Thats only if your earnings will also grow, keeping you ahead of the curve of growing interest rates, which will not be the case for great majority of workers.
I have a mortage in Poland. Base rates went from 1.5% to 6.75%. My mortage’s monthly payment went from 1792PLN to 3200 PLN (~715 USD), where 3000 PLN is interest. This is not big enough to bankrupt me, but 1000 PLN is a lot of money here and a lot of people feel the pressure so our govt enacted law that lets you move four rates in a year to the end of mortage for two years, effectively extending the mortage by 8 months, but at no base cost of mortage changing.
> I have a mortage in Poland. Base rates went from 1.5% to 6.75%. My mortage’s monthly payment went from 1792PLN to 3200 PLN (~715 USD), where 3000 PLN is interest.
Anecdotally it meshes with some things I've heard elsewhere but don't hold me to it:
- Canadian mortgages are typically something like 5 years.
- UK is similar, it's either variable, or fixed for something super short, like 2-3 years.
- Australia same kind of boat, most are variable, I've heard the interest rates during covid temporarily reversed the trend, but same deal, they're only fixed for a few years.
That's kind of wild, even in my teens (1990s in Illinois) it seemed to be common knowledge that variable APR mortgages were a risky/Bad Idea. I had no idea they were the norm elsewhere.
The cynic in me would have assumed the US led the world in predatory style lending. This country loves handing people more than enough rope to hang themselves with, while depriving them of any relevant education beforehand.
No. Bank oversight comission required banks to offer fixed rate mortages only after swiss franc mortage crisis (2009), and not shorter than 5 years. What happened was banks introduced fixed mortages for 5 years, after which time you move to variable mortage, or update rates for next 5 years.
Banks also made those mortages noticably pricer, so few people picked them (me included).
Even if people who took the low mortgage counted with a rate hike like yours they probably didn’t count with the energy prices hiking so much AND the food prices hiking so much AND all of this happening within ~9 months.
Are you sure? Inflation is slowing but your interest rate will remain the same. You run the risk or being laid off, and you most likely not going to see any huge inflation adjusted salary increases anytime soon.
Wages are decreasing. Companies are using inflation and recession fears to not just stagnate wages, but actually lower them. Public and private sectors are doing massive layoffs.
Spending money you don't have is being financially irresponsible, regardless of whether it's through credit cards or some other equivalent.
However, the financially irresponsible tend to blame the tool (eg credit cards) rather than becoming more responsible, and, in the case of this article, Gen Z seemed to have fallen prey to a similar tool but with a newer name.
Advertising only works on a minority of people who are naive. The other goal of advertising is to generate awareness. The more you teach people about the influence of ads the more agency they gain.
Precisely, I only have and use a credit card to maintain my credit score. I don't max i as I don't spend more than two-figure to keep it active then I pay it within 3 days.
The system is designed to obligate people to use credit, and I can see how tempting and easy it is for someone that lives paycheck to paycheck to use their credit card and carry balance.
Edit: I wanted to add. News websites have a habit of blaming gen z for all the different issues but forget to blame the system. Gen z is poorer than previous generations, and that should be highlighted everytime they're blamed
Every individual success and failure is systemic because individuals are molded by the system. Blaming individuals could be seen as an attempt to fix the system from the bottom.
Fixing the system from the top probably works better for the future, but the current generation cannot be helped like that.
Credit scores based on credit card use seems fundamentally broken. Having had a good salary and paid all your bills on time for decades should of course count as being financially responsible and creditworthy. Luckily I think only the US has this system?
> Credit scores based on credit card use seems fundamentally broken.
The thing that makes me angry is that I am not interested in their money, credit is still needed even when installing internet at my home (looking at you AT&T), where the bill could be prepaid instead, but they could still reject you and charge a high deposit. It's beyond ridiculous.
> I think only the US has this system?
I think so. And I hope no one gets "inspired" thinking the US is perfect and copies the same system in their country.
Why do you need to victim blame? You wouldn't victim blame in worse situations like murder or rape (he was murdered because he didn't teach himself self defense, or she was raped because she wore provocative clothing) so why victim blame here? Reserving some critique for the perpetrator is generalizable to more benign crimes too, and it's only fair.
I am a Nigerian Prince, and I'm about to come into some wealth, but in order to access these millions of dollars, I need you to give me a small amount. ($10k) If you do, in exchange for your kindness and help unlocking my assets, I will immediately pay back your investment at 10x ($100k).
People consent to giving people their money all the time, and it is still illegal and immoral if the person offering deceived them. OR maybe you're a phisher and you think there's nothing wrong with phishing...
Victims are not always blameless. In this instance, victims are well informed about the consequences of borrowing & choose to consent. One could even argue that creditors who do not get paid are victims - they're the ones who provided funds to the borrower for them to enjoy their goods
Obviously, one should not blame a murder/rape victim
I think the point is, young people are in fact _not_ well informed. It's in the entire credit industry's collective best interest to keep consumers in the dark.
And creditors are well informed about the consequences of lending and chose to consent. Not repaying a loan is not a huge moral failing. In most cases it is not a even crime--because no one believes all loans will be repaid, especially the creditors.
"victims are well informed about the consequences of borrowing" - Citation Needed.
Have you read the terms and conditions of buy-now-pay-later companies? I think the clearest takeaway from this article is that people aren't well informed.
In the original Pinnochio, a trickster steals a large sum from him, so he goes before a wide old ape judge. The judge hears his complaint - and then has him imprisoned for stupidity. The thief wasn’t arrested in the book.
There are similar parallels with ancient Sparta. Back then, boys were soldiers by mandate, and were taught to steal from local farms. They were whipped for getting caught - not for theft. Theft was encouraged, getting caught was severely punished.
Just interesting things to consider that come to my mind. Especially because I think banks may turn out to be Pinnochio in the story and we the thieves in the long run. ;)
There is a huge difference in difficulty and reasonableness between the examples you list and going into debt. "He didn't teach himself self-defense", "she wore provocative clothing" vs. "he spent money he didn't have through installment payment plans". Listen to yourself apply those judgments and it should be clear why these are different situations.
Note that in cases where people go into debt for much more unavoidable reasons ("her husband got cancer and racked up a million dollars in medical bills before he died", "she was born into poverty and had to start work as a waitress at a young age to keep a roof over her sibling's heads"), people are much less likely to victim-blame, because those cases are much more legitimately victims.
You're assuming things about the people using these companies for this. What if this is for some essential item (fridge? Smartphone? nice clothes for interview? etc.)
Who is the moral arbiter of what kind of debt is/isn't valid. Everyone on here is pretending like people are perfectly informed about how these companies collect on their debts, but the nature of this article suggests there's more behind the scenes from these companies.
If I open up "xracy's murder tools" am I responsible for people who buy things from me to murder people? Surely not, surely it's only on the people who didn't read the terms and conditions in my store that explicitly state you can't use my tool's to murder people.
These companies are offering people one-off credit cards without actually stating that. That's shady business at best, and actively misleading at worst. Surely they're to blame for misleading promises. I would bet dollars to donuts also that in the next few years it'll come out they have other shady practices too...
I think the threshold for victim blaming depends on the event. Your examples of rape and murder have an extremely high threshold for victim blaming, where you should almost never, but perhaps in some cases you still could e.g. responding to a cannibal who advertised for victims on a forum.
Things like gambling, pay day loans, credit cards, buy now pay later are all forms of predatory behaviour and are in that way similar to rape/murder but considerably less grievous. The threshold for victim blaming is alot less in these situations but you certainly still could.
I don't think you should admonish someone for victim blaming here or make out they're equivalent to rape or murder, they're clearly not.
Is the person who built his house upon the sand to blame or is he an innocent victim of the people who sold him the land, the bricks, the plans and the labour?
Everyone here is taking a single example from the article and assuming it applies to all people who use these services. I think the comparison, albeit a bit extreme, is fair given that everyone presupposes there's no good reason to use these services and everyone knew what they were getting themselves into off of one anecdote.
Mostly because it's at least drawing people to consider there is another side to this.
> Spending money you don't have is being financially irresponsible, regardless of whether it's through credit cards or some other equivalent.
Meh - I've spent money I didn't have when I was younger - life is short, what was a lot of money back then is irrelevant to me now and that's expected (you earn more the further you go in your career). I can't go back to twenties now no matter how much I saved back then.
You basically just described loans. So the mortgage industry.
I'm not looking forward to bailing people or companies out for being irresponsible again (referring to 2008 housing, I'm fine with student loan forgiveness).
I don't think I really disagree with this. Mortgages are so unbelievably stupid and if they weren't the norm wouldn't be invented again. The people taking out mortgages have no idea if they'll have stable income for 15 or 30 years because such a thing is impossible. So long as your ability to pay your mortgage is tied to your ability to work you have no guarantees at all.
So how do you propose anyone ever buys a house, then? Waste money on rent whilst saving for 30 years so they can finally buy a house in cash at age 50? A modestly sized mortgage seems better than that.
You’re either gonna be wasting money on rent or interest and interest rates are so bad you might be better off with rent.
I found a 450k home near me on Zillow. If I put 20% down today with a 30 year mortgage, include property taxes, home owner’s insurance and the $100/mo hoa fee I will spend $550k in interest, $210k in property taxes, $30k in hoa fees and $60k in homeowners insurance or $850k of money that isn’t equity over the lifetime of the loan.
My rent is $1400/mo in the same area. Let’s make it $2k to account for some inflation. I will spend $720k over 30 years and all my “equity” actually pays because it’s in the market and not my roof.
But wait that’s not at all realistic. I want to own a house! If me and my partner can save 5k/mo (which is actually low since that mortgage was gonna cost us 3.7k a month and be at most 30% of our cash flow) we can buy cash in about 8 years.
So we spend $192k in rent to get $450k of equity or we spend $550k to do the same.
And this isn’t theoretical either. I’m two years and 130k into this process. I would be further but I had to eat a high six figure medical bill which thankfully didn’t financially ruin me and cost nothing setting my clock back. And if that isn’t the biggest endorsement of this strategy I don’t know what is.
As you point out mortgages can be bad for some people, but equally they are an enormous benefit for others.
If your life is "unstable" in the sense that you change address frequently for work reasons, or your income is insecure, then making long term commitments make no sense.
On the other hand lots of people live stable, productive lives, and are lucky enough to have good job security, and good financial discipline. Let's call this group the "middle class" - they earn a reasonable salary, with good job security, but don't have access to capital, but equally are not as insecure as the masses living day to day.
Providing this group with access to capital has benefits to them, and society as a whole. It encourages long-term decision making and promotes community stability. Ultimately it allows people to "rise up" the economic ladder.
On an even longer scale than the mortgage, it provides security. Someone approaching retirement discovers they will forever now live rent-free, or alternatively have accumulated capital that can help fund retirement.
If you never get a mortgage you still have to live somewhere, but you'll be paying rent for 50 years, not 20.
Why? Is that so different? I'd consider owning ones own home via a mortgage to be more sensible than overspending on a student loan.
I would agree that higher education shouldn't be the price it is and should be funded. However, student loan forgiveness is kind of back door higher education funding, it's pretty odd.
I don’t like bailouts of any sort tbh. I think there should be a post secondary state paid option though. Not because I love paying taxes, but because I think society at large will benefit.
> Spending money you don't have is being financially irresponsible, regardless of whether it's through credit cards or some other equivalent.
Hmmmm... spending money you don't have is how modern economies work, to a great extent. Companies take out loans to fund investment when cost of capital makes sense. People take out mortgages to buy homes.
> However, the financially irresponsible tend to blame the tool (eg credit cards) rather than becoming more responsible, and, in the case of this article, Gen Z seemed to have fallen prey to a similar tool but with a newer name.
Well, there is a certain class of loan products that preys on people who don't deeply understand how our financial system works. That understanding only comes from experience. How much can you truly blame someone when the "tool" is designed in such a way to take advantage of them. Lenders obscure the cost/risk, use advertising to make it seem like free money, etc. They target young people, because they are the ones most vulnerable to such tactics, and they can probably work for a long time, so you can make a ton of interest odd them, especially with the current bankruptcy laws.
>> Hmmmm... spending money you don't have is how modern economies work, to a great extent. Companies take out loans to fund investment when cost of capital makes sense. People take out mortgages to buy homes.
I think it's worth distinguishing between different kinds of debt here. The article is discussing consumer debt (caused by consumption). The debt you are referring to is capital-debt, ie debt incurred to purchase an asset (which could be resold) or used to build an income.
Consumer debt is typically bad, and asset debt is typically good
But your point is not wrong. Western economies are largely fueled by consumer debt. If consumers all spent according to their means, and saved as much as they could, the effects on the "economy" (which is literally the "movement of money") would be devastating.
This is going to sound stupid, but the real advice is that if you don't have the money to pay your ER bill just don't pay it. The hospital can and will wait, offer you a lower bill, send it to collections where you can negotiate lower than that.
I have no illusions that this debt will be paid (I have perpetually uninsured friends - one even says he just gives a fake name at the ER), but the debt is incurred anyway.
Then banks are deeply unethical if my college campus is any gauge with tshirt giveaways for signups with cool young people smooth talking the freshmen.
Not to mention the student loan industry cruelty.
The financially responsible move of course being to call that debt a “mortgage” and then spend the rest of your life stifling all attempts to build more housing.
I'd add a small caveat that it's irresponsible to buy liabilities with money you don't have. Buying appreciating assets with money you don't have is how our entire economy is based around, and is also what all of the rich people do.
I completely agree. With the proviso that the economy also revolves around the existance of consumer debt, and the willingness of huge numbers of people to squander it.
Why are credit cards regulated pretty strictly for this, but these loans aren't? That doesn't sound like personal responsibility to me... that sounds like regulation doing its job...
Part of the home ec curriculum (at least when I took it a long time ago) is personal finances; one thing that we learned in high school (before being able to get a credit card) was that carrying a balance on a credit card is really expensive in the long run.
Exactly. I don't think it warrants it's own class, but it could be integrated into a known framework like ec where the kids are instilled some financial literacy --any literacy in debt.
I don't disagree --but I don't want to overreach. It's bad enough kids are graduating not knowing the perils of compound interest. Yes, it would definitely be better if we started earlier, but let's go for the easier goal first.
I wish. It’s not just Gen Z though - look at average amount saved by household, or average amount of incoming going to savings, or average household credit card debt. Average credit card balance recently had the highest leap in 20 years.
It’s all really, really ugly.
It’s interesting though… if historical parallels return. When a man owes little money, the bank is in power for the relationship. When a man owes a mountain of money, he’s in charge. Banks can’t magically force customers to pay what they don’t have - and politicians won’t accept having tons of people on the street with their assets seized. I would see the higher credit card utilization statistics as something to panic over if I was a bank. It crosses into potential en-masse default territory.
I highly doubt many high school students would care or even pay attention to such a subject.
I am not saying teaching the subject in school is bad idea nor should it not be required schooling. I just think this solution is too utopic.
Keeping people financially illiterate makes a minute subpopulation of the finically literate very wealthy. In other words, I think the system, albeit vile, is working as intended (sadly).
They taught it to us (very briefly) in our Canadian high school, it was part of a mandatory course. I don't remember what it was called but the other thing I remember learning in that class was sex ed stuff.
I won't say a lot about the credit card industry...
But the one thing they have going for them is that you can't get a credit card without someone with good credit bringing you along.
There need to be more ways to build credit... but that's what's doing this currently in our society and it seems to work pretty well...
As I pass through my incarnations in every age and race,
I make my proper prostrations to the Gods of the Market Place.
Peering through reverent fingers I watch them flourish and fall,
And the Gods of the Copybook Headings, I notice, outlast them all.
We were living in trees when they met us. They showed us each in turn
That Water would certainly wet us, as Fire would certainly burn:
But we found them lacking in Uplift, Vision and Breadth of Mind,
So we left them to teach the Gorillas while we followed the March of Mankind.
We moved as the Spirit listed. They never altered their pace,
Being neither cloud nor wind-borne like the Gods of the Market Place,
But they always caught up with our progress, and presently word would come
That a tribe had been wiped off its icefield, or the lights had gone out in Rome.
With the Hopes that our World is built on they were utterly out of touch,
They denied that the Moon was Stilton; they denied she was even Dutch;
They denied that Wishes were Horses; they denied that a Pig had Wings;
So we worshipped the Gods of the Market Who promised these beautiful things.
When the Cambrian measures were forming, They promised perpetual peace.
They swore, if we gave them our weapons, that the wars of the tribes would cease.
But when we disarmed They sold us and delivered us bound to our foe,
And the Gods of the Copybook Headings said: "Stick to the Devil you know."
On the first Feminian Sandstones we were promised the Fuller Life
(Which started by loving our neighbour and ended by loving his wife)
Till our women had no more children and the men lost reason and faith,
And the Gods of the Copybook Headings said: "The Wages of Sin is Death."
In the Carboniferous Epoch we were promised abundance for all,
By robbing selected Peter to pay for collective Paul;
But, though we had plenty of money, there was nothing our money could buy,
And the Gods of the Copybook Headings said: "If you don't work you die."
Then the Gods of the Market tumbled, and their smooth-tongued wizards withdrew
And the hearts of the meanest were humbled and began to believe it was true
That All is not Gold that Glitters, and Two and Two make Four
And the Gods of the Copybook Headings limped up to explain it once more.
As it will be in the future, it was at the birth of Man
There are only four things certain since Social Progress began.
That the Dog returns to his Vomit and the Sow returns to her Mire,
And the burnt Fool's bandaged finger goes wabbling back to the Fire;
And that after this is accomplished, and the brave new world begins
When all men are paid for existing and no man must pay for his sins,
As surely as Water will wet us, as surely as Fire will burn,
The Gods of the Copybook Headings with terror and slaughter return!
It really does. I believe it's really bad for society as a whole.
I know not everyone agrees, but as a Muslim, it's really tough for me thinking of starting a business without loans from a bank. I'll eventually have to find an investor, or better save up enough to get started slowly.
Usery is forbidden in the 3 Abrahamic religions, which are Islamic, Christianity and Judaism.
My historic understanding (I am happy to be corrected) was that Jewish people practiced usery with non-jewish people but was forbidden within them, and at the same time it was not practiced at all by christians, and that was an opportunity for Jewish merchants during the crusades to establish what we know today as banking. Christians couldn't travels from Europe to Jerusalem safely without being robbed, so they'd get a note from a Jewish person in Europe and cache it on the other side, and vice versa.
Today, most Christians from what I see do not mind dealing with usery. Most Muslims still stay away from it as it's considered riba.
Why should they worry? Some future President or Congress will just make people who were responsible pay their debt for them. That's what we've taught them, after all.
Right - we did it with student loans (even if it is in legal limbo). It’ll start with $10K for school loans, then $10K for your credit card debt, and then…
And debt was forgiven done before with mortgage payments in 2008 (even if people lied on their mortgage applications, or took out HELOCs on the mortgage!) and on taxes owed on stock option speculation during the dot-com crash of 2000.
And you don’t even have to be a person! Bankrupt car companies? Send them checks! Incompetent banks? Send them checks! Incompetent schools? Send them grants! Incompetent government agencies? More cash (1)!
This can’t last… it’s a pyramid scheme that assumed the authority to shut down competing pyramid schemes.
(1) My home state of Minnesota spent over $100 million and over a decade of time to build a driver’s license system. Total sunk-cost. The rollout was so bad they scrapped it for a third party platform. Look up MNLARS for the gory details of absolute technical failure.
I like how strong a causal link you have that people have taken anything away from the gov't paying off some of their debt. I think large banks are much more likely to take that message away than individual borrowers...
97 comments
[ 5.6 ms ] story [ 166 ms ] threadThe whole idea that inflation eats into future debt assumes that your pay inflates alongside your expenses.
Inflation doesn't magically make debt cheaper, your rising salary does.
I have a mortage in Poland. Base rates went from 1.5% to 6.75%. My mortage’s monthly payment went from 1792PLN to 3200 PLN (~715 USD), where 3000 PLN is interest. This is not big enough to bankrupt me, but 1000 PLN is a lot of money here and a lot of people feel the pressure so our govt enacted law that lets you move four rates in a year to the end of mortage for two years, effectively extending the mortage by 8 months, but at no base cost of mortage changing.
Are fixed-rate mortgages not the norm in Poland?
This is from 2010 but has some good charts. https://business.sdsu.edu/_resources/files/real-estate/resea...
Anecdotally it meshes with some things I've heard elsewhere but don't hold me to it:
- Canadian mortgages are typically something like 5 years.
- UK is similar, it's either variable, or fixed for something super short, like 2-3 years.
- Australia same kind of boat, most are variable, I've heard the interest rates during covid temporarily reversed the trend, but same deal, they're only fixed for a few years.
The cynic in me would have assumed the US led the world in predatory style lending. This country loves handing people more than enough rope to hang themselves with, while depriving them of any relevant education beforehand.
Banks also made those mortages noticably pricer, so few people picked them (me included).
It is truly bad for a lot of people right now.
Wages are decreasing. Companies are using inflation and recession fears to not just stagnate wages, but actually lower them. Public and private sectors are doing massive layoffs.
No. This is a bad idea.
However, the financially irresponsible tend to blame the tool (eg credit cards) rather than becoming more responsible, and, in the case of this article, Gen Z seemed to have fallen prey to a similar tool but with a newer name.
The system is designed to obligate people to use credit, and I can see how tempting and easy it is for someone that lives paycheck to paycheck to use their credit card and carry balance.
Edit: I wanted to add. News websites have a habit of blaming gen z for all the different issues but forget to blame the system. Gen z is poorer than previous generations, and that should be highlighted everytime they're blamed
Fixing the system from the top probably works better for the future, but the current generation cannot be helped like that.
They used to blame millennials. It's amazing how little introspection media outlets have.
The thing that makes me angry is that I am not interested in their money, credit is still needed even when installing internet at my home (looking at you AT&T), where the bill could be prepaid instead, but they could still reject you and charge a high deposit. It's beyond ridiculous.
> I think only the US has this system?
I think so. And I hope no one gets "inspired" thinking the US is perfect and copies the same system in their country.
People consent to giving people their money all the time, and it is still illegal and immoral if the person offering deceived them. OR maybe you're a phisher and you think there's nothing wrong with phishing...
Ftx claimed a token they made up had value and it didn't. Everyone knew the token was made up
Obviously, one should not blame a murder/rape victim
Have you read the terms and conditions of buy-now-pay-later companies? I think the clearest takeaway from this article is that people aren't well informed.
There are similar parallels with ancient Sparta. Back then, boys were soldiers by mandate, and were taught to steal from local farms. They were whipped for getting caught - not for theft. Theft was encouraged, getting caught was severely punished.
Just interesting things to consider that come to my mind. Especially because I think banks may turn out to be Pinnochio in the story and we the thieves in the long run. ;)
Note that in cases where people go into debt for much more unavoidable reasons ("her husband got cancer and racked up a million dollars in medical bills before he died", "she was born into poverty and had to start work as a waitress at a young age to keep a roof over her sibling's heads"), people are much less likely to victim-blame, because those cases are much more legitimately victims.
Who is the moral arbiter of what kind of debt is/isn't valid. Everyone on here is pretending like people are perfectly informed about how these companies collect on their debts, but the nature of this article suggests there's more behind the scenes from these companies.
If I open up "xracy's murder tools" am I responsible for people who buy things from me to murder people? Surely not, surely it's only on the people who didn't read the terms and conditions in my store that explicitly state you can't use my tool's to murder people.
These companies are offering people one-off credit cards without actually stating that. That's shady business at best, and actively misleading at worst. Surely they're to blame for misleading promises. I would bet dollars to donuts also that in the next few years it'll come out they have other shady practices too...
Things like gambling, pay day loans, credit cards, buy now pay later are all forms of predatory behaviour and are in that way similar to rape/murder but considerably less grievous. The threshold for victim blaming is alot less in these situations but you certainly still could.
I don't think you should admonish someone for victim blaming here or make out they're equivalent to rape or murder, they're clearly not.
Is the person who built his house upon the sand to blame or is he an innocent victim of the people who sold him the land, the bricks, the plans and the labour?
Mostly because it's at least drawing people to consider there is another side to this.
They're not victims. They knew the risks and decided to venture.
Meh - I've spent money I didn't have when I was younger - life is short, what was a lot of money back then is irrelevant to me now and that's expected (you earn more the further you go in your career). I can't go back to twenties now no matter how much I saved back then.
You basically just described loans. So the mortgage industry.
I'm not looking forward to bailing people or companies out for being irresponsible again (referring to 2008 housing, I'm fine with student loan forgiveness).
I found a 450k home near me on Zillow. If I put 20% down today with a 30 year mortgage, include property taxes, home owner’s insurance and the $100/mo hoa fee I will spend $550k in interest, $210k in property taxes, $30k in hoa fees and $60k in homeowners insurance or $850k of money that isn’t equity over the lifetime of the loan.
My rent is $1400/mo in the same area. Let’s make it $2k to account for some inflation. I will spend $720k over 30 years and all my “equity” actually pays because it’s in the market and not my roof.
But wait that’s not at all realistic. I want to own a house! If me and my partner can save 5k/mo (which is actually low since that mortgage was gonna cost us 3.7k a month and be at most 30% of our cash flow) we can buy cash in about 8 years.
So we spend $192k in rent to get $450k of equity or we spend $550k to do the same.
And this isn’t theoretical either. I’m two years and 130k into this process. I would be further but I had to eat a high six figure medical bill which thankfully didn’t financially ruin me and cost nothing setting my clock back. And if that isn’t the biggest endorsement of this strategy I don’t know what is.
If your life is "unstable" in the sense that you change address frequently for work reasons, or your income is insecure, then making long term commitments make no sense.
On the other hand lots of people live stable, productive lives, and are lucky enough to have good job security, and good financial discipline. Let's call this group the "middle class" - they earn a reasonable salary, with good job security, but don't have access to capital, but equally are not as insecure as the masses living day to day.
Providing this group with access to capital has benefits to them, and society as a whole. It encourages long-term decision making and promotes community stability. Ultimately it allows people to "rise up" the economic ladder.
On an even longer scale than the mortgage, it provides security. Someone approaching retirement discovers they will forever now live rent-free, or alternatively have accumulated capital that can help fund retirement.
If you never get a mortgage you still have to live somewhere, but you'll be paying rent for 50 years, not 20.
Why? Is that so different? I'd consider owning ones own home via a mortgage to be more sensible than overspending on a student loan.
I would agree that higher education shouldn't be the price it is and should be funded. However, student loan forgiveness is kind of back door higher education funding, it's pretty odd.
Hmmmm... spending money you don't have is how modern economies work, to a great extent. Companies take out loans to fund investment when cost of capital makes sense. People take out mortgages to buy homes.
> However, the financially irresponsible tend to blame the tool (eg credit cards) rather than becoming more responsible, and, in the case of this article, Gen Z seemed to have fallen prey to a similar tool but with a newer name.
Well, there is a certain class of loan products that preys on people who don't deeply understand how our financial system works. That understanding only comes from experience. How much can you truly blame someone when the "tool" is designed in such a way to take advantage of them. Lenders obscure the cost/risk, use advertising to make it seem like free money, etc. They target young people, because they are the ones most vulnerable to such tactics, and they can probably work for a long time, so you can make a ton of interest odd them, especially with the current bankruptcy laws.
I think it's worth distinguishing between different kinds of debt here. The article is discussing consumer debt (caused by consumption). The debt you are referring to is capital-debt, ie debt incurred to purchase an asset (which could be resold) or used to build an income.
Consumer debt is typically bad, and asset debt is typically good
But your point is not wrong. Western economies are largely fueled by consumer debt. If consumers all spent according to their means, and saved as much as they could, the effects on the "economy" (which is literally the "movement of money") would be devastating.
Don't take on debt to pay debt.
Many around ~20 don't have a sense for financial responsibility yet, and will rack up debt without being aware of the consequences.
Banks & Co. couldn't care less though, a young person in debt will have all its life to pay up, so why not just shower them in money.
Never used a credit card before?
Why are credit cards regulated pretty strictly for this, but these loans aren't? That doesn't sound like personal responsibility to me... that sounds like regulation doing its job...
It’s all really, really ugly.
It’s interesting though… if historical parallels return. When a man owes little money, the bank is in power for the relationship. When a man owes a mountain of money, he’s in charge. Banks can’t magically force customers to pay what they don’t have - and politicians won’t accept having tons of people on the street with their assets seized. I would see the higher credit card utilization statistics as something to panic over if I was a bank. It crosses into potential en-masse default territory.
I am not saying teaching the subject in school is bad idea nor should it not be required schooling. I just think this solution is too utopic.
Keeping people financially illiterate makes a minute subpopulation of the finically literate very wealthy. In other words, I think the system, albeit vile, is working as intended (sadly).
There need to be more ways to build credit... but that's what's doing this currently in our society and it seems to work pretty well...
as surely as fire will burn
the gods of the copybook headings
with terror and slaughter return
usury destroys societies
I know not everyone agrees, but as a Muslim, it's really tough for me thinking of starting a business without loans from a bank. I'll eventually have to find an investor, or better save up enough to get started slowly.
I have read/heard that early Christianity had something against charging interest or similar. Is it the same with Islam?
Was that related to stories of money lenders being mostly Jewish? (Or were they? Or was that some rumor to stoke resentment?).
Apologies if I’m asking too ignorant a question. I don’t come from a Judeo-Christian background.
My historic understanding (I am happy to be corrected) was that Jewish people practiced usery with non-jewish people but was forbidden within them, and at the same time it was not practiced at all by christians, and that was an opportunity for Jewish merchants during the crusades to establish what we know today as banking. Christians couldn't travels from Europe to Jerusalem safely without being robbed, so they'd get a note from a Jewish person in Europe and cache it on the other side, and vice versa.
Today, most Christians from what I see do not mind dealing with usery. Most Muslims still stay away from it as it's considered riba.
Interest is not usury.
They are different things, at least in out modern language. One has a moral value, the orher has not.
"Sharia prohibits riba, or usury, defined as interest paid on all loans of money"
This can’t last… it’s a pyramid scheme that assumed the authority to shut down competing pyramid schemes.
(1) My home state of Minnesota spent over $100 million and over a decade of time to build a driver’s license system. Total sunk-cost. The rollout was so bad they scrapped it for a third party platform. Look up MNLARS for the gory details of absolute technical failure.