[garysears]

Ah yes, the old “life is better when you are a homedebtor” argument.

Believe it or not I actually recently wondered if I might “miss” this correction for lack of down payment cash. How stupid does that sound?

Now that I think about it, the complete lack of savings and down payment required for real loans virtually guarantees a prolonged decline. People who want to own are going to have to get frugal again and save. No way around it. I’m pretty sure I can outfrugal the masses so I don’t have anything to worry about.

I’m guessing there aren’t enough responsible buyers on the sidelines to make a big difference to the upside for many years to come, especially staring down the barrel of double digit interest rates. People are going to get real demotivated about real estate.

Rent now before you’re wiped out forever!

[garysears]

Ah yes, the old “life is better when you are a homedebtor” argument.

Believe it or not I actually recently wondered if I might “miss” this correction for lack of down payment cash. How stupid does that sound?

Now that I think about it, the complete lack of savings and down payment required for real loans virtually guarantees a prolonged decline. People who want to own are going to have to get frugal again and save. No way around it. I’m pretty sure I can outfrugal the masses so I don’t have anything to worry about.

I’m guessing there aren’t enough responsible buyers on the sidelines to make a big difference to the upside for many years to come, especially staring down the barrel of double digit interest rates. People are going to get real demotivated about real estate.

Rent now before you’re wiped out forever!

[garysears]

Ok, maybe not intentional in the sense that there is a conscious war against savers. But the effect seems the same.

“Inflation is a collective consequence of everybody desiring to consume more than we produce. When a society as a whole likes to live beyond its means, you get inflation.”

Your example of the credit card cash advance is interesting. Isn’t consuming more than we produce only possible by ever increasing debt? If the credit card cash advance has a limit, so should inflation. Isn’t inflation simply the result of more newly created dollars running around looking for homes? This doesn’t seem as easy to do without a fiat system. Doesn’t all new money come into existence as debt? My point is an ever increasing amount of dollars has to be in circulation to continue to fund the imbalance. If individual spending recklessness has consequence then why shouldn’t national spending recklessness? Just like the individual, doesn’t our nation eventually either have to walk away on its debt obligations or begin to make some very drastic and painful changes in spending?

“For the simple reasons that population is growing and the productivity is also growing. Do the math, if GDP does not grow, the hours worked per person must drop.”

I’m not overly informed I guess, but this doesn’t make sense to me. Isn’t GDP simply a measure of the total dollars spent and not a measure of the productivity purchased with those dollars? What I am getting at is if you are paying for the same productivity with inflated dollars how can GDP accurately reflect productivity? Also, how can you assume productivity increases just because population does? People have to be gainfully employed actually producing something for productivity to increase. It seems real productivity growth could actually be a small part of GDP growth.

I don’t think a lot of hours worked have anything to do with productivity. I must admit that I don’t really produce anything for society yet I am highly paid. I don’t think a lot of the “workers” in our society do either. Spending all day trying to reshuffle inflated dollars between accounts may employ a lot of people but doesn’t seem to have real intrinsic value. I can see how it would be optimal for there to be neither inflation nor deflation and for the relative purchasing power of a dollar to remain constant. Erring continuously on the side of inflation must certainly have eventual consequence.

Isn’t the main point how much you get for your dollar and not how many dollars are out there? It seems strange for anyone to argue that increasing the supply of dollars consistently faster than real productivity is a good thing. All those new dollars are created at the expense of future productivity (interest). Am I wrong to wonder that interest is charged on money that never existed before? I wish I could create my own money out of thin air and tax future productivity for the service.

How long can we continue to put off eventual repayment of our collective debts? When does the tax on future productivity for all this interest show up? How much longer will creditors issue us new cards to help us shuffle around and increase our debt? It is entertaining to make fun of foolish home debtors, but isn’t that an allegory for our nation as a whole?

[garysears]

Ok, maybe not intentional in the sense that there is a conscious war against savers. But the effect seems the same.

“Inflation is a collective consequence of everybody desiring to consume more than we produce. When a society as a whole likes to live beyond its means, you get inflation.”

Your example of the credit card cash advance is interesting. Isn’t consuming more than we produce only possible by ever increasing debt? If the credit card cash advance has a limit, so should inflation. Isn’t inflation simply the result of more newly created dollars running around looking for homes? This doesn’t seem as easy to do without a fiat system. Doesn’t all new money come into existence as debt? My point is an ever increasing amount of dollars has to be in circulation to continue to fund the imbalance. If individual spending recklessness has consequence then why shouldn’t national spending recklessness? Just like the individual, doesn’t our nation eventually either have to walk away on its debt obligations or begin to make some very drastic and painful changes in spending?

“For the simple reasons that population is growing and the productivity is also growing. Do the math, if GDP does not grow, the hours worked per person must drop.”

I’m not overly informed I guess, but this doesn’t make sense to me. Isn’t GDP simply a measure of the total dollars spent and not a measure of the productivity purchased with those dollars? What I am getting at is if you are paying for the same productivity with inflated dollars how can GDP accurately reflect productivity? Also, how can you assume productivity increases just because population does? People have to be gainfully employed actually producing something for productivity to increase. It seems real productivity growth could actually be a small part of GDP growth.

I don’t think a lot of hours worked have anything to do with productivity. I must admit that I don’t really produce anything for society yet I am highly paid. I don’t think a lot of the “workers” in our society do either. Spending all day trying to reshuffle inflated dollars between accounts may employ a lot of people but doesn’t seem to have real intrinsic value. I can see how it would be optimal for there to be neither inflation nor deflation and for the relative purchasing power of a dollar to remain constant. Erring continuously on the side of inflation must certainly have eventual consequence.

Isn’t the main point how much you get for your dollar and not how many dollars are out there? It seems strange for anyone to argue that increasing the supply of dollars consistently faster than real productivity is a good thing. All those new dollars are created at the expense of future productivity (interest). Am I wrong to wonder that interest is charged on money that never existed before? I wish I could create my own money out of thin air and tax future productivity for the service.

How long can we continue to put off eventual repayment of our collective debts? When does the tax on future productivity for all this interest show up? How much longer will creditors issue us new cards to help us shuffle around and increase our debt? It is entertaining to make fun of foolish home debtors, but isn’t that an allegory for our nation as a whole?

[garysears]

Ok, maybe not intentional in the sense that there is a conscious war against savers. But the effect seems the same.

“Inflation is a collective consequence of everybody desiring to consume more than we produce. When a society as a whole likes to live beyond its means, you get inflation.”

Your example of the credit card cash advance is interesting. Isn’t consuming more than we produce only possible by ever increasing debt? If the credit card cash advance has a limit, so should inflation. Isn’t inflation simply the result of more newly created dollars running around looking for homes? This doesn’t seem as easy to do without a fiat system. Doesn’t all new money come into existence as debt? My point is an ever increasing amount of dollars has to be in circulation to continue to fund the imbalance. If individual spending recklessness has consequence then why shouldn’t national spending recklessness? Just like the individual, doesn’t our nation eventually either have to walk away on its debt obligations or begin to make some very drastic and painful changes in spending?

“For the simple reasons that population is growing and the productivity is also growing. Do the math, if GDP does not grow, the hours worked per person must drop.”

I’m not overly informed I guess, but this doesn’t make sense to me. Isn’t GDP simply a measure of the total dollars spent and not a measure of the productivity purchased with those dollars? What I am getting at is if you are paying for the same productivity with inflated dollars how can GDP accurately reflect productivity? Also, how can you assume productivity increases just because population does? People have to be gainfully employed actually producing something for productivity to increase. It seems real productivity growth could actually be a small part of GDP growth.

I don’t think a lot of hours worked have anything to do with productivity. I must admit that I don’t really produce anything for society yet I am highly paid. I don’t think a lot of the “workers” in our society do either. Spending all day trying to reshuffle inflated dollars between accounts may employ a lot of people but doesn’t seem to have real intrinsic value. I can see how it would be optimal for there to be neither inflation nor deflation and for the relative purchasing power of a dollar to remain constant. Erring continuously on the side of inflation must certainly have eventual consequence.

Isn’t the main point how much you get for your dollar and not how many dollars are out there? It seems strange for anyone to argue that increasing the supply of dollars consistently faster than real productivity is a good thing. All those new dollars are created at the expense of future productivity (interest). Am I wrong to wonder that interest is charged on money that never existed before? I wish I could create my own money out of thin air and tax future productivity for the service.

How long can we continue to put off eventual repayment of our collective debts? When does the tax on future productivity for all this interest show up? How much longer will creditors issue us new cards to help us shuffle around and increase our debt? It is entertaining to make fun of foolish home debtors, but isn’t that an allegory for our nation as a whole?

[garysears]

Ok, maybe not intentional in the sense that there is a conscious war against savers. But the effect seems the same.

“Inflation is a collective consequence of everybody desiring to consume more than we produce. When a society as a whole likes to live beyond its means, you get inflation.”

Your example of the credit card cash advance is interesting. Isn’t consuming more than we produce only possible by ever increasing debt? If the credit card cash advance has a limit, so should inflation. Isn’t inflation simply the result of more newly created dollars running around looking for homes? This doesn’t seem as easy to do without a fiat system. Doesn’t all new money come into existence as debt? My point is an ever increasing amount of dollars has to be in circulation to continue to fund the imbalance. If individual spending recklessness has consequence then why shouldn’t national spending recklessness? Just like the individual, doesn’t our nation eventually either have to walk away on its debt obligations or begin to make some very drastic and painful changes in spending?

“For the simple reasons that population is growing and the productivity is also growing. Do the math, if GDP does not grow, the hours worked per person must drop.”

I’m not overly informed I guess, but this doesn’t make sense to me. Isn’t GDP simply a measure of the total dollars spent and not a measure of the productivity purchased with those dollars? What I am getting at is if you are paying for the same productivity with inflated dollars how can GDP accurately reflect productivity? Also, how can you assume productivity increases just because population does? People have to be gainfully employed actually producing something for productivity to increase. It seems real productivity growth could actually be a small part of GDP growth.

I don’t think a lot of hours worked have anything to do with productivity. I must admit that I don’t really produce anything for society yet I am highly paid. I don’t think a lot of the “workers” in our society do either. Spending all day trying to reshuffle inflated dollars between accounts may employ a lot of people but doesn’t seem to have real intrinsic value. I can see how it would be optimal for there to be neither inflation nor deflation and for the relative purchasing power of a dollar to remain constant. Erring continuously on the side of inflation must certainly have eventual consequence.

Isn’t the main point how much you get for your dollar and not how many dollars are out there? It seems strange for anyone to argue that increasing the supply of dollars consistently faster than real productivity is a good thing. All those new dollars are created at the expense of future productivity (interest). Am I wrong to wonder that interest is charged on money that never existed before? I wish I could create my own money out of thin air and tax future productivity for the service.

How long can we continue to put off eventual repayment of our collective debts? When does the tax on future productivity for all this interest show up? How much longer will creditors issue us new cards to help us shuffle around and increase our debt? It is entertaining to make fun of foolish home debtors, but isn’t that an allegory for our nation as a whole?

[garysears]

Ok, maybe not intentional in the sense that there is a conscious war against savers. But the effect seems the same.

“Inflation is a collective consequence of everybody desiring to consume more than we produce. When a society as a whole likes to live beyond its means, you get inflation.”

Your example of the credit card cash advance is interesting. Isn’t consuming more than we produce only possible by ever increasing debt? If the credit card cash advance has a limit, so should inflation. Isn’t inflation simply the result of more newly created dollars running around looking for homes? This doesn’t seem as easy to do without a fiat system. Doesn’t all new money come into existence as debt? My point is an ever increasing amount of dollars has to be in circulation to continue to fund the imbalance. If individual spending recklessness has consequence then why shouldn’t national spending recklessness? Just like the individual, doesn’t our nation eventually either have to walk away on its debt obligations or begin to make some very drastic and painful changes in spending?

“For the simple reasons that population is growing and the productivity is also growing. Do the math, if GDP does not grow, the hours worked per person must drop.”

I’m not overly informed I guess, but this doesn’t make sense to me. Isn’t GDP simply a measure of the total dollars spent and not a measure of the productivity purchased with those dollars? What I am getting at is if you are paying for the same productivity with inflated dollars how can GDP accurately reflect productivity? Also, how can you assume productivity increases just because population does? People have to be gainfully employed actually producing something for productivity to increase. It seems real productivity growth could actually be a small part of GDP growth.

I don’t think a lot of hours worked have anything to do with productivity. I must admit that I don’t really produce anything for society yet I am highly paid. I don’t think a lot of the “workers” in our society do either. Spending all day trying to reshuffle inflated dollars between accounts may employ a lot of people but doesn’t seem to have real intrinsic value. I can see how it would be optimal for there to be neither inflation nor deflation and for the relative purchasing power of a dollar to remain constant. Erring continuously on the side of inflation must certainly have eventual consequence.

Isn’t the main point how much you get for your dollar and not how many dollars are out there? It seems strange for anyone to argue that increasing the supply of dollars consistently faster than real productivity is a good thing. All those new dollars are created at the expense of future productivity (interest). Am I wrong to wonder that interest is charged on money that never existed before? I wish I could create my own money out of thin air and tax future productivity for the service.

How long can we continue to put off eventual repayment of our collective debts? When does the tax on future productivity for all this interest show up? How much longer will creditors issue us new cards to help us shuffle around and increase our debt? It is entertaining to make fun of foolish home debtors, but isn’t that an allegory for our nation as a whole?

[garysears]

Ok, maybe not intentional in the sense that there is a conscious war against savers. But the effect seems the same.

“Inflation is a collective consequence of everybody desiring to consume more than we produce. When a society as a whole likes to live beyond its means, you get inflation.”

Your example of the credit card cash advance is interesting. Isn’t consuming more than we produce only possible by ever increasing debt? If the credit card cash advance has a limit, so should inflation. Isn’t inflation simply the result of more newly created dollars running around looking for homes? This doesn’t seem as easy to do without a fiat system. Doesn’t all new money come into existence as debt? My point is an ever increasing amount of dollars has to be in circulation to continue to fund the imbalance. If individual spending recklessness has consequence then why shouldn’t national spending recklessness? Just like the individual, doesn’t our nation eventually either have to walk away on its debt obligations or begin to make some very drastic and painful changes in spending?

“For the simple reasons that population is growing and the productivity is also growing. Do the math, if GDP does not grow, the hours worked per person must drop.”

I’m not overly informed I guess, but this doesn’t make sense to me. Isn’t GDP simply a measure of the total dollars spent and not a measure of the productivity purchased with those dollars? What I am getting at is if you are paying for the same productivity with inflated dollars how can GDP accurately reflect productivity? Also, how can you assume productivity increases just because population does? People have to be gainfully employed actually producing something for productivity to increase. It seems real productivity growth could actually be a small part of GDP growth.

I don’t think a lot of hours worked have anything to do with productivity. I must admit that I don’t really produce anything for society yet I am highly paid. I don’t think a lot of the “workers” in our society do either. Spending all day trying to reshuffle inflated dollars between accounts may employ a lot of people but doesn’t seem to have real intrinsic value. I can see how it would be optimal for there to be neither inflation nor deflation and for the relative purchasing power of a dollar to remain constant. Erring continuously on the side of inflation must certainly have eventual consequence.

Isn’t the main point how much you get for your dollar and not how many dollars are out there? It seems strange for anyone to argue that increasing the supply of dollars consistently faster than real productivity is a good thing. All those new dollars are created at the expense of future productivity (interest). Am I wrong to wonder that interest is charged on money that never existed before? I wish I could create my own money out of thin air and tax future productivity for the service.

How long can we continue to put off eventual repayment of our collective debts? When does the tax on future productivity for all this interest show up? How much longer will creditors issue us new cards to help us shuffle around and increase our debt? It is entertaining to make fun of foolish home debtors, but isn’t that an allegory for our nation as a whole?

[garysears]

Thanks patientrenter for your reply. I particularly liked points 1 and 2 that you made. You make it sound like inflation is intentional coercion to force participation in the stock market mania by either investing or spending on companies (which then fuels the market). I still don’t know why saving cash is considered such an evil. I can’t get over the notion that money should be ultimately linked to intrinsic value and production. Is it only evil if consumers save the money but good when it ultimately piles up in some rich guy’s account where he can convert it to real assets?

So inflation is intentionally made in order to force participation in the stock market scheme. “Buy now or you’ll never be able to retire.” or “If you aren’t willing to participate then you will lose all your savings’ purchasing power.” Sure seems strange that the stock market can increase in value consistently much faster than real economic growth. My common man theory of finance thinks a major adjustment is inevitable.

I wonder how long we can keep putting off worrying about the national debt though. That is a little more than an 800 pound gorilla in our economy I suspect. It also seems like that eventual “crisis” will doom the consumer if nothing else will. That probably sounds quaint because doomsayers have been worried about this for a few decades now but the system still hasn’t imploded. Seems like there is a lot more reason to worry now than ever.

The only way for government to pay debt is through raising taxes or to inflate it away. I have heard estimates that taxes would have to at least double to start meeting our obligations. That would sure take the wind out of my consumer confidence. Either solution seems like dark times are ahead. Inflating debt away can’t ever be the ultimate solution. That would be like getting away with your toxic house mortgage because appreciation will bail you out. It doesn’t make sense to never have to worry about the size of your mortgage/HELOC debt because your house can rapidly increase forever in value. It also doesn’t make sense to never worry how many trillions we owe as a nation because inflation will always bail us out. There has to be a practical limit to inflation. Eventually everyone will see our money as the worthless paper it is.

What happens when the government decides to just “mail the keys in”?

[garysears]

Thanks patientrenter for your reply. I particularly liked points 1 and 2 that you made. You make it sound like inflation is intentional coercion to force participation in the stock market mania by either investing or spending on companies (which then fuels the market). I still don’t know why saving cash is considered such an evil. I can’t get over the notion that money should be ultimately linked to intrinsic value and production. Is it only evil if consumers save the money but good when it ultimately piles up in some rich guy’s account where he can convert it to real assets?

So inflation is intentionally made in order to force participation in the stock market scheme. “Buy now or you’ll never be able to retire.” or “If you aren’t willing to participate then you will lose all your savings’ purchasing power.” Sure seems strange that the stock market can increase in value consistently much faster than real economic growth. My common man theory of finance thinks a major adjustment is inevitable.

I wonder how long we can keep putting off worrying about the national debt though. That is a little more than an 800 pound gorilla in our economy I suspect. It also seems like that eventual “crisis” will doom the consumer if nothing else will. That probably sounds quaint because doomsayers have been worried about this for a few decades now but the system still hasn’t imploded. Seems like there is a lot more reason to worry now than ever.

The only way for government to pay debt is through raising taxes or to inflate it away. I have heard estimates that taxes would have to at least double to start meeting our obligations. That would sure take the wind out of my consumer confidence. Either solution seems like dark times are ahead. Inflating debt away can’t ever be the ultimate solution. That would be like getting away with your toxic house mortgage because appreciation will bail you out. It doesn’t make sense to never have to worry about the size of your mortgage/HELOC debt because your house can rapidly increase forever in value. It also doesn’t make sense to never worry how many trillions we owe as a nation because inflation will always bail us out. There has to be a practical limit to inflation. Eventually everyone will see our money as the worthless paper it is.

What happens when the government decides to just “mail the keys in”?

[garysears]

Thanks patientrenter for your reply. I particularly liked points 1 and 2 that you made. You make it sound like inflation is intentional coercion to force participation in the stock market mania by either investing or spending on companies (which then fuels the market). I still don’t know why saving cash is considered such an evil. I can’t get over the notion that money should be ultimately linked to intrinsic value and production. Is it only evil if consumers save the money but good when it ultimately piles up in some rich guy’s account where he can convert it to real assets?

So inflation is intentionally made in order to force participation in the stock market scheme. “Buy now or you’ll never be able to retire.” or “If you aren’t willing to participate then you will lose all your savings’ purchasing power.” Sure seems strange that the stock market can increase in value consistently much faster than real economic growth. My common man theory of finance thinks a major adjustment is inevitable.

I wonder how long we can keep putting off worrying about the national debt though. That is a little more than an 800 pound gorilla in our economy I suspect. It also seems like that eventual “crisis” will doom the consumer if nothing else will. That probably sounds quaint because doomsayers have been worried about this for a few decades now but the system still hasn’t imploded. Seems like there is a lot more reason to worry now than ever.

The only way for government to pay debt is through raising taxes or to inflate it away. I have heard estimates that taxes would have to at least double to start meeting our obligations. That would sure take the wind out of my consumer confidence. Either solution seems like dark times are ahead. Inflating debt away can’t ever be the ultimate solution. That would be like getting away with your toxic house mortgage because appreciation will bail you out. It doesn’t make sense to never have to worry about the size of your mortgage/HELOC debt because your house can rapidly increase forever in value. It also doesn’t make sense to never worry how many trillions we owe as a nation because inflation will always bail us out. There has to be a practical limit to inflation. Eventually everyone will see our money as the worthless paper it is.

What happens when the government decides to just “mail the keys in”?

[garysears]

This is an interesting thread. My financial education is also limited. The key question that has always bothered me seems similar:

What is inflation?

I understand the value of dollars declines over time and can read a graph, but why must this happen? Isn’t purchasing power important? Inflation seems generally referred to as if it is a fundamental natural force or law like entropy. “The total amount of dollars in any closed financial system must always increase.” Is this really inevitable and if so why is it considered good and simple “economic grease”?

This seems related to the original question of the necessity for continued economic expansion. It also seems fundamentally related to the current housing fiasco as well. Shouldn’t housing basically be a zero sum game, taken as a whole? How can housing really ever outpace wage increases or inflation? How can GDP increase ever really outpace wage increase/actual production? Likewise, how can housing ever be a real source of “wealth building”? What other perceived market values are going to evaporate with the housing/credit bubble?

As far as our economy goes, what happens if wages do not keep pace with inflation? If they have not in the past, do not currently, or will not in the future what does that directly imply?

The whole issue of nearly unrestrained addition of money supply to a relatively static economic capacity seems fundamental. Also seemingly fundamental is the fact that debt presumes on the future. Isn’t debt interest a sort of tax on future productivity? Where is the expectation for future payoff of our current national debt load (personal, corporate, and private)? Won’t the introduction of such a concept require a total shift in values as a nation? What happens if we don’t shift our values in time?

Nationally speaking, what is the current national tax “budget”? What percent of all taxes is currently being spent on debt interest? How fast is that growing? When will our national debt servicing obligations exceed our ability to pay? What will happen then? Isn’t the fundamental faith in the whole system really a fundamental expectation of actual future debt repayment? I think the current housing market shows what happens when that expectation is forgotten. Isn’t our national debt similar to a toxic mortgage? Maybe negative amortization perhaps?

Can anyone explain to me how housing became so fundamental to our economy? I understand the consumer part of GDP. But how can our economy be considered healthy and strong if it is so dependent on spending and not production? Doesn’t money ultimately represent intrinsic value and production? Shouldn’t we be more concerned about actual production measurement and intrinsic value, rather than the total number of dollars being created and spent, when judging economic health?…especially given the nearly unlimited ability to create new dollars. Doesn’t this fact make GDP a poor indicator?

How do a slow down in housing starts, a deceleration in house price appreciation, and a rise in foreclosures pose such a serious threat to an otherwise healthy economy and world financial markets? Why should it pose a systemic banking crisis? How are we going to afford even the interest on the future debt the government will create to try to buy out the current problem?

The more I ask these sorts of questions, the more convinced I become that the future is darker than most bears have imagined. Maybe we shouldn’t assume that ours can will be the first successful fiat monetary system in history. I guess it’s only successful until it fails…

Should I be buying guns and gold? Warming up my bartering skills? My common man theory of finance kept me from buying a house in San Diego in 2004. It is telling me now that our whole monetary system itself looks like a giant pyramid scheme. What am I missing?

[garysears]

This is an interesting thread. My financial education is also limited. The key question that has always bothered me seems similar:

What is inflation?

I understand the value of dollars declines over time and can read a graph, but why must this happen? Isn’t purchasing power important? Inflation seems generally referred to as if it is a fundamental natural force or law like entropy. “The total amount of dollars in any closed financial system must always increase.” Is this really inevitable and if so why is it considered good and simple “economic grease”?

This seems related to the original question of the necessity for continued economic expansion. It also seems fundamentally related to the current housing fiasco as well. Shouldn’t housing basically be a zero sum game, taken as a whole? How can housing really ever outpace wage increases or inflation? How can GDP increase ever really outpace wage increase/actual production? Likewise, how can housing ever be a real source of “wealth building”? What other perceived market values are going to evaporate with the housing/credit bubble?

As far as our economy goes, what happens if wages do not keep pace with inflation? If they have not in the past, do not currently, or will not in the future what does that directly imply?

The whole issue of nearly unrestrained addition of money supply to a relatively static economic capacity seems fundamental. Also seemingly fundamental is the fact that debt presumes on the future. Isn’t debt interest a sort of tax on future productivity? Where is the expectation for future payoff of our current national debt load (personal, corporate, and private)? Won’t the introduction of such a concept require a total shift in values as a nation? What happens if we don’t shift our values in time?

Nationally speaking, what is the current national tax “budget”? What percent of all taxes is currently being spent on debt interest? How fast is that growing? When will our national debt servicing obligations exceed our ability to pay? What will happen then? Isn’t the fundamental faith in the whole system really a fundamental expectation of actual future debt repayment? I think the current housing market shows what happens when that expectation is forgotten. Isn’t our national debt similar to a toxic mortgage? Maybe negative amortization perhaps?

Can anyone explain to me how housing became so fundamental to our economy? I understand the consumer part of GDP. But how can our economy be considered healthy and strong if it is so dependent on spending and not production? Doesn’t money ultimately represent intrinsic value and production? Shouldn’t we be more concerned about actual production measurement and intrinsic value, rather than the total number of dollars being created and spent, when judging economic health?…especially given the nearly unlimited ability to create new dollars. Doesn’t this fact make GDP a poor indicator?

How do a slow down in housing starts, a deceleration in house price appreciation, and a rise in foreclosures pose such a serious threat to an otherwise healthy economy and world financial markets? Why should it pose a systemic banking crisis? How are we going to afford even the interest on the future debt the government will create to try to buy out the current problem?

The more I ask these sorts of questions, the more convinced I become that the future is darker than most bears have imagined. Maybe we shouldn’t assume that ours can will be the first successful fiat monetary system in history. I guess it’s only successful until it fails…

Should I be buying guns and gold? Warming up my bartering skills? My common man theory of finance kept me from buying a house in San Diego in 2004. It is telling me now that our whole monetary system itself looks like a giant pyramid scheme. What am I missing?

[garysears]

This is an interesting thread. My financial education is also limited. The key question that has always bothered me seems similar:

What is inflation?

I understand the value of dollars declines over time and can read a graph, but why must this happen? Isn’t purchasing power important? Inflation seems generally referred to as if it is a fundamental natural force or law like entropy. “The total amount of dollars in any closed financial system must always increase.” Is this really inevitable and if so why is it considered good and simple “economic grease”?

This seems related to the original question of the necessity for continued economic expansion. It also seems fundamentally related to the current housing fiasco as well. Shouldn’t housing basically be a zero sum game, taken as a whole? How can housing really ever outpace wage increases or inflation? How can GDP increase ever really outpace wage increase/actual production? Likewise, how can housing ever be a real source of “wealth building”? What other perceived market values are going to evaporate with the housing/credit bubble?

As far as our economy goes, what happens if wages do not keep pace with inflation? If they have not in the past, do not currently, or will not in the future what does that directly imply?

The whole issue of nearly unrestrained addition of money supply to a relatively static economic capacity seems fundamental. Also seemingly fundamental is the fact that debt presumes on the future. Isn’t debt interest a sort of tax on future productivity? Where is the expectation for future payoff of our current national debt load (personal, corporate, and private)? Won’t the introduction of such a concept require a total shift in values as a nation? What happens if we don’t shift our values in time?

Nationally speaking, what is the current national tax “budget”? What percent of all taxes is currently being spent on debt interest? How fast is that growing? When will our national debt servicing obligations exceed our ability to pay? What will happen then? Isn’t the fundamental faith in the whole system really a fundamental expectation of actual future debt repayment? I think the current housing market shows what happens when that expectation is forgotten. Isn’t our national debt similar to a toxic mortgage? Maybe negative amortization perhaps?

Can anyone explain to me how housing became so fundamental to our economy? I understand the consumer part of GDP. But how can our economy be considered healthy and strong if it is so dependent on spending and not production? Doesn’t money ultimately represent intrinsic value and production? Shouldn’t we be more concerned about actual production measurement and intrinsic value, rather than the total number of dollars being created and spent, when judging economic health?…especially given the nearly unlimited ability to create new dollars. Doesn’t this fact make GDP a poor indicator?

How do a slow down in housing starts, a deceleration in house price appreciation, and a rise in foreclosures pose such a serious threat to an otherwise healthy economy and world financial markets? Why should it pose a systemic banking crisis? How are we going to afford even the interest on the future debt the government will create to try to buy out the current problem?

The more I ask these sorts of questions, the more convinced I become that the future is darker than most bears have imagined. Maybe we shouldn’t assume that ours can will be the first successful fiat monetary system in history. I guess it’s only successful until it fails…

Should I be buying guns and gold? Warming up my bartering skills? My common man theory of finance kept me from buying a house in San Diego in 2004. It is telling me now that our whole monetary system itself looks like a giant pyramid scheme. What am I missing?

[garysears]

Good news! Forbes.com is predicting a recovery (does that mean prices have to decline?) in Q2’08 for San Diego. We can then expect 5%+ appreciation!

http://realestate.msn.com/Buying/Article_Forbes.aspx?cp-documentid=5008065

I love the indepth reporting. Seems strange that there is absolutely no justification for the prediction other than the big “Forbes” name. I’m sure they built a “model”, but nice choice of data. Lets see…randomly call a “bottom” with no supporting data or estimate of total price decline, decline %, or nominal bottom price. Then create the expectation for the continuation of the madness. Don’t give a cost basis for the appreciation so you don’t have to bother with any downturn prediction. Don’t specifically say WHEN that increase will begin or how long it will last. Unreal. So basically this guy is predicting an overcorrection of unknown extent and guessing it will come back because it has in the past. I guess all an expert for Forbes has to be able to do is explain what would make a chart look like a “V”, “U”, or “L” and then randomly pick a good positive number. I’m so underpaid. I’m one of the most undereducated posters (financially speaking) on the board and I think I could fake a similar article. I would include lucky lotto numbers for each city in another column.

[Author]

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