Fiat Economics

Got a couple of guys trying to convince me that if our government takes on more debt it “somehow” {insert Trickle Down magic math}” increases the wealth of Citizens and or the Nation”

In REAL Life it does exactly the opposite because of several factors

1) Interest costs which apply any time a fiat money nation (Like the USA) prints more dollars without a balancing deposit of value in our treasure in Fort Knox). These can be direct interest, as in we paid an x dollar value to others, or they can be “hidden” interest costs (taken from Citizens spending power by inflation)

Their first example was to claim that if I bought a truck for $50 K I’d gained a truck worth $50 K. This is patently untrue because IRL the vast majority of ppl take out a loan to buy that truck and there are costs involved with that loan; including origination and interest costs 
It’s also patently untrue because IRL the very second you drive that truck off the lot you LOSE ~30% of the value… which loss is unrecoverable. (Yes folks IRL depreciation IS a real, cash, cost. Lost $ is a loss no matter how you obfuscate it with pretty names)

Thus in the Truck example the formula IRL looks like this:

($50k loan) +I%= (<$50k × 0.7)

IRL no matter how you obfuscate it you LOSE $15k PLUS the interest. This simple reality is entirely exclusive of the FACT that, until the loan is paid off in full, if you default you ALSO LOSE every dime you paid in the loan and all the costs of the repossession as an additional debt

Thier second example was a house… which they claim is “different” because it supposedly appreciates. 

The same simple math & facts apply here, but at a higher level of cost

Here’s the cost (loss) structure of a standard 30 yr mortgage at 4%

Now, IF the market gains you that $86k (or more) you’ve won but if the home is repossessed, then IRL you lose that potential gain, the original asset, AND any money you’ve paid out in interest and principal. Thus until the loan is paid in full the loss is very real while the gains are entirely theoretical. Aka: A Net Loss 

Until the loan is paid off in full, that house is a net loss because of the interest required to be paid in addition to the principal and the Fact that you lose ALL the principal paid off of there’s a default & repossession in addition to losing the asset. As with stocks any suppose gains from appreciation are entirely mythical until after the loan is paid in full.

Whether it’s an individual, or a nation, we’re discussing these facts still hold true. Debt NEVER EVER increases wealth.

They tried to claim that a sovereign nation printing money (aka: taking on more debt because it’s fiat money) is “somehow” {insert Trickle Down magic here} a net gain for Citizens while conveniently ignoring the costs of interest payments and any fees involved

Here’s where that is proven to be false

http://www.usdebtclock.org
If you’re paying interest, taking on debt is ALWAYS a Net Loss in and of itself until that loan is paid off in full. To claim otherwise is simply disengenuious… at best.

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