Regarding the first house selling for $1M ... He originally paid $100K for it, paid $20K up front, and owes the bank $80K. So, after all the dust settles, he should profit overall only $900K at most ($1M gained, $100K spent), if we disregard interest, fees, taxes, etc. So, after paying back the bank the $80K loan, he keeps $920K from the sale, where $20K of that was his original down payment. So, he is net $900K richer than before, and he goes to Costa Rica with $920K, not $940K.
@AUSM92 I suspect you'll find that the vast majority of that is state pension provision, not benefits. Unless you don't want a pension? Maybe pensions are just a disincentive to work until you die? Good luck with abolishing the concept of retirement!
And it very much agrees with my point that most government expenditure does not go directly to the rich, as you asserted before. You can't have it both ways.
@AUSM92 Your post is moot as you didn't understand the point I was making. Of course rich people and large organisations can make money from providing products and services to the government, just like anyone else can. The fact is though, that that is a small fraction of the economy. Therefore most people who get rich must predominantly make their money from people below them on the income scale. Where else do you think rents and the interest in mortgage repayments goes for example?
@AUSM92 I suspect you'll find most of that is state pension provision, not benefits. Unless you don't want a pension? Maybe pensions are just a disincentive to work until you die? Good luck with abolishing the concept of retirement!
@AUSM92 Tax isn't theft. Every civilised country has it and it's generally avoidable: stop earning money.
Welfare is a small part of public expenditure. If the welfare state in your country were dismantled entirely, you'd be barely aware of a drop in tax, but you'd notice your society descend into squalor and crime. That's what you pay for.
I don't know how you work out that the rich earn all their money via government. Maybe look at where public expenditure goes before making assumptions?
@Mechness are you aware that this country did not have a personal income tax until the 20th century. And when personal income tax was passed, it was the top 1% who paid 10% of their income. It wasn't until the 30's (thanks FDR and your big government programs) did all Americans have to start paying a personal income tax. How did this country make it to the 1930's with no income tax?
@ramrants wait...so you are against the New Deal but for a /more/ progressive tax structure? how do you reconcile those two things? oh, and how they made it? slave labor, for one thing...
@AUSM92 Welfare isn't theft. It's blatantly the opposite. Rhetoric is all very well, but you need a better system to compare to before criticising. Laissez-faire capitalism and small government isn't it - you just get a taller pyramid with a tendency toward periodic collapse. Socialism sees that capitalism is flawed and attempts to address the imbalance. It's never perfectly implemented, but it's better than the alternatives. To improve on it you'd have to fundamentally change human nature.
@Mechness yes, implementing a centralized economy does require a change in human nature. This is why centralized economies are implemented through force. The USSR, China, Cuba are just a few examples of how wonderful that system is. Everyone is poor or dead.
Yeah he would only have $920k (minus taxes of course) plus he would have been paying interest over those 10 years so his net gain would not have been quite $900,000 but the principal is the same, there is no good reason why a house bought in 1995 for $100k should be worth $1 million ten years later.
"....this wasn't real investment...." This is exactly what Peter Schiff said when he won his penny bet vs. Art Laffer. Unfortunately, hindsight is 20-20.
GOOD EXPLANATION, IT'S JUST THAT IT'S WRONG. the economy as it is is dependant of constant growth , because of interest. Just imagine constant growth in a closed system - a bobble (inflation) , and a blow. read people! You tube does not have it all. search with your heart . the truth is out there.The Natural Economic Order
@rbmaserang re: your comment to knowledgeaboveall &yakyakyak69
your accusation that they are 'ignorant uneducated scum', is totally devoid of any explaination. The only thing that anyone can infer from your comment is that in your opinion, anyone who hasn't studied economics at university, and who's world view differs from yours, is 'an idiot'
The fact is, if you just believe all the books, and don't take a look around you, then I'm afraid your own insults should be thrown right back at you.
@rbmaserang I did not comment on this video to insult you and do not appreciate being insulted in return for stating fact. Your vulgar expression is false when you reference me as uneducated I have a couple of bachelors degrees and a masters that states otherwise. Take a look around you and research for yourself. Do not believe what people are telling you to believe. There is a reason that simple things seem so hard to rectify in the world. Who is pulling the strings? Not me and not you.
The system is rigged. They dont care if the banks go bust. What they want is to buy the property cheap from a broke population that becomes tenants who cannot pay interests on their own property but just pays to be able to live under a roof, and gets nothing: no savings, no house at the end, no property to leave their children. They want money for nothing. We ALL become serfs.
Just one small error, the seller of the first house gets 920K after paying off his 80K loan after selling the house for 1M. He does NOT get his initial 20K down payment back. That would be absurd.
but in the modern times.......money creation depends on the debt....as more the loans are more money banks create....look for money as debt videos.......
When you tell me these things some of my old collegues' stories comes to mind. - How they kept getting richer and richer, took out new loans and improved their houses etc. Hahaha, if I knew what you say now, I'd sure be preaching, haha.
Thank you for your insights, this is extremely interesting.
Home improvement is real investment. It creates an asset (the pretty rec room and kitchen) that is expected to provide value for someone in the future. The problem is that it's even more grossly overvalued than the house. So they overpay for it. They might expend $200k of factors of production to produce improvements that are really only worth $20k as a stream of imputed revenue.
Some dodgy arithmetic here. So we're ignoring the interest payments, but the seller of the house on the left ends up buying a $100K house for $60K. He should be moving to Costa Rica with only $900K. You've knocked his $20K equity off the cost of the house at the start - that makes sense. Then you've taken $20K off the mortgage before settling it AND then given him the 20$ back as well. He's $40K up on the deal.
The problem is when the link between loan and average income is lost. But its not lost money, its money that was always an illusion, it never existed as value. I have done it but I bought 1972 (UK). Now house is worth 36 times what it was then. Along the way there was 16 percent Inflation which helped lots. Really houses are to live in, not speculative investment. Houses DID go down in values in the 1930s.
basically money is just an idea. the market value of a house at any particular point in time is a sentiment for that particular asset. sentiments vary as people look to other outside indicators ie: stock market, geopolitical issues, environmental issues even, etc...yes there is no 'wealth' now, but time was the main factor. the wealth was not 'illusionary', rather, that's not the best word for it....since if you sold at the right time, wealth would be present.
The world needs confidence in the US $ Dollar NOT more hyperinflation & US Debt! We need LESS US Central Planning, MORE oversight and a REAL free market.
Printing MORE fiat US $Dollars to encourage more Wall Street greed will debase the currency, end confidence in the $Dollar and cause a MUCH larger collapse later!
Real Estate AND the stock market MUST be allowed to return to their TRUE value NOW before the problem grows any larger!
Capitalism is about each person wanting to keep his own money. Let's call that greed, to concede your point. Socialism is about wanting to take someone else's money. That too is greed, but it has another element: theft. We all are greedy, certainly you are. You want more money, and if I ask you for $5, you will say no because it's yours (your capitalist greed at work). Under socialist greed, I could take your money by force. Now which is better?
No. Those with capital can increase their wealth using the labor of others. This increases the burden on the poor, while rewarding the wealthy simply for being rich.
Socialism guarantees a minimum standard of living. Because the poor spend all their income there is little net cost, yet it stabilises the economy as then there are more consumers spending.
Conservatism aims to erode this mechanism for short term gain. Resulting in a crash when the base of the pyramid can not pass up more wealth.
@Mechness this is wrong on so, so, so many levels. First, those with capital increase their wealth as well as those providing the labor. Those providing the labor don't work for free - they are paid with capital.
Socialism does guarantee a standard of living - it guarantee's everyone is poor.
Wealth does not pass up, it passes down. Those at the "base of the pyramid' have the least amount of wealth, with little disposable income. There is little/nothing to pass up.
What bothers me is the printing of money with no true value. The fact is this has been going on since before Kennedy. The world bank can completely dissolve our nation and others by us buying into the ideology that we can lean on false currency which is all determined World Bank standards. This makes a nation of slaves eating from the hand of some shadowy figure behind a desk somewhere. But then again everyone is afraid because no one knows whatelse 2 do.
This is the plain truth which is omitted from economics classes and the media.
If one studies the events surrounding the the economic slumps and booms since the middle ages, it's clear that private central banks covertly engineer, via a plethora of tactics, situations where nations have little choice but to concede to the greed of a very few unknown individuals. Unfortunately as a consequence, a totalitarian oligarchy thrives.
@knowledgeaboveall this is a fallacy. gold has no intrinsic true value either -- the only reason it's rising right now is psychological -- people /perceive/ it to be intrinsically valuable. but really, it's a mostly worthless, if attractive, metal. money is a social construct; it's an accounting tool, not a commodity. and what's all this about the world bank? the Fed determines our money supply, dude
@knowledgeaboveall Actually printing money just redistributes wealth. The new money does have true value as the new money becomes a vehicle for redistributing wealth.
Regarding the first house selling for $1M ... He originally paid $100K for it, paid $20K up front, and owes the bank $80K. So, after all the dust settles, he should profit overall only $900K at most ($1M gained, $100K spent), if we disregard interest, fees, taxes, etc. So, after paying back the bank the $80K loan, he keeps $920K from the sale, where $20K of that was his original down payment. So, he is net $900K richer than before, and he goes to Costa Rica with $920K, not $940K.
DaveJLin 1 month ago
money huh?
heyathere1000 6 months ago
@namewasavailable It's a book , written by Silvio Gesell - THE NATURAL ECONOMIC ORDER.
It refers to Interest as an unnecessary evil, and proposes another way.
dold1tflkin 10 months ago
@AUSM92 If you ever had a point to make, I missed it.
Mechness 10 months ago
Really great videos! Would be great if Sal could make one about "Wealth Construction" as well..
87ddda 11 months ago
Brilliant video ! Love all your videos on finance and the Credit Crisis. Thank you Sal
exemsexis 11 months ago
@AUSM92 I suspect you'll find that the vast majority of that is state pension provision, not benefits. Unless you don't want a pension? Maybe pensions are just a disincentive to work until you die? Good luck with abolishing the concept of retirement!
And it very much agrees with my point that most government expenditure does not go directly to the rich, as you asserted before. You can't have it both ways.
Mechness 11 months ago
@AUSM92 Your post is moot as you didn't understand the point I was making. Of course rich people and large organisations can make money from providing products and services to the government, just like anyone else can. The fact is though, that that is a small fraction of the economy. Therefore most people who get rich must predominantly make their money from people below them on the income scale. Where else do you think rents and the interest in mortgage repayments goes for example?
Mechness 11 months ago
@AUSM92 I suspect you'll find most of that is state pension provision, not benefits. Unless you don't want a pension? Maybe pensions are just a disincentive to work until you die? Good luck with abolishing the concept of retirement!
Mechness 11 months ago
@AUSM92 Tax isn't theft. Every civilised country has it and it's generally avoidable: stop earning money.
Welfare is a small part of public expenditure. If the welfare state in your country were dismantled entirely, you'd be barely aware of a drop in tax, but you'd notice your society descend into squalor and crime. That's what you pay for.
I don't know how you work out that the rich earn all their money via government. Maybe look at where public expenditure goes before making assumptions?
Mechness 11 months ago
@Mechness are you aware that this country did not have a personal income tax until the 20th century. And when personal income tax was passed, it was the top 1% who paid 10% of their income. It wasn't until the 30's (thanks FDR and your big government programs) did all Americans have to start paying a personal income tax. How did this country make it to the 1930's with no income tax?
ramrants 10 months ago
@ramrants I think you need to study your history more closely.
Mechness 10 months ago
@ramrants wait...so you are against the New Deal but for a /more/ progressive tax structure? how do you reconcile those two things? oh, and how they made it? slave labor, for one thing...
TallFastLoud 4 months ago
@AUSM92 Welfare isn't theft. It's blatantly the opposite. Rhetoric is all very well, but you need a better system to compare to before criticising. Laissez-faire capitalism and small government isn't it - you just get a taller pyramid with a tendency toward periodic collapse. Socialism sees that capitalism is flawed and attempts to address the imbalance. It's never perfectly implemented, but it's better than the alternatives. To improve on it you'd have to fundamentally change human nature.
Mechness 11 months ago
@Mechness yes, implementing a centralized economy does require a change in human nature. This is why centralized economies are implemented through force. The USSR, China, Cuba are just a few examples of how wonderful that system is. Everyone is poor or dead.
ramrants 10 months ago
best cliff hanger ending
degauze 1 year ago
I can see good illustration of wealth destruction here..
markfuller042 1 year ago
if he gets $1m for his house and owes 80k...surely he goes to "costa rica" with 920k....not 940k...I'm confused
evereddy 1 year ago
@evereddy
Yeah he would only have $920k (minus taxes of course) plus he would have been paying interest over those 10 years so his net gain would not have been quite $900,000 but the principal is the same, there is no good reason why a house bought in 1995 for $100k should be worth $1 million ten years later.
theporksicle 11 months ago
Hi there Firstly thanks for the video. Just 2 questions: 1) which prog are you using for the screen recording and 2) does it work on the Mac
Thanks
Mimimounir 1 year ago
"....this wasn't real investment...." This is exactly what Peter Schiff said when he won his penny bet vs. Art Laffer. Unfortunately, hindsight is 20-20.
wabio 1 year ago
GOOD EXPLANATION, IT'S JUST THAT IT'S WRONG. the economy as it is is dependant of constant growth , because of interest. Just imagine constant growth in a closed system - a bobble (inflation) , and a blow. read people! You tube does not have it all. search with your heart . the truth is out there.The Natural Economic Order
By Silvio Gesell
Translated by Philip Pye M.A.
dold1tflkin 1 year ago
Comment removed
rbmaserang 1 year ago
@rbmaserang re: your comment to knowledgeaboveall &yakyakyak69
your accusation that they are 'ignorant uneducated scum', is totally devoid of any explaination. The only thing that anyone can infer from your comment is that in your opinion, anyone who hasn't studied economics at university, and who's world view differs from yours, is 'an idiot'
The fact is, if you just believe all the books, and don't take a look around you, then I'm afraid your own insults should be thrown right back at you.
Y0UTUBERCUL0SIS 1 year ago
@rbmaserang I did not comment on this video to insult you and do not appreciate being insulted in return for stating fact. Your vulgar expression is false when you reference me as uneducated I have a couple of bachelors degrees and a masters that states otherwise. Take a look around you and research for yourself. Do not believe what people are telling you to believe. There is a reason that simple things seem so hard to rectify in the world. Who is pulling the strings? Not me and not you.
knowledgeaboveall 1 year ago
The system is rigged. They dont care if the banks go bust. What they want is to buy the property cheap from a broke population that becomes tenants who cannot pay interests on their own property but just pays to be able to live under a roof, and gets nothing: no savings, no house at the end, no property to leave their children. They want money for nothing. We ALL become serfs.
gunthaarz 1 year ago
Is there stilll money to be made in this type of situation ex. buying wholesale at 250K or is this still a bad market to invest in.
5959512 2 years ago
I think the problems with this analysis would be cured if you spoke in terms of wealth TRANSFER rather than wealth destruction.
YusefAsabiyah 2 years ago
Just one small error, the seller of the first house gets 920K after paying off his 80K loan after selling the house for 1M. He does NOT get his initial 20K down payment back. That would be absurd.
mike11022 2 years ago
wow, your hindsight is 20/20
gibnaroomy 2 years ago
but in the modern times.......money creation depends on the debt....as more the loans are more money banks create....look for money as debt videos.......
pagalmadman1 2 years ago
... or simplified debt = disaster. The modern English translation of the latin "Mort-gage" is a handshake with death.
PeterSodhi 2 years ago
@PeterSodhi i think that one is closer tied to marr- iage
rbmaserang 1 year ago
Sal, this is so funny!
When you tell me these things some of my old collegues' stories comes to mind. - How they kept getting richer and richer, took out new loans and improved their houses etc. Hahaha, if I knew what you say now, I'd sure be preaching, haha.
Thank you for your insights, this is extremely interesting.
MatteNoob 2 years ago
Home improvement is real investment. It creates an asset (the pretty rec room and kitchen) that is expected to provide value for someone in the future. The problem is that it's even more grossly overvalued than the house. So they overpay for it. They might expend $200k of factors of production to produce improvements that are really only worth $20k as a stream of imputed revenue.
dsws2 2 years ago
Some dodgy arithmetic here. So we're ignoring the interest payments, but the seller of the house on the left ends up buying a $100K house for $60K. He should be moving to Costa Rica with only $900K. You've knocked his $20K equity off the cost of the house at the start - that makes sense. Then you've taken $20K off the mortgage before settling it AND then given him the 20$ back as well. He's $40K up on the deal.
Mechness 2 years ago
The problem is when the link between loan and average income is lost. But its not lost money, its money that was always an illusion, it never existed as value. I have done it but I bought 1972 (UK). Now house is worth 36 times what it was then. Along the way there was 16 percent Inflation which helped lots. Really houses are to live in, not speculative investment. Houses DID go down in values in the 1930s.
gunsandroses1111 3 years ago
basically money is just an idea. the market value of a house at any particular point in time is a sentiment for that particular asset. sentiments vary as people look to other outside indicators ie: stock market, geopolitical issues, environmental issues even, etc...yes there is no 'wealth' now, but time was the main factor. the wealth was not 'illusionary', rather, that's not the best word for it....since if you sold at the right time, wealth would be present.
mark7996 2 years ago 6
thanks for your vids. get me keeping up with some important and useful theory. cheers
manoman0 3 years ago
THANKS A LOT- IT WAS GREAT!
Lovela11 3 years ago
great video
thanks a lot
Patrickthedutch 3 years ago
Thanks Sal! Now it's time to watch the vice-presidential comedy show. Where's my popcorn?!
pongman 3 years ago
Corporatism LOVES Socialism!
The world needs confidence in the US $ Dollar NOT more hyperinflation & US Debt! We need LESS US Central Planning, MORE oversight and a REAL free market.
Printing MORE fiat US $Dollars to encourage more Wall Street greed will debase the currency, end confidence in the $Dollar and cause a MUCH larger collapse later!
Real Estate AND the stock market MUST be allowed to return to their TRUE value NOW before the problem grows any larger!
Bailout? HELL NO!!
yakyakyak69 3 years ago
They love it because they get less competition. Hell, just look at how much American car companies have bitched and moaned for import quotas.
Shadyhunter04 3 years ago
a real free market ? lol
we have nothing but trouble by the free market system.
Because you have only one thing that you must understand my friend, the whole economic drives on greed, and fear.
Thats the only two.
Greed, because its never enough, and fear of losing what they have.
Thats all, and thats why it all is doomed to fail. From the beginning of.
I call it the origin of sin human element.
Patrickthedutch 3 years ago
Capitalism is about each person wanting to keep his own money. Let's call that greed, to concede your point. Socialism is about wanting to take someone else's money. That too is greed, but it has another element: theft. We all are greedy, certainly you are. You want more money, and if I ask you for $5, you will say no because it's yours (your capitalist greed at work). Under socialist greed, I could take your money by force. Now which is better?
AdamSmith102938 3 years ago
No. Those with capital can increase their wealth using the labor of others. This increases the burden on the poor, while rewarding the wealthy simply for being rich.
Socialism guarantees a minimum standard of living. Because the poor spend all their income there is little net cost, yet it stabilises the economy as then there are more consumers spending.
Conservatism aims to erode this mechanism for short term gain. Resulting in a crash when the base of the pyramid can not pass up more wealth.
Mechness 2 years ago
@Mechness this is wrong on so, so, so many levels. First, those with capital increase their wealth as well as those providing the labor. Those providing the labor don't work for free - they are paid with capital.
Socialism does guarantee a standard of living - it guarantee's everyone is poor.
Wealth does not pass up, it passes down. Those at the "base of the pyramid' have the least amount of wealth, with little disposable income. There is little/nothing to pass up.
Get a clue.
ramrants 10 months ago
What bothers me is the printing of money with no true value. The fact is this has been going on since before Kennedy. The world bank can completely dissolve our nation and others by us buying into the ideology that we can lean on false currency which is all determined World Bank standards. This makes a nation of slaves eating from the hand of some shadowy figure behind a desk somewhere. But then again everyone is afraid because no one knows whatelse 2 do.
knowledgeaboveall 2 years ago 5
@knowledgeaboveall i really wonder who's behind it all . there's definitely some person(s) pulling strings.
onion77478 1 year ago
@knowledgeaboveall you've dead right my friend.
This is the plain truth which is omitted from economics classes and the media.
If one studies the events surrounding the the economic slumps and booms since the middle ages, it's clear that private central banks covertly engineer, via a plethora of tactics, situations where nations have little choice but to concede to the greed of a very few unknown individuals. Unfortunately as a consequence, a totalitarian oligarchy thrives.
AUDIT THE FED!!!
Y0UTUBERCUL0SIS 1 year ago
@knowledgeaboveall this is a fallacy. gold has no intrinsic true value either -- the only reason it's rising right now is psychological -- people /perceive/ it to be intrinsically valuable. but really, it's a mostly worthless, if attractive, metal. money is a social construct; it's an accounting tool, not a commodity. and what's all this about the world bank? the Fed determines our money supply, dude
TallFastLoud 4 months ago
@knowledgeaboveall Actually printing money just redistributes wealth. The new money does have true value as the new money becomes a vehicle for redistributing wealth.
Ksblue 3 months ago
Very good video, thanks!
blahduh 3 years ago