Prove it (or at least provide some evidence)!

[Bern80]

You may want to amend that to a third of net income. Even so, many people followed that rule and lost in the housing market. Your experts will be issuing revisions soon I'm sure.

How would you lose if you followed that rule?

1. You used an ARM to achieve the payment.
2. The martgage balance is higher than the home's value.
3. You lose your job and can't find one at the same rate of pay.

Only #3 would technically be correct.

 

[bripat9643]

It is. That is to say, it's the duty of the government to deal with emergencies that may arise, and Congress is granted the authority to borrow money for that very reason. And once it has done so, it is irresponsible of the government to pay the debt off. So there will be a tendency for the accumulated debt to ratchet up over time, as emergencies are dealt with.

You've got to be kidding with this. You've got a difficult row to hoe claiming that paying off debt is "irresponsible." That idea is founded on thoroughly discredited nonsense. furthermore, government doesn't need to borrow money to handle emergencies. Government shouldn't even be involved in paying for natural disasters. Even if it decides to do that, it can setup a reserve fund to handle such situations. If it has to it can pass temporary taxes to handle them. However, there's no such thing as a temporary tax.

 

[saveliberty]

How would you lose if you followed that rule?

1. You used an ARM to achieve the payment.
2. The martgage balance is higher than the home's value.
3. You lose your job and can't find one at the same rate of pay.

Only #3 would technically be correct.

Sure you wnat to open that can of worms?

1. You followed the third of your monthly income rule with an ARM @ 4.5%. Next year your adjusted rate is 7%.

2. Despite following the rule, other factors render the rule worthless. The rule doesn't stand on it own.

 

[bripat9643]

Interesting. Of course, there's really no need for the federal government to create such a sinking fund, which doesn't mean it was a bad idea. In my opinion, the government should not borrow money except for emergencies -- major wars, economic downturns, an asteroid smashing the hell out of Kansas, etc. Borrowing money should not be SOP.

You might have a case if the Congress ever demonstrated it was responsible with money. Since any teenager with a no-limit credit card spends more responsibly than Congress, allowing it to borrow money is a prescription for disaster.

 

[Wry Catcher]

You ignore that government borrowing is a major contributor to less borrowing available to private parties.

How did you come to this conclusion? Treasury securities have been risk free since the days of our founders and in good times and times of uncertainty are a favorite investment for many. Why would anyone 'invest' their money in a national bank today? Paying less to depostors then 1% they continue to raise the cost of borrowing for all.

Move your savings and all other accounts to a local bank or credit union; it's good for your local economy.
'

 

[saveliberty]

It is. That is to say, it's the duty of the government to deal with emergencies that may arise, and Congress is granted the authority to borrow money for that very reason. And once it has done so, it is irresponsible of the government to pay the debt off. So there will be a tendency for the accumulated debt to ratchet up over time, as emergencies are dealt with.

You've got to be kidding with this. You've got a difficult row to hoe claiming that paying off debt is "irresponsible." That idea is founded on thoroughly discredited nonsense. furthermore, government doesn't need to borrow money to handle emergencies. Government shouldn't even be involved in paying for natural disasters. Even if it decides to do that, it can setup a reserve fund to handle such situations. If it has to it can pass temporary taxes to handle them. However, there's no such thing as a temporary tax.

Good point, most emergencies are covered by insurance.

 

[Bern80]

Every sentence of the above is simply not true.

I'm sorry you think that. It doesn't make it so.

How long you live has a great deal to do with healthy versus unhealthy debt. A household has an income trajectory. Its income rises to a certain point, plateaus, then declines when its leading members retire. It drops to zero when those people die. For that reason, accumulated debt should be held to a level that can be paid off during the productive part of a person's life. There is a limited amount of time in which to do it. That is simply not a consideration with the government. The productive life of a whole nation, unlike that of a household, is potentially unlimited. There is no reason why a nation needs to ever pay off its public debt. No reason at all.

Your premise is that as long as you generate income you can carry debt. To an extent that's true. As i said before, I'm not saying the government or a household must have zero debt. They simply have to have debt they can manage. Whether the government goes on forever or not is irrelevent. This isn't a question of none vs. some. It's question of how much is too much. The U.S., in the opinion of most is well past that point.

That the government has been collecting roughly the same amount of revenue as a percentage of GDP is also not true, but even if it was true it would be meaningless, because GDP growth would still mean growing revenue. But it isn't true:

United States Government Revenue History - Charts

Of course, as GDP grew during the same period covered in these charts, total revenue as an absolute amount grew much more than the charts would indicate.

Which is why my statment is correct that tax revenue relative to GDP has remained relatively constant for decades. The charts in your link only show total revenue. They don't show the picture relative to GDP.

Historical Source of Revenue as Share of GDP

As you can see starting in about 1950 tax revenue as a percent of GDP has only fluctuated a couple percentage points. What is the point? The point is to illustrate to you tax and spenders that it doesn't matter what you do with the tax code. What the government collects in taxes is going to be about the same every year. Whatever GDP is, government can expect to collect somewher between 17 and 19 of that in taxes. This means that government can forecast with a decent degree of accuracy, what it's 'income' will be. You say government can have the debt it has because it can go on forever. The problem with that idea is that if they keep spending the way their spending, so will the debt. And if they keep spending the way their spending it will keep increasing forever. Infinite income generation is irrelevent if your debt keeps growing infinitely as well.

There is no claim that government's potential to generate revenue is "infinite," but there is no limit to its long-term growth. There are however practical limits to its short-term growth, which is why, although the accumulated debt isn't important, the deficit -- the rate at which the total debt is increasing -- is very important.

No, the government is not bound by the same rules as a household. It will not retire, it will not die, and it can print its own money, none of which is true of a household.

Still not true. Frankly you're just being silly now. Of course the U.S. government won't go on forever. The U.S. has existed for less than the blink of an eye in terms of earth history. Civilizations come and go and so to will the U.S.A. The only true statement there is that it can print it's own money. That doesn't mean it is okay to continue to accumulate debt. Want to find out if you're right or not? it's pretty simply. Apply what you say a household can't do to a household anyway. What would happen if a household could print its own money to pay for its expenses? If you have half a brain you know the answer to that and thus no the ability to print money doesn't make it okay to keep piling on the debt.

 

[Bern80]

Sure you wnat to open that can of worms?

1. You followed the third of your monthly income rule with an ARM @ 4.5%. Next year your adjusted rate is 7%.

Then you need to adjust your income and/or expenses by 2.5%

2. Despite following the rule, other factors render the rule worthless. The rule doesn't stand on it own.

Sure it does. You can calculate based on your income how much a third of that is and thus how much house you can afford. Following that rule does't of course promise that nothing bad will ever happen to you. Never the less you still know the possibility exists and this have the capability of planning accordingly for it.

 

[saveliberty]

Sure you wnat to open that can of worms?

1. You followed the third of your monthly income rule with an ARM @ 4.5%. Next year your adjusted rate is 7%.

Then you need to adjust your income and/or expenses by 2.5%

2. Despite following the rule, other factors render the rule worthless. The rule doesn't stand on it own.

Sure it does. You can calculate based on your income how much a third of that is and thus how much house you can afford. Following that rule does't of course promise that nothing bad will ever happen to you. Never the less you still know the possibility exists and this have the capability of planning accordingly for it.

Now you have introduced a new rule: Your loan should be equal to your income at all times.

 

[Bern80]

Sure you wnat to open that can of worms?

1. You followed the third of your monthly income rule with an ARM @ 4.5%. Next year your adjusted rate is 7%.

Then you need to adjust your income and/or expenses by 2.5%

2. Despite following the rule, other factors render the rule worthless. The rule doesn't stand on it own.

Sure it does. You can calculate based on your income how much a third of that is and thus how much house you can afford. Following that rule does't of course promise that nothing bad will ever happen to you. Never the less you still know the possibility exists and this have the capability of planning accordingly for it.

Now you have introduced a new rule: Your loan should be equal to your income at all times.

No your loan should not be equal to your income. The monthly payment terms for it should be about a third of your monthly income. Obvously if your income changes severly then something will have to change with your housing payment. That isn't adding a new rule. In math terms it's simpy Y = 3 x X.

 

[saveliberty]

Then you need to adjust your income and/or expenses by 2.5%


Sure it does. You can calculate based on your income how much a third of that is and thus how much house you can afford. Following that rule does't of course promise that nothing bad will ever happen to you. Never the less you still know the possibility exists and this have the capability of planning accordingly for it.

Now you have introduced a new rule: Your loan should be equal to your income at all times.

No your loan should not be equal to your income. The monthly payment terms for it should be about a third of your monthly income. Obvously if your income changes severly then something will have to change with your housing payment. That isn't adding a new rule. In math terms it's simpy Y = 3 x X.

At the risk of hair spliting my friend, you took a 2.5% change in a loan interest rate and assumed a 2.5% adjustment in income/expenses would cover it. Unless your income and the loan are equal, that will not hold.

 

[Bern80]

Now you have introduced a new rule: Your loan should be equal to your income at all times.

No your loan should not be equal to your income. The monthly payment terms for it should be about a third of your monthly income. Obvously if your income changes severly then something will have to change with your housing payment. That isn't adding a new rule. In math terms it's simpy Y = 3 x X.

At the risk of hair spliting my friend, you took a 2.5% change in a loan interest rate and assumed a 2.5% adjustment in income/expenses would cover it. Unless your income and the loan are equal, that will not hold.

You've been hair splitting for a while now....anywho I could be off by a little bit so let's try it out shall we?
Follow our 'rule', if your mortgage/rent/whatever is $1000/mo. + 4.5% = $1045 x 3 = $3135 suggest monthly income. Next month our interext goes to 7% so our mortgage payment is now $1070 x 3 = $3210 suggestd monthly income. So to adhere real strictly to our one third rule you need to come with another $165 each mo or, said differently, 2.344% more money. So yeah. I was a hair off.

 

[saveliberty]

No your loan should not be equal to your income. The monthly payment terms for it should be about a third of your monthly income. Obvously if your income changes severly then something will have to change with your housing payment. That isn't adding a new rule. In math terms it's simpy Y = 3 x X.

At the risk of hair spliting my friend, you took a 2.5% change in a loan interest rate and assumed a 2.5% adjustment in income/expenses would cover it. Unless your income and the loan are equal, that will not hold.

You've been hair splitting for a while now....anywho I could be off by a little bit so let's try it out shall we?
Follow our 'rule', if your mortgage/rent/whatever is $1000/mo. + 4.5% = $1045 x 3 = $3135 suggest monthly income. Next month our interext goes to 7% so our mortgage payment is now $1070 x 3 = $3210 suggestd monthly income. So to adhere real strictly to our one third rule you need to come with another $165 each mo or, said differently, 2.344% more money. So yeah. I was a hair off.

I appreciate the accuracy. At least we have hair right?

 

[Bern80]

At the risk of hair spliting my friend, you took a 2.5% change in a loan interest rate and assumed a 2.5% adjustment in income/expenses would cover it. Unless your income and the loan are equal, that will not hold.

You've been hair splitting for a while now....anywho I could be off by a little bit so let's try it out shall we?
Follow our 'rule', if your mortgage/rent/whatever is $1000/mo. + 4.5% = $1045 x 3 = $3135 suggest monthly income. Next month our interext goes to 7% so our mortgage payment is now $1070 x 3 = $3210 suggestd monthly income. So to adhere real strictly to our one third rule you need to come with another $165 each mo or, said differently, 2.344% more money. So yeah. I was a hair off.

I appreciate the accuracy. At least we have hair right?

Well if we can get back to the big picture not that the hair splitting is over. Your conjecture was that some people followed the relatively sound one third advice and got burned on the mortgages anyway. Well the fact is, no they didn't get burned by their lenders. They burned themselves. If they took out an ARM then they should have known that their interest rate will fluctuate and thus to adhere strictly to that rule their income would have to fluctuate. If we're talking a mortgage payment of $1000/mo. on a typical 30 yr mortgage, that's 300k home. If one does just a bit of homework they can figure out what realistically the worst case scenario in terms of payments will be based on historic interest rates. In the early 2000's they were a bit over 7% now they're a bit under 4%. So a smart person would caclulate the worst case monthly payment scenario of 7% and figure they want three times that for a monthly income. I'm sure you get the picture.

The point in all of this is no one screwed anyone over here and no one lost for any reason other than negligence on their own part and poor planning. I understand some will lose jobs and things of that nature, but if a 3% change in your ARM is what put you in hot water you really don't have anyone to blame but yourself. That's just poor financial planning. And that is a HUUUUGE part of the problem with both our government and individuals. Too many people are simply too financially illiterate.

 

[saveliberty]

Not sure about the rest of the country, but the bank I worked with several years ago would only do an ARM as I was self employed and did not meet FhA requirements due to that fact. You might want to retract the financially illiterate comment.

 

[Bern80]

Not sure about the rest of the country, but the bank I worked with several years ago would only do an ARM as I was self employed and did not meet FhA requirements due to that fact. You might want to retract the financially illiterate comment.

I'm not calling you financially illiterate. The fact remains a big part of the country is and it's why a lot of people are in trouble. Not because someone screwed them. And while it seems like I'm harping it is still an important point to make cause you can't fix what you (not you persoally) what you don't acknowledge. And it seems an awful lot of people, primarily the left would rather blame others than themselves for the situations they're in. Which makes your board moniker here saveliberty an interesting one. If you want to save liberty you need not only freedom of choice, but to allow those to reap the consequences of their choices, good or bad.

 

[saveliberty]

Not sure about the rest of the country, but the bank I worked with several years ago would only do an ARM as I was self employed and did not meet FhA requirements due to that fact. You might want to retract the financially illiterate comment.

I'm not calling you financially illiterate. The fact remains a big part of the country is and it's why a lot of people are in trouble. Not because someone screwed them. And while it seems like I'm harping it is still an important point to make cause you can't fix what you (not you persoally) what you don't acknowledge. And it seems an awful lot of people, primarily the left would rather blame others than themselves for the situations they're in. Which makes your board moniker here saveliberty an interesting one. If you want to save liberty you need not only freedom of choice, but to allow those to reap the consequences of their choices, good or bad.

I started a thread on that very concept Bern80 (Shrinking Middle Class). I agree.
Thank you for sharing this thread with me today. I enjoyed it.

 

[daveman]

Again I'm forced not to ignore your obvious ignorance and respond. Unions are not Super PACs, the money used by unions in making donations is money paid by union members. The source is known, as is the amount.

CU v. FEC allows an unlimited amount of money to influence our elections and allows for the complete anonymity of where the money originated.

Are you stupid or truly mendacious? The evidence suggests both.

I'm sure it comports you to feel that way, but the answer is, of course, neither.

Your alleged reasoning is less than compelling. Occam's Razor suggests than an ideologue such as yourself supports union donations simply because they donate to Democrats.

LOL, advantage to stupid.

Hey, not my fault you're not nearly as clever as you think -- sorry, wrong word -- feel you are.

 

[saveliberty]

Again I'm forced not to ignore your obvious ignorance and respond. Unions are not Super PACs, the money used by unions in making donations is money paid by union members. The source is known, as is the amount.

CU v. FEC allows an unlimited amount of money to influence our elections and allows for the complete anonymity of where the money originated.

Are you stupid or truly mendacious? The evidence suggests both.

I'm sure it comports you to feel that way, but the answer is, of course, neither.

Your alleged reasoning is less than compelling. Occam's Razor suggests than an ideologue such as yourself supports union donations simply because they donate to Democrats.

LOL, advantage to stupid.

No, no its advantage daveman, but I understand with the stupid and all why you'd think it was you.

 

[Wry Catcher]

I'm sure it comports you to feel that way, but the answer is, of course, neither.

Your alleged reasoning is less than compelling. Occam's Razor suggests than an ideologue such as yourself supports union donations simply because they donate to Democrats.

LOL, advantage to stupid.

No, no its advantage daveman, but I understand with the stupid and all why you'd think it was you.

Thanks for sharing. On point, my reasoning was to simply state facts. That you're so biased you can't see that is truly sad.