and Bob lived in his own house. Excluding the rent income and rent expense (which offset), thei…
This only works in some magical tax depreciation scheme. In reality, monthly mortgage costs in an area are going to be market driven as are rental prices for the exact same property, and while the two axis aren't completely orthogonal they are somewhat independent. My experience is that in any given year in most regions rent income will not cover house payments/taxes/upkeep without tying up absurd amounts of down pay…
Combine low wages, increasing loan delinquency, and the probable start of trade wars with mexico and china and I can't see how this doesn't turn out to be like 2008 on steroids.
Does America really have low wages? Granted, the lack of a minimum wage is crazy, but the median household income is $56k. Compare that to £23k in the UK.
Earlier quoted context omitted.
A large amount of individual debt is wholly optional. What people ignore and therefor schools do not teach to be wary is that marketing is very well developed and convince otherwise rational people to make an irrational decision which has them take on more debt. from buying too much house or car to over buying an education that cannot be used where the person is or in a field that cannot withstand the costs. all of t…
> convince otherwise rational people to make an irrational decision This is a myth that economics will not let go of. Almost all human decisions are influenced by emotions. Here's two examples: [A] Would you rather receive $49 or have a 50% of receiving $100? - The rational decision would be to choose the 50% chance since your expected value would be $50. Most people go for the $49, humans are irrationally risk-avers…
I don't want to be a jerk, but you are wrong to a phenomenal degree.