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Comment by njarboe | Hacker News Reader

There are most certainly many things deeply wrong.

Most people have negative savings every year. They have more debt. If one has bought a house, then it is very easy to go into more debt every year, when house prices are rising. Then they fall.

Since the beginning of written history (the first written records are records of debts) there are stories and parables about the evil of debt and the need for debt jubilees. Also the idea that lending with interest is immoral is found through out time. Having such easy access to debt/credit from strangers seems not to work well over the long term for human societies.

I mean, is it a good thing that one can get a "Rocket Mortgage" where you can "Get Approved Fast. Get an approval to buy a home or refinance your mortgage in minutes."? [1]

[1] https://rocket.quickenloans.com/

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> Since the beginning of written history (the first written records are records of debts) there are stories and parables about the evil of debt and the need for debt jubilees. Also the idea that lending with interest is immoral is found through out time. Having such easy access to debt/credit from strangers seems not to work well over the long term for human societies.

I suppose shrimp and pork and beef are also unquestionably evil... Debt didn't historically work because property rights were poorly recorded. This meant enforcing one's debt involved mafia tactics. Modern debt is cleaner and subject to bankruptcy, a process that occurs on a case-by-case basis when it's needed, a far better solution than randomly cancelling debt every so many years.

Well, the trend is now removing bankruptcy on certain forms of debt as an option, replacing it with cancelling it after X years. This is student debt.

That isn't new and it only applies to very specific cases: student debt is one of a very short lists of debt that aren't cancelable via bankruptcy.

It is new.

Easy access to credit is an important component to a free market. Making borrowing illegal just leads to all sorts of inefficient contortions to do it another way.

For example, businesses often need to borrow money in order to get started.

For another, "bridge" loans and "revolving lines of credit" allow a business to operate when the timing of receiving payments does not line up with the timing of when bills are due.

Forgiving debts means that interest rates must rise to cover those losses.

> Forgiving debts means that interest rates must rise to cover those losses.

Exactly. Interests rates are way too low at the moment.

I agree credit can be very useful and good, but most people are not using debt to try an investment that allows them to pay back the debt and make some profit. They are buying consumables: dinners out, clothing, gadgets, vacations, cars, even housing is really a cost of something you are using. A depreciating asset and not an investment. I think it would be really good to use some of this education everyone gets to get across the fact that consuming using debt with is very bad. Some counter to all the other marketing in the world that says, "Buy, buy, buy". Not immune to it myself.

The problem again is that consuming using available funds is not possible if you need to work 10 years of median salary for it - that in the more affordable states.

The figures mentioned use full salary, in reality you might get some 50% of that possible to allocate to paying off the debt. You still get to pay utilities, cost of life for the family, transportation, education and probably extras. Note I've even ignored any savings - and with high mortgage debt, you can be wiped out by any more expensive health problem.

True; house prices are crazy high in some areas. A decent 3 or 4 bedroom house can be built for 100-200 thousand dollars. In these expensive places, land is the major cost. People can bid up the land cost of housing because of loans especially ones with low down payments. If people had to have %50 down, like not that very long ago, buying a house would be much more inline with incomes. Anywhere where rent is much cheaper than house payment + prop tax + upkeep, the prices are being push higher by home ownership subsidies/lock out of one kind or another.

As a counterpoint Arab traders did very well for hundreds of years without interest (until Europeans came). Interestingly they are probably where our free market ideas come from: there should be no worldly market interference, the market is shaped by the invisible hand which means the rules given by god.

Interest based credit is important for capitalism (use money to make more money), but certainly not for market economies (Use money as a tool to exchange goods you want/need). Both are distinct and can exist independently.

Islamic banks are issuing loans without interest to this day. They have a clever fee schedule though, and I'm not sure it works out any differently for the borrower at the end of the day.

There was a Planet Money episode [1] where a bank setup a no-interest loan to a Muslim family because Islamic law prohibits charging interest.

In the end it was basically just a workaround that was effectively the same as charging interest and that same Muslim family ended up taking a conventional loan when they moved instead of an "Islamic-compliant" mortgage because it was a lot easier.

[1] http://www.npr.org/sections/money/2016/05/13/477956675/episo...

We no longer have a free market. Central banks print and buy stocks, bonds, and mortgage backed securities. China prints and their citizens buy homes in foreign countries.

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