True wealth distribution in the US

[PeshakJang]

Not only do you not know accounting, you don't know time value of money either.

1) The only way the bank could have a 20K receivable on their books, in addition to your 100K mortgage, is if you were delinquent on paying your mortgage for a couple of years

2) On a 30 year mortgage, you would be paying a LOT more than just 20K in interest. But that's over the FULL LIFE OF THE MORTGAGE. I bought a house with around a 250K mortgage last year. The bank has the exact same 250K mortgage on their books. . They don't just tack on 40 or 50K on their receivable 'just because'. Again, look up 'time value of money'

This thread is full of unbelievable fail and now i completely understand why conservatives exist.

Ok, I guess you can't understand simplified examples for the purpose of making a point. I'm fully aware that you don't just "tack on" X amount of money, but the POINT I was making was that the debtor's net value is decreased by the extra money spent on financing the mortgage which is not returned through the equity of the home (ignoring appreciation of the home). The lender sees an increase in his net worth through that extra financing cost, which becomes his profit.

Is that simple enough so that you can actually address the argument instead of the technicalities of the analogy?

 

[Phokus]

Actually, his OP was pretty damn good despite some pretty understandable errors that I had forgotten myself. PJ rambles on incessantly with no coherence and cites nothing but extreme righty blogs.

"Understandable errors"? Are you shitting me? The OP claimed that when you get a mortgage, you go into mortgage debt essentially without getting anything in return and claims that he made the mistake because he didn't understand 'accounting'. No, it's not just accounting, it's basic logic. The whole premise was built on retardation.

 

[Phokus]

Ok, I guess you can't understand simplified examples for the purpose of making a point. I'm fully aware that you don't just "tack on" X amount of money, but the POINT I was making was that the debtor's net value is decreased by the extra money spent on financing the mortgage which is not returned through the equity of the home (ignoring appreciation of the home). The lender sees an increase in his net worth through that extra financing cost, which becomes his profit.

Is that simple enough so that you can actually address the argument instead of the technicalities of the analogy?

THIS is what you said:

So I lend you $100,000 cash, my net receivable would be maybe $120,000, your liability would be $120,000. There would still be a transfer of wealth, just not as drastic

Which is essentially this on the bank's books, say on January 1st, 2011:

Credit Cash 100K

Debit Mortgage 100K

On February 1st, 2011, i send my payment to the bank

This is what happens to their balance sheet and P&L income statement

Credit Interest Income (THIS is his profit and it's nowhere NEAR 20K)
Credit Mortgage (This is basically like an accounts receivable)
Debit Cash (my full monthly mortgage payment to the bank)

I'd like to know how the bank gets that extra 20K on top of the mortgage on january 1st.

 

[PeshakJang]

THIS is what you said:

Which is essentially this on the bank's books, say on January 1st, 2011:

Credit Cash 100K

Debit Mortgage 100K

On February 1st, 2011, i send my payment to the bank

This is what happens to their balance sheet and P&L income statement

Credit Interest Income (THIS is his profit and it's nowhere NEAR 20K)
Credit Mortgage (This is basically like an accounts receivable)
Debit Cash (my full mortgage payment to the bank)

For Christ's sake... it's not that complicated to understand what I am saying. If I take out a loan and you lend me the money, I am trading future wealth to you for something now. You can go on and on with accounting lingo, but that's what is going on, that's the point I was making, and that's the point you are avoiding.

Also, interest on a 30 year loan is significantly more than $20,000 in most cases, minus inflation... but you know that.

 

[PeshakJang]

"Understandable errors"? Are you shitting me? The OP claimed that when you get a mortgage, you go into mortgage debt essentially without getting anything in return and claims that he made the mistake because he didn't understand 'accounting'. No, it's not just accounting, it's basic logic. The whole premise was built on retardation.

I'm sorry you don't think it's a reasonable error... the point I was making is still valid, just overestimated. Not accounting for inflation or appreciation/depreciation, if you take out a loan to buy something now, you are essentially trading future wealth for present gain.

Again, that's the point, and you still fail to address it.

 

[Throckmorton]

What is the effect of a student loan on net worth?

 

[Phokus]

For Christ's sake... it's not that complicated to understand what I am saying. If I take out a loan and you lend me the money, I am trading future wealth to you for something now. You can go on and on with accounting lingo, but that's what is going on, that's the point I was making, and that's the point you are avoiding.

Also, interest on a 30 year loan is significantly more than $20,000 in most cases, minus inflation... but you know that.

If you discount that future 'wealth' to the present day value, you have your fucking mortgage of 100K on the very first day of your mortgage. There is no '120K' in any economic/accounting/logical sense.

 

[Phokus]

I'm sorry you don't think it's a reasonable error... the point I was making is still valid, just overestimated. Not accounting for inflation or appreciation/depreciation, if you take out a loan to buy something now, you are essentially trading future wealth for present gain.

Again, that's the point, and you still fail to address it.

It's not just an overestimation, ITS COMPLETELY WARPED. Hmm, yes, lets not count one of the biggest assets you will ever own in a computation of net wealth and ONLY count the liability, multiply that by however many homeowners in this country and how could that possibly not go wrong in your argument?

 

[PeshakJang]

What is the effect of a student loan on net worth?

Since it goes toward a non-fungible asset (tuition), I'd imagine it would be a 100% liability, until you turn your education into a higher-paying career.

 

[PeshakJang]

It's not just an overestimation, ITS COMPLETELY WARPED. Hmm, yes, lets not count one of the biggest assets you will ever own in a computation of net wealth and ONLY count the liability, multiply that by however many homeowners in this country and how could that possibly not go wrong in your argument?

Gosh you're awfully offended by this. Did an accountant rape your family?

You're basically saying that the interest on a mortgage is negligible. Like you said, it's one of the most expensive assets most people will own, yet they pay for it by taking their future wealth and giving it to somebody else.

Surely you wouldn't argue that interest rates don't matter... would you?

 

[Phokus]

Gosh you're awfully offended by this. Did an accountant rape your family?

You're basically saying that the interest on a mortgage is negligible. Like you said, it's one of the most expensive assets most people will own, yet they pay for it by taking their future wealth and giving it to somebody else.

Surely you wouldn't argue that interest rates don't matter... would you?

IT DEPENDS.

One, you're forgetting that your home's value may appreciate

Two, you're forgetting to factor in inflation

Three, you have to look at opportunity costs. Assuming Mortgage vs. Renter and Mortgage vs. Someone who buys their house with cash, i can tell you that the person with the mortgage will come out way ahead of the person who buys their house outright with cash, assuming the mortgager uses their leveraged cash to invest in something safe like index funds or something.

Edit:

Check this calculator:

http://www.nytimes.com/interactive/business/buy-rent-calculator.html

I come out ahead of what i was doing as a renter after about 20 years, after some reasonable assumptions on return on investment/inflation/price appreciation.

Edit: actually im already ahead since i bought my house at a substantial discount of fair market value since it was a short sale, but i'm pretending i bought it at FMV

 

[ElFenix]

but the POINT I was making was that the debtor's net value is decreased by the extra money spent on financing the mortgage which is not returned through the equity of the home (ignoring appreciation of the home).

well, no, not really. a person's net worth doesn't include the present value of future income streams. that's how assets are valued, though.

This thread is full of unbelievable fail and now i completely understand why conservatives exist.

this thread isn't any worse than the OT thread by one of our lefties who was going to make it rich by purchasing stock the day before a dividend and then selling the stock immediately afterward.

What is the effect of a student loan on net worth?

if you wanted to do double entry as a person you'd put that the money taken out went toward something similar to 'good will.' of course then you'd be forced to write it down when your graduate psychology degree that you paid $120,000 for got you a job at barnes & noble.