15 Apr 11
1 edit
Originally posted by SeitseIt's not an "illusion", it's transferring your funds across time. You may save now to have more later or save later to have more now. Both are "uncertain", you can also save and not have what you expected tomorrow. If I'm young and with a promising career why should I not anticipate the future income? Seems pretty normal to me.
Would you borrow if you would have the cash?
Unless you have the reserves to guarantee it,
penny by penny, it is an illusion. Borrowing is
done in expectation of something future, that
may or may not happen, and that converts it
in a gamble. But gambler and the one who
accepts the gamble are in a situation where they
would not be if they would have the resources
themselves.
What is the guarantee a country gives when it
issues a bond?
As for the guarantee, it's simple. It gives none.
15 Apr 11
Originally posted by PalynkaYup, that is the common wisdom.
It's not an "illusion", it's transferring your funds across time. You may save now to have more later or save later to have more now. Both are "uncertain", you can also save and not have what you expected tomorrow. If I'm young and with a promising career why should I not anticipate the future income? Seems pretty normal to me.
As for the guarantee, it's simple. It gives none.
But we're not here to repeat the obvious or what the theory books
say, right? The fun is in analyzing. Is borrowing and lending mere
speculation?
Unless there is a valid, cash convertible guarantee behind it, it is.
Now the question is: what is speculation and what value it adds in
a solid, long lasting and tangible economic life?
15 Apr 11
Originally posted by SeitseWhy does the guarantee make any difference in whether borrowing is an evil or not? Maybe I'm missing your point, but I honestly don't understand what you're saying.
Yup, that is the common wisdom.
But we're not here to repeat the obvious or what the theory books
say, right? The fun is in analyzing. Is borrowing and lending mere
speculation?
Unless there is a valid, cash convertible guarantee behind it, it is.
Now the question is: what is speculation and what value it adds in
a solid, long lasting and tangible economic life?
Speculation is a meaningless word with an emotional charge which is used for rhetorical purposes whenever it is convenient.
15 Apr 11
Originally posted by PalynkaOk, let's go step by step:
Why does the guarantee make any difference in whether borrowing is an evil or not? Maybe I'm missing your point, but I honestly don't understand what you're saying.
Speculation is a meaningless word with an emotional charge which is used for rhetorical purposes whenever it is convenient.
Why do you borrow money?
15 Apr 11
Originally posted by SeitseBuy new house money needed now £400,000
So why not wait until you gather the needed money instead of borrowing it?
Money in bank £40,000
Anticipated future income £80,000 per annum
Borrow money from bank to buy house
Alternatively save £20,000 per year and in 18 years have enough money to buy house
18 years time house now costs £1,000,000
Yep I have £400,000 in bank but had I borrowed the £400,000 I would now own a property worth £1,000,000 but have no money in bank.
Guess I am glad I borrowed rather than saved.