Interest Rates

Glad I qualified for 0% interest from Toyota Financial. But I will be refinancing my other car with PenFed soon.

 

Borrowing money is always a bad idea. Pay cash or do without. Remember Mr. Magruder's (sp?) advice from Dickens's (IIRC) Great Expectations: "The recipe for happiness is to spend one pound less than your income; the recipe for misery is to spend one pound more than your income."

 

Borrowing money that does not make money is a bad idea. Education is often a good example of smart borrowing.

 

Prudent borrowing makes many things possible, including increased individual wealth. Most people would never be able to purchase a home without a mortgage - they'd be paying rent forever, and would never profit from increased property values. Borrowing too much is a problem, as is borrowing any amount on a charge card, with their criminal rates of interest. But I would not say borrowing is always a bad idea.

 

Profiting from what? Just kidding.

But, remember, leverage works both ways.

 

I'll admit it when I'm wrong, and you are right on this. Borrowing to pay for an education can be a wise move. (An even wiser move would be for society to provide education for free, since an educated populace makes a stronger nation.)

Can you say "housing bubble"? Property does not increase in value. It only increases in price. Except when it decreases in price. The notion, popular until a short while ago, that property can only go up in value, is as mysterious as the notion still held by some confused people, that a Hummer has a smaller carbon footprint than a Prius. Or that political parties have any interest other than increasing their own wealth and power at the expense of the citizenry.

 

I think your only seeing part of the picture with property values, daniel. It is true that our stubborn belief that property values could only go up ended up in disaster. It's also true that property values will fluctuate both up and down over time. But given a long enough time frame, the trend will be up... The US is a huge country, with a [ame="http://en.wikipedia.org/wiki/List_of_sovereign_states_and_dependent_territories_by_population_density"]relative low population density[/ame] (178th in the world). According to the most recent census, our population is growing by close to 10%. Much of that growth can be absorbed with our vast tracks of nearly empty land, replacing excess farm land without much of a cost (since we currently produce more food than we need, as a country). However, with a constantly growing population and a fixed land mass, there is no choice but for property demand to increase over time. And with an increase in demand, the value (and price) of that property will also increase.

 

The increase of property cost due to population growth will be tiny and slow. It could account for a doubling in cost in a century, much more slowly than any productive investment (investment that creates stuff, whether farming or manufacturing).

What has driven the rapid rise in property costs for much of the 20th century is the overall increase in wealth of the population. As people become wealthier, they are willing to pay more for land and housing. The "use-value" of land does not change with time. Only the market value as people bid up the price because they have more money to spend.

The bubble, of course, was related to low interest rates, the desire of investors to find a better return on investment, and the way bankers and brokers manipulated those facts.

With a mere half century of boom times driving a steady increase of wealth and thus a rise in land prices, the myth is born that "property can only go up" and the bankers and brokers have the final piece to assemble their scam, create a bubble, suck wealth from the economy, and walk away laughing while millions are left ruined.

Land price does not appreciably rise due to population growth. It rises due to market demand resulting from general prosperity, or to a different kind of market demand fueled by too much credit.

Property values plummeted during the Great Depression, but by the time of the last bubble, we had already forgotten that fact.

 

Michael: No need to apologize for your post! I expressed my opinion of borrowing. As for check loan or payday loan companies, the practice should clearly be illegal. As for the woman who does not understand what interest is, we need better schools, and especially, nobody should be allowed out of high school without understanding mathematics.

 

Always is a difficult word. What you say is not always true. It's usually true, but not always.

Banks borrow our money, in the form of a CD—which pays less than 3% interest—and lend it to credit card holders at 20% interest or higher. I'd say that's a good reason to borrow money.

 

navy fed also has good rates- 1.99 new and 2.99 used. we've been keeping an eye out because we are eventually going to need to borrow a few bucks to replace DH's car.

the reason we're not saving up to pay cash? we get a better return paying off these @*&$#^$! student loans that stand at 6.8% interest, asap. (also, the sooner we get these #$*!&%$ lying liar idiots at sallie mae off our balance sheet, the better.)