[lbo-talk] frontiers of financial innovation

Doug Henwood dhenwood at panix.com
Wed Jan 19 13:52:20 PST 2005


Jordan Hayes wrote:


>Doug writes:
>
>> Lesse, borrow money at floating rates to buy a house that
>> you can only afford if rates stay low and the price
>> appreciates ("Ponzi finance," in Minsky's terminology).
>
>I don't know where you got your bad attitude about home ownership, but
>it's downright un-American :-)

Yup, I know.


>I think this is a vast mischaracterization of this product.

If people borrow a reasonable amount of money at a fixed rate to buy a house they can comfortably afford, that's one thing. If they stretch beyond their means in the hope that 1) their income rises, 2) rates stay low or fall even, and/or 3) prices appreciate, they're being insanely reckless with their primary residence. If they want to gamble, there's Vegas or the CBOE.

Doug



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