A Lesson in Economic for Liberals

[cbirch2]

REPOST: Basically a decrease in home prices is fine if your cash flow is positive. But if your cash flow is negative, and youve have to eat into savings (equity) to finance your spending and have no way of cutting spending, then a decrease in housing prices can make you bankrupt.

If your cash flow is negative, and a lot are during a recession, then you have to finance that deficit with your equity. If your assets depreciate, housing prices fall, then your assets decrease in value and your equity decreases as well. if housing prices decrease by the inverse of your leverage (mathematical formula, assets:equity) then you become insolvent.

It doesnt matter if you have enough money coming in to pay your mortgage that month, because you now have negative equity and if you choose to pay your mortgage you must choose to not pay something else, like your grocery bill.

so if your cash flow is negative a decrease in assets can indeed make you insolvent!!!!

 

[Toddsterpatriot]

What are you talking about, i said that opposite. I didnt say an increase in equity increases your cash. i said an increase in cash increases your equity, as long as you dont increase your liabilities at the same time.

You really dont understand this point do you? A person can be insolvent, but still able to make mortgage payments in the short term. Thats being insolvent, but still being liquid.

You would rather be the opposite, illiquid but solvent. An entity thats liquid but insolvent is doomed to bankrupty, just not in the immediate future.

Changes in equity don't change your cash balance.
We're talking about people being able to make their mortgage payments. Or not.
We're not talking about decreasing, or increasing, net worth.

My house goes down $50,000 this month. Does that make it harder for me to pay my mortgage?
It goes up $50,000 next month. Does this make it easier for me to pay my mortgage?
The answers are no and no.

Wow is it really impossible for you to understand the diference between long term and short term? Apparently so.

In the short term you base your spending on your cash flow statement. In the long term you have to base your liabilities with your assets, otherwise you become insolvent.

You can't spend your assets unless you turn them into cash first.

 

[cbirch2]

Changes in equity don't change your cash balance.
We're talking about people being able to make their mortgage payments. Or not.
We're not talking about decreasing, or increasing, net worth.

My house goes down $50,000 this month. Does that make it harder for me to pay my mortgage?
It goes up $50,000 next month. Does this make it easier for me to pay my mortgage?
The answers are no and no.

Wow is it really impossible for you to understand the diference between long term and short term? Apparently so.

In the short term you base your spending on your cash flow statement. In the long term you have to base your liabilities with your assets, otherwise you become insolvent.

You can't spend your assets unless you turn them into cash first.

See the above post.

 

[Toddsterpatriot]

Wow is it really impossible for you to understand the diference between long term and short term? Apparently so.

In the short term you base your spending on your cash flow statement. In the long term you have to base your liabilities with your assets, otherwise you become insolvent.

You can't spend your assets unless you turn them into cash first.

See the above post.

My house goes down $50,000 this month. Does that make it harder for me to pay my mortgage?
It goes up $50,000 next month. Does this make it easier for me to pay my mortgage?
The answers are no and no.

 

[cbirch2]

You can't spend your assets unless you turn them into cash first.

See the above post.

My house goes down $50,000 this month. Does that make it harder for me to pay my mortgage?
It goes up $50,000 next month. Does this make it easier for me to pay my mortgage?
The answers are no and no.

Like ive been saying the whole fucking time, in this situation the home owner is still liquid.

However, the homeowner is insolvent.

 

[Toddsterpatriot]

See the above post.

My house goes down $50,000 this month. Does that make it harder for me to pay my mortgage?
It goes up $50,000 next month. Does this make it easier for me to pay my mortgage?
The answers are no and no.

Like ive been saying the whole fucking time, in this situation the home owner is still liquid.

However, the homeowner is insolvent.

Since we're talking about failure to keep your mortgage paid, liquidity is the issue.

 

[cbirch2]

My house goes down $50,000 this month. Does that make it harder for me to pay my mortgage?
It goes up $50,000 next month. Does this make it easier for me to pay my mortgage?
The answers are no and no.

Like ive been saying the whole fucking time, in this situation the home owner is still liquid.

However, the homeowner is insolvent.

Since we're talking about failure to keep your mortgage paid, liquidity is the issue.

Actually my original contention was solvency friend.

 

[Toddsterpatriot]

Like ive been saying the whole fucking time, in this situation the home owner is still liquid.

However, the homeowner is insolvent.

Since we're talking about failure to keep your mortgage paid, liquidity is the issue.

Actually my original contention was solvency friend.

And I showed you that a $50,000 monthly change in your home equity doesn't impact your ability to pay.
You keep insisting it does.

 

[cbirch2]

Since we're talking about failure to keep your mortgage paid, liquidity is the issue.

Actually my original contention was solvency friend.

And I showed you that a $50,000 monthly change in your home equity doesn't impact your ability to pay.
You keep insisting it does.

For the last time, no i dont. My contention has always been solvency, not liquidity.