Debt is good. It's what enables people who don't have the money up front to start businesses or buy houses. It becomes bad when people are relying on it to finance small purchases or when loans have predatory terms (like credit card payments, payday loans, etc.)
> Debt is good. It's what enables people who don't have the money up front to start businesses or buy houses.
The reason people go into debt to buy houses is because everyone is using debt to buy houses, thus driving the prices up.
If mortgages were capped at 5-year terms, the price of houses would be a lot lower, which would be great for society - for the same reason that having cheaper electricity is great for society.
Prices wouldn't significantly change. You still have people/pension funds/governments with lots of money to invest (the people who currently buy mortgage debt). How would you prohibit this money from just buying houses and renting them out?
And even if you could lower prices, how would you compensate the current homeowners for destroying the value of their largest asset?
> Prices wouldn't significantly change. You still have people/pension funds/governments with lots of money to invest (the people who currently buy mortgage debt). How would you prohibit this money from just buying houses and renting them out?
This won't happen - because:
1. Up until the 80s, houses used to cost closer to three years of wages, as opposed to ten. Yet, there was no shortage of people and pension funds in the 80s.
2. Individuals borrowing mountains of money for their first home get tax advantages, compared to institutional investors. It's individuals pulling the price of houses up, not institutions.
> And even if you could lower prices, how would you compensate the current homeowners for destroying the value of their largest asset?
The same way we compensate people who bought pets.com stock in 1999, the same way that we compensate 22 year olds who amassed $200,000 of debt, and an English Literary History degree, and the same way that we compensate someone who invested into a coal plant, when utility solar starts selling electricity for 2 cents/KWH.
