vtsnowedin
Elite Member
I find it curious how people in our microwave, have-it-now, culture have somehow managed to redefine debt. Somehow if the interest rate on your loan is low or zero percent, it isn't debt. If you have a 30 yr mortage, owe $40K on cars, but have no credit car debt you somehow consider yourself to not be in debt. In the mid-2000's before the banking and housing crisis, lots of people were claiming it was stupid to have no house mortgage. So now what do those people have to say about the millions of people who bought 0% down houses whose house prices dropped 20%, 30%, or 50%? Those people can't sell their houses and are trapped. Talk about a miserable position to be in without any good options!
A $100K mortage at 0% interest is still $100K of debt and still involves risk. When the great depression hit, the people who were in debt were the ones who lost their homes. The people without debt were able to manage and many of them prospered in the process.
End of rant.
Not a bad rant. Lots of truth in it. The part about people in the depression making money if they weren't in debt at the start of it is spot on as my father told me at least a thousand times. But there is this to consider: If you have a reasonable expectation of having competative cash flow for the next few years and you expect inflation to happen in a big way then it makes sense to buy hard assetes such as land , gold , or houses at todays prices and pay them off with inflated dollars over the period of the loan. I have my house and land payed for but property taxes keep eating away at it and those rise with inflation. I have his and hers vehicles at low interest rates that are worth about what I owe on them at any given time and I expect to drive at least one of them 100K after the last payments are made so I consider the asset of the vehicles as a wash. Then there is the tractor. Zero percent interest, no way to wear it out over the life of the loan and a solid asset once it is payed for and no property taxes or registrations to pay on it each year. Yes I have debt. But the debt I have is balanced by the value of the collateral so I have a positive net worth even if real estate prices take another dive down to what liveing space is really worth. And if inflation hits I will pay off the last of those loans with inflated dollars in effect getting a big discount on the purchase price where if I had just left cash in the bank inflation would have eaten away at the value of my account.