So... I built a business. It's fuckin' expensive. We've got a business loan with a balance of over a quarter million dollars on it. And my wife got a medical degree. there's nearly a quarter million dollars on that one, too. My family is a half million dollars in debt before you even get to the house. But I realized last week that if you take the appreciation on the house and subtract the business loan from it, we're tens of thousands of dollars in the black. I could sell my house right fuckin' now and pay off the loan. BAM. But I'm not going to do that. Because see we got a TARP bailout which means the thing will be paid off in like nine years. And that TARP bailout was on our mortgage, which was refinanced over ten years ago. And the student debt? Income-based repayment. And the loan counts as a loss. Which we get to depreciate over a number of years. And we make 360 payments and the loan is forgiven. Income-based repayment on that sucka right now covers about 1/5th the interest on the loan. My family is a half million dollars in debt and deeply fat and happy. If I were a 1040EZ kinda guy I'd be fucked but since I've gotten in the habit of playing with six-figure balances I've learned some of the horrific games rich people play. To even get the loan we had to get all sorts of insurance to prevent against hardship and loss so there really aren't many things that could go wrong that would actually put my family in financial jeopardy. The business? Sure. But it doesn't run around in a tutu so I don't give a fuck. It's a symptom of the problems we're in that you need to go to school for six weeks to be legally allowed to cut hair but a quarter million dollars in debt? Sign on the dotted line. On the one hand, any schmuck who bought this house in 2001 would be sitting pretty. On the other hand, any schmuck who bought this house in 2001 would have faced weekly or monthly exhortations to open a line of credit, take a 2nd mortgage, refinance over and over again (and reset the 30-year clock) and piss away her investment. "Here - we're going to give you a whole bunch of money! Then we're going to spend the rest of your life tricking you out of it! Welcome to capitalism!" Our basic problem is we live in a caveat emptor society and we teach our citizens exactly nothing about what they should be aware of or how to stay out of danger.
To clarify, I have nothing against debt. I've taken on housing and business debt, made money on the former and plan to on the latter. Debt is neither good nor bad in its own. What's bad is artificially derisking debt in such a way that a few people make a lot of money off of it, while the risk is spread across the US taxpayer. Caveat emptor doesn't quite describe that situation, because debt is being foisted on you and I through no consent of our own, with little chance of reaping any of the benefits. My two specific examples, the 30yr fixed and the interest deduction are both cases that encourage people to take on way more debt (risk) than they probably should. I could finance an $800,000 house if wanted to, according to Fannie Mae's guidelines. The taxpayer would be paying for my foreclosure within a couple years if I actually did that.