You get 50-year mortgages after voting for deporting foreigners, shoring up domestic manufacturing, ending foreign wars and controlling spending

[acptulsa]

Thats why we... have democratized the economic system in our country.

Democratized, LOL.

 

[ClaytonB]

Why?

A fixed rate, 30 year loan on $300,000 at 4% has a total cost of $215,608 interest over the whole thirty years.

Principle payments on the same loan would be $833 per month.

Interest would be $598 per month.

Each payment, from day one, would be $1431, equally paying interest and principle.

1) Why we use compounding

Let's say Bobby loans $1,000 to Joey for 1 year at 10% interest ($100 interest). We can divide this up into monthly calculation--

10% / 12 = 0.83% per month

$1,000 * 0.83% * 12 = $99.99 interest

I'll skip weekly and go straight to daily:

10% / 365 = 0.0274% per day

$1,000 * 0.0274% * 365 = $100.00

Notice how, as we chop up the interest in finer intervals, we still retain the same total interest payment. So, why bother?

The reason is that most loan contracts have a call option which permits the creditor to "call" the loan after some duration, meaning, they can say "you must pay all the principal back right now". The value of a call option is that if interest rates in the market move up significantly, the creditor can move the money to a more valuable investment. ARMs integrate this into the mortgage where it is understood that the debtor is almost surely not able pay the loan on call, so the mortgage-rate itself is directly adjusted. To escape an ARM, you're going to have to be willing to pay a significantly higher interest rate to get the luxury of having it fixed.

A long-term loan is equivalent to borrowing dollars at many different time lengths. So, some dollars you are borrowing for 30 years. Those dollars are the most expensive to borrow, because the term is so long. Some dollars you are borrowing for 20 years. Some for 10 years, etc. The fixed-rate combines all of these time-ranges into a single number (that's how the math is actually calculated). A fixed, compound-interest cleanly captures all of these factors into a single calculation.

As for the "why does the creditor get paid first?"-question, the answer should be obvious: because the money is his, not yours. If you rent a tractor, you have to pay the rent on the unit before you use it. You don't use it, then pay the rent after. Why would the equipment rental take on all that risk? You're the one who needs to use the tractor for whatever it is, so pay up. That's how mortgages also work. You're the one who can't afford the house you want, so you are the one borrowing the cash to buy it. Pay up for that privilege, or don't buy the house. How "fair" this is, is irrelevant. Nobody is going to rent a tractor or loan the cash for a house on a basis where you get to use it now (risk-free) and pay later. Pay now, and then use it.

2) Why Western banking doesn't actually make any sense (and the implications are larger than you think)

As I said above, the real issue here isn't compounding. It isn't even how interest is scheduled over your payments. The real issue is that every loan is effectively an infinite debt obligation because the compounding goes on indefinitely if the loan cannot be serviced. People use the word "usury" in many different ways so I don't even use that word. The point is that every loan in Western banking is actually an open-ended contract where one side (the creditor) puts a fixed, finite amount of wealth at-risk, but the other side (the debtor) has a potentially infinite obligation. This is obviously lop-sided and wrong. The courts try to fix this in various ways by imposing various limitations on debts, but the more you dig into the details, the more you will find that it's an arbitrary hodge-podge of baseless legal opinions indistinguishable from insanity.

The correct solution is to re-characterize what a loan is to match the reality of what is occurring. If I loan you my house, you have the use of it for the duration of the loan. You'll have to pay me for this, we call that rent. In the same way, if I loan you cash, you have the use of it for some duration, and you'll have to pay me for that. Rent can just be paid ahead of time and the real property being rented is more or less secure, as long as nothing happens to it like a fire. Not so with a money loan. The principal is unsecured. That's the problem with money loans and this is what makes them categorically unlike other forms of rental. This is why you can't just "pay the interest" up-front, and then "return the principal" all at the end. I mean, you could write a contract like that, but it would be really stupid. That's why nobody does that. But the Western banking solution, where the debtor carries an effectively infinite debt obligation, is also stupid.

Islamic banking has the right solution. There are many variations on this, so it's not just an Islam thing, there are many ways this can be arranged. The reality of what is happening in a money loan, is that the lender is becoming a co-investor with the borrower in whatever venture the borrower is engaging in. So, suppose I am a farmer and I want a loan to buy a tractor. Without the tractor, my harvest will be X. With the tractor, it will be 100*X. So, the investor is essentially investing in that 99-factor increase. Before the loan is made, the farm is valuated (its revenue stream, etc.) The value of the tractor is then added to the value of the farm. Let's suppose the farm is worth $100k and the tractor is worth $10k (toy numbers). So, the farm+tractor is $110k. 10k/110k of that (9.1%) is the lender's share in the new venture. So, the investor purchases the tractor and recoups his investment from the 9.1% of revenues going forward. He can also later sell this share if he likes, or even sell it back to the farmer. This is how stock-valuations are calculated in the stock market, by the way. So, this is how practically all commercial loans used to be calculated before the rise of modern banking.

This kind of calculation would make consumer credit impossible, because there is no venture being invested in. And good riddance. It would also make mortgages disappear in almost all cases, except where the house itself is being used as surety/collateral for a commercial loan of some kind. And once again, good riddance.

The more clear you make the stakes of all stake-holders in a loan transaction, the clearer the issues with modern Western banking will become. An infinite obligation to a creditor who has loaned $400+k for a strictly domestic purchase?! This is an act of insanity within insanity. But we treat it like it's normal. It's the furthest possible thing from normal. Unless you're a jet-setting multi-millionaire with a spare Swiss chateau you want to use to finance an expansion on your factory, avoid mortgages like the plague...

 

[Intrepid]

1) Why we use compounding

Let's say Bobby loans $1,000 to Joey for 1 year at 10% interest ($100 interest). We can divide this up into monthly calculation--

10% / 12 = 0.83% per month

$1,000 * 0.83% * 12 = $99.99 interest

I'll skip weekly and go straight to daily:

10% / 365 = 0.0274% per day

$1,000 * 0.0274% * 365 = $100.00

Notice how, as we chop up the interest in finer intervals, we still retain the same total interest payment. So, why bother?

The reason is that most loan contracts have a call option which permits the creditor to "call" the loan after some duration, meaning, they can say "you must pay all the principal back right now". The value of a call option is that if interest rates in the market move up significantly, the creditor can move the money to a more valuable investment. ARMs integrate this into the mortgage where it is understood that the debtor is almost surely not able pay the loan on call, so the mortgage-rate itself is directly adjusted. To escape an ARM, you're going to have to be willing to pay a significantly higher interest rate to get the luxury of having it fixed.

A long-term loan is equivalent to borrowing dollars at many different time lengths. So, some dollars you are borrowing for 30 years. Those dollars are the most expensive to borrow, because the term is so long. Some dollars you are borrowing for 20 years. Some for 10 years, etc. The fixed-rate combines all of these time-ranges into a single number (that's how the math is actually calculated). A fixed, compound-interest cleanly captures all of these factors into a single calculation.

As for the "why does the creditor get paid first?"-question, the answer should be obvious: because the money is his, not yours. If you rent a tractor, you have to pay the rent on the unit before you use it. You don't use it, then pay the rent after. Why would the equipment rental take on all that risk? You're the one who needs to use the tractor for whatever it is, so pay up. That's how mortgages also work. You're the one who can't afford the house you want, so you are the one borrowing the cash to buy it. Pay up for that privilege, or don't buy the house. How "fair" this is, is irrelevant. Nobody is going to rent a tractor or loan the cash for a house on a basis where you get to use it now (risk-free) and pay later. Pay now, and then use it.

2) Why Western banking doesn't actually make any sense (and the implications are larger than you think)

As I said above, the real issue here isn't compounding. It isn't even how interest is scheduled over your payments. The real issue is that every loan is effectively an infinite debt obligation because the compounding goes on indefinitely if the loan cannot be serviced. People use the word "usury" in many different ways so I don't even use that word. The point is that every loan in Western banking is actually an open-ended contract where one side (the creditor) puts a fixed, finite amount of wealth at-risk, but the other side (the debtor) has a potentially infinite obligation. This is obviously lop-sided and wrong. The courts try to fix this in various ways by imposing various limitations on debts, but the more you dig into the details, the more you will find that it's an arbitrary hodge-podge of baseless legal opinions indistinguishable from insanity.

The correct solution is to re-characterize what a loan is to match the reality of what is occurring. If I loan you my house, you have the use of it for the duration of the loan. You'll have to pay me for this, we call that rent. In the same way, if I loan you cash, you have the use of it for some duration, and you'll have to pay me for that. Rent can just be paid ahead of time and the real property being rented is more or less secure, as long as nothing happens to it like a fire. Not so with a money loan. The principal is unsecured. That's the problem with money loans and this is what makes them categorically unlike other forms of rental. This is why you can't just "pay the interest" up-front, and then "return the principal" all at the end. I mean, you could write a contract like that, but it would be really stupid. That's why nobody does that. But the Western banking solution, where the debtor carries an effectively infinite debt obligation, is also stupid.

Islamic banking has the right solution. There are many variations on this, so it's not just an Islam thing, there are many ways this can be arranged. The reality of what is happening in a money loan, is that the lender is becoming a co-investor with the borrower in whatever venture the borrower is engaging in. So, suppose I am a farmer and I want a loan to buy a tractor. Without the tractor, my harvest will be X. With the tractor, it will be 100*X. So, the investor is essentially investing in that 99-factor increase. Before the loan is made, the farm is valuated (its revenue stream, etc.) The value of the tractor is then added to the value of the farm. Let's suppose the farm is worth $100k and the tractor is worth $10k (toy numbers). So, the farm+tractor is $110k. 10k/110k of that (9.1%) is the lender's share in the new venture. So, the investor purchases the tractor and recoups his investment from the 9.1% of revenues going forward. He can also later sell this share if he likes, or even sell it back to the farmer. This is how stock-valuations are calculated in the stock market, by the way. So, this is how practically all commercial loans used to be calculated before the rise of modern banking.

This kind of calculation would make consumer credit impossible, because there is no venture being invested in. And good riddance. It would also make mortgages disappear in almost all cases, except where the house itself is being used as surety/collateral for a commercial loan of some kind. And once again, good riddance.

The more clear you make the stakes of all stake-holders in a loan transaction, the clearer the issues with modern Western banking will become. An infinite obligation to a creditor who has loaned $400+k for a strictly domestic purchase?! This is an act of insanity within insanity. But we treat it like it's normal. It's the furthest possible thing from normal. Unless you're a jet-setting multi-millionaire with a spare Swiss chateau you want to use to finance an expansion on your factory, avoid mortgages like the plague...

.
Way too many words.

Reported.
.

 

[nikcers]

.
Who made the rules for all this so-called democratic capitalism?

Who made the rules for this so-called national monetary system?

Could those rules be why kids are graduating college buried in debt?

Could those rules help explain why nobody saves money anymore?

Could those rules help explain the steadily growing mountain of revolving consumer debt in America?

Could those rules help explain the number of Americans that are one maybe two paychecks from being homeless?

Asking for a friend....

A lot of people criticize our consumer culture but its precisely why we have had so many jobs and upward social mobility.

Our consumer culture is why we have things like the American dream in our country.

We seriously have people who go from rags to riches and from growing up poor with 4 kids living in one bedroom to having a career and owning a house.

It has seriously been the envy of the world its why we have so many people that want to come here but since people don't assimilate into our culture anymore it has devastated the culture.

People send their money they make to other countries to their families and they don't go buy stuff they make stuff at home.

A large percentage of the GDP of other countries is just Americans sending them welfare and building up those countries.

Instead of buying stuff from your local community and creating jobs here they send money to other countries and give other countries the american dream.

We even sent almost all of our manufacturing out of the country.

This all really happened though since 1990.

Thats what makes Trump such a great leader he is making America great again.

When he was on the campaign trail in 2016 he said we don't win anymore and that when he is president we are going to win so much we will get tired of winning.

Closing the borders has definitely been a good start and I definitely consider it a win.

 

[acptulsa]

We even sent almost all of our manufacturing out of the country.

This all really happened though since 1990.

Thats what makes Trump such a great leader he is making America great again.

Then why aren't his clothes, shoes or cologne made in the US? Why doesn't he hire US citizens to make the beds at Mar-A-Lago? You think he can't afford to pay the living wage that would attract them to apply?

 

[TheCount]

Then why aren't his clothes, shoes or cologne made in the US? Why doesn't he hire US citizens to make the beds at Mar-A-Lago? You think he can't afford to pay the living wage that would attract them to apply?

Why are all his new real estate projects outside of the US?

 

[nikcers]

Then why aren't his clothes, shoes or cologne made in the US? Why doesn't he hire US citizens to make the beds at Mar-A-Lago? You think he can't afford to pay the living wage that would attract them to apply?

Since when does the president of the USA have to hire Americans to work for him in the private sector?

Thats not the role of the president and not what we elected him to do.

You think we elected the president to manufacture stuff?

No he is rebalancing trade and lowering taxes so that people who manufacture stuff have an incentive to manufacture stuff here in the USA and its happening.

Obama criticized Trump and said you can't just wave a magic wand to bring jobs back that are outsourced but its happening.

The USA is leading the world in cutting edge AI and opening auto manufacturing plants and this is just the beginning you ain't seen nothing yet.