Mish, they haven't gone off the deep end per se. On the first page is the assumption on which their entire "myths" argument hinges:
"This suggests that the vast majority of debt is used to acquire assets, not spent on transitory consumption that yields no future potential returns".
(note: of course, by "assets" they mean primarily housing and also equities).
So its really quite simple. If you believe that a house is an "asset", then there is really no problem. If you believe that owning a house is "consumption" then we are toast.
Of course, you know where i stand on this argument. In my opinion, real estate is in fact CONSUMPTION; it has been shown to my satisfaction, beyond a shadow of a doubt, that adjusted for inflation, larger home sizes, property taxes, and upkeep, that real estate does not provide a REAL rate of return. I frankly don't care to argue this point, as it has been argued to death on any number of threads in SI over the last 4 years, and a simple Google search will bring many of the academic articles of which i am speaking.
So it's really quite simple, and hinges on a single assumption. Is real estate an ASSET, that provides REAL, after-tax cash returns, or is it CONSUMPTION. Once you answer this question you have answered all the others, IMO (well, not ALL questions, but all questions related to the appropriatness and sustainability of consumer debt).
Cheers |
