economy and Christian economics

Discussion in 'Money Talk$' started by billwald, Jul 2, 2010.

  1. billwald

    billwald
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    For 40 years I have heard economic gurus, Christian and most others, advise people with money problems to tear up credit cards, pay cash for everything, save money, and especially don't buy toys on credit. Apparently this latest depression has convinced people to take this advise.

    Was the great increase in the middle class over the last 40 years caused by the people who were acting foolishly? Can we have a large middle class if a majority start to follow good Christian economic advise?
     
  2. targus

    targus
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    Sure. Something bought for cash a month or two from now stimulates the economy as much as the same thing bought for credit now.

    Additionally, not paying interest provides for more funds available to purchase tangible items - stimulating the economy even more.
     
  3. billwald

    billwald
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    OK, good points.
     
  4. billwald

    billwald
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    But then the recovery should take at least until people have saved a couple months pay in the bank? 5 to 10 years?

    (I think slowly, slower than the send button)
     
  5. targus

    targus
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    Probably, but it would be worth it if the economy were strong and stable based on fundamentals - rather than illusion that is based on artifical government interventions.
     
  6. Ruiz

    Ruiz
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    Bill,

    Your statement above confuses me a little. I think you are talking about financial experts rather than economics experts, but I could be wrong.

    Yes, I do believe you can not have debt and have seen prosperity. From an economics perspective, I believe the increase in debt and the ease of debt has caused greater hardship, not less. For instance, a house that used to be able to be purchased with a 10-15 year loan, now is a 30-45 year. The ease of debt has caused prices to rise an exorbitant amount making obtaining a home easier to buy, but harder to pay off. Thus the continual cycle of debt does suffocate. Our system rewards debt not savings, thus a 10 to 15 year loan makes saving for a home more economically feasible. A 30-45 year loan makes that savings less appealing.

    Education is the same thing. The higher education has resulted in higher cost in lower level programs and had deflated the value of a College Education (a College Degree is not as important as it once was).

    From an economics perspective, there should be savings in one sector of the economy to loan in another. I have heard it said this is not necessary but then I simply ask, "If you are not loaning saved money, then where are you getting the money?" Most other methods of loaning money devalue the currency and/or creates bubbles that have negative economic consequences. With cost of living, it is feasible that you actually pay for a house in 30 years what the cash value of the house was when you purchased the home. That, is bad for the banks and makes bank loans even riskier. For instance, if you get a home loan for 3.99% (happened with my wife and I) and inflation is 3.5%-4+% over 30 years, the bank's margins is insignificant. Especially considering they borrowed the money at a set interest rate. This only hampers the economy, driving up housing prices but just a slight increase in foreclosures would cause a banking catastrophe.

    While debt is not always wrong, I think we would have been more prosperous without debt. In my opinion, Reagan's increase in the interest rates in the early 80's led to the boom of the late 80's and created the fuel that helped the economy in the 90's. The high interest rates forced people to shelter their money, giving room for great growth later. The "cheap money" in the late 90's and during the Bush Administration helped lead to the collapse we have seen in the past couple of years.

    From an economic perspective, I am not sure my ideas are all "Christian." There are some concepts that are Christians, but economics is not always addressed specifically in the Bible.

    While I am no expert economist, through my MBA work, I have thought much about it.
     
  7. billwald

    billwald
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    OK, financial experts.

    >Our system rewards debt not savings, thus a 10 to 15 year loan makes saving for a home more economically feasible. A 30-45 year loan makes that savings less appealing.

    ??? With money inflation, every year the mortgage is payed off with 2% or whatever cheaper money. I just saw an analysis that a person was better off financially by buying instead of renting. I don't but it. (in this analysis) The buyer values his personal time used for mowing the lawn and other chores at zero. This premise might be true if the mortgage was on an equal size and quality condo unit but that is seldom the case.

    >Education is the same thing. The higher education has resulted in higher cost in lower level programs and had deflated the value of a College Education (a College Degree is not as important as it once was).

    Because of the dumbing down of the public and flooding the market with high school equivalent college "degrees." Another generation and a "Masters of Recycling" will be required to drive a garbage truck.

    The worst part of this is that apparently except for public employees, our new college grads think they are to smart to need a labor union. Instead of learning a trade as an apprentice and getting paid, they prefer to pay a junior college for the same training. Half the college grads will NEVER break even.

    >For instance, if you get a home loan for 3.99% (happened with my wife and I) and inflation is 3.5%-4+% over 30 years, the bank's margins is insignificant. Especially considering they borrowed the money at a set interest rate.

    Recently the banks have been borrowing from the fed/govt for close to zero, maybe even a negative cost, all things considered.

    Personally, we like the security of having a house free and clear. Our largest fixed cost is The Wife's medical plan with Group Health followed by out property taxes, around $200/month.
     
  8. Ruiz

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    In general, at these interest rates, a person is better off buying than renting (there are exceptions, of course. Yet, the pure numbers are true). Rent increases by a standard cost of inflation. A mortgage stays the same. Thus, a 30 year loan taken out in 1990 where the mortgage was $500.00 then, would actually have been about $850.00 real dollars. Thus, if they are still paying that loan at the $500 rate, they are essentially saving $350.00 a month, that is a savings of $4,200.00 this year. This total only increases per year as inflation increases. Yes, renting you do not always mow the lawn; however, those costs are built into the rent and the rent sticks close to inflation.

    Then, add to the fact that you will eventually pay off the loan (as you have) then your savings is greater.

    So, the general math says buying is better than renting. However, there are exceptions.
     
  9. billwald

    billwald
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    Agree, thanks for the response.
     

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