Fiscal responsibility: suppose the govt "doesn't spend money it doesn't have."

[Dr. Jones]

I get that. BUT, the risk is higher. They are taking the risk that a loan at 2% will yield returns at 8%, giving themselves a 6% profit. It is the same reason why we borrow for houses and banks lend. We believe that even though I will pay double for my house over 30 years, after 30 years my house will be worth more than double what I paid for it.

I'll give you an example. RC Willey was owned by two brothers. When they had TWO stores, they decided that they would get debt free. They did that, and wondered what to do with their cash. They decided that they would loan their customers the cash they had, with 18% interest.

A few years ago, Warren Buffett bough RC Willey 175 million. Was it because he had interest in the furniture side of things? NOPE. It was because RC Willey was the fourth largest bank in Utah. They got out of debt in 1978. Their net worth was 2 furniture store business. What would that be? Let's aim high and say a million a store. So, in twenty years, their net worth went from 2 million (which is probably ridiculously high) to 175 million. Your billionaire friends aren't getting returns off their debt like that.

I get debt. It is useful, and risky. It is nowhere as good as cash.

Your example also had risk. The Willey's purchased the furniture with cash and then loaned it out .. same risk as borrowing money to purchase the furniture and then selling it for cash, sans the interest rate.

I did the same thing. A company I had sold in '04 was purchased less for the business, less for the physical assets, and much more because I had millions in performing consumer loans averaging 16% interest.

 

[Dr. Jones]

I sympathize with green. If you guys really want to crack down on wasteful spending , a pay as you go system might do the trick. It is not clear to me that the benefits of debt outweigh the costs. Of course, the world would be very different. PKM and Franklin might have to find different lines of work. The transformation might involve lots of discontent -- something along the lines of the Lord of the Rings Trilogy.

At the risk of sounding like a total dick .. I don't care what rules are changed/enacted .. I'll be successful, so have at it.

 

[franklin]

No debt. Yes, it takes a little longer to get the ball rolling when you try to go with no debt. But your risk is essentially zero, and once that ball gets rolling, it will roll faster than you could have ever imagined.

It comes down to are you willing to do the work, make the sacrifices, and have the patience to go debt free. Most people aren't, and smart people (who are debt free) get rich off those people.

That's not an option. Do you think we all have magical money trees growing in our back yard or are you being a simpleton on purpose? Your pretending money magically appears out of thin air is everything that scares me about the current republican party.

 

[NAOS]

@PKM,

how much do you "donate" to the Kentucky BBall team? I kid, I kid, I kid, I kid.

A'ight gents, I'm off again for a while. If we sign Howard and don't trade Jefferson you'll hear me cry from the jungle.

 

[northeast]

I think that's naive. I have 3 billionaire (literally) friends and each of them carry at least $200MM in debt because they can borrow money drastically cheaper than they can get in returns.

In this case, debt is the means for the gov't to subsidize the rich.

 

[NAOS]

That's not an option. Do you think we all have magical money trees growing in our back yard or are you being a simpleton on purpose? Your pretending money magically appears out of thin air is everything that scares me about the current republican party.

it scares me how the average voting citizen doesn't understand that "money" doesn't equal "cash."
The republican party is making a lot of confusion and noise about debt. It's particularly noisy because nobody knows how to make sense of their "claims."

 

[franklin]

@PKM,

how much do you "donate" to the Kentucky BBall team? I kid, I kid, I kid, I kid.

A'ight gents, I'm off again for a while. If we sign Howard and don't trade Jefferson you'll hear me cry from the jungle.

You're pissed that a rich white guy gives tons of money to help poor black kids play college ball? (J/K)

 

[Dr. Jones]

That's not an option. Do you think we all have magical money trees growing in our back yard or are you being a simpleton on purpose? Your pretending money magically appears out of thin air is everything that scares me about the current republican party.

No, but I have a few in my attic under grow lights.

 

[Dr. Jones]

@PKM,

how much do you "donate" to the Kentucky BBall team? I kid, I kid, I kid, I kid.

A'ight gents, I'm off again for a while. If we sign Howard and don't trade Jefferson you'll hear me cry from the jungle.

Watch the blow darts, don't be a Jarreder.

 

[Dr. Jones]

In this case, debt is the means for the gov't to subsidize the rich.

The money didn't come from the gov't, you douchey-doucher.

 

[Dr. Jones]

You're pissed that a rich white guy gives tons of money to help poor black kids play college ball? (J/K)

Hey, yeah .. missed that .. sounds like he's moving center to me.

 

[northeast]

At the risk of sounding like a total dick .. I don't care what rules are changed/enacted .. I'll be successful, so have at it.

Still lacking in this discussion is the answers to the OP question.
i was simply implying that the real estate industry would be very different without debt, and in retrospect , one might say that this would be a good thing..
Yes, you are rich, so you have resources and you are diversified, and you will be fine,.
but if there was no debt in the past, there would likely have been less people making big money in the real estate bus, so your career would likely have turned out very different.

my point is that society would be very different if debt were abolished.
One example would be less real estate bubbles.
Everyone here is saying that things would be very different, and it seems that only green still is arguing for a debtless society, but everyone's opinion boils down to "it would be good" , or "it would be bad", occasionally backed up with insults of the intelligence of opposing parties, but not much revelation beyond that.
What would actually happen?
If we all bought houses without debt, wiould that be so terrible? We'd still have houses, just not housing bubbles.
Governments, could still tax and spend money, but they would have to keep spending in line.
We'd still have banks , but they would be scaled down.

The world would be very different, but it is not clear it would be worse.