Debt - Back to the Future

There is nothing wrong with debt, in principal, but needs to be used in the right way. For example, take a home. Brinks and mortar probably will last, say 100 years until things like the roof needs replacing, so its not unreasonable to pay for that roof with a 100 year mortgage, and so on with the rest of the house. So, its not unreasonable to borrow to pay for this asset.

however, the oven may well only last 10 years, so here, borrow for just a 10-year term. Perhaps the whole thing has an average life of 30 years.

Now, you get a choice, a big house or a small one, an expensive one, or a cheap one. Whatever you decide you clearly have to have earnings to service your mortgage. Debt means you borrow from the future, and you dont know what job you will have, or indeed what other commitments you will have, let alone, how inflation will change those earnings. Lets look at some numbers....see you really dont know by an order of 5!

Inflation. Now we're talking. Youve been duped. When I hear you talk you 'assume' there will be inflation, you assume you will be successful, and you assume prices always go up. Wake-up call ... its 2009 and things aint so simple anymore (in fact they never were, but you were duped into thinking you knew how eceonomies work!). You are not alone, the powers that be didnt read the hiostory books either and perhaps even aided and abetted you.

Now look at the nation and its debt, and unfunded liabilities ... looks grim huh....