More Debt = More Wealth

[Josie]

Do you agree with this statement - "The more money you borrow, the wealthier you are."

 

[tacomancer]

I think it depends on the situation. For example, if you are using that debt for an investment with a higher return than you can be generating wealth even though you are technically in debt. Alternatively, if you are using debt for a big screen TV and things that do not have a lasting value, you are reducing your wealth.

 

[Aunt Spiker]

No, borrowing money does not reflect wealth - it reflects your deficit and what you do not have to begin with.

If you borrow to try to increase profits (like prongman said) then you're gambling and you're only wealthy *later* if your debted investment pays off. . . and your wealth is only calculated *after* your debt is gone - so debt might be a way to gain profits but debt will be deducted from those profit-margins until your debt and interest in paid off.

 

[tacomancer]

No, borrowing money does not reflect wealth - it reflects your deficit and what you do not have to begin with.

If you borrow to try to increase profits (like prongman said) then you're gambling and you're only wealthy *later* if your debted investment pays off. . . and your wealth is only calculated *after* your debt is gone - so debt might be a way to gain profits but debt will be deducted from those profit-margins until your debt and interest in paid off.

prongman? That is truly awesome :lol: (seriously, I like prongman better than progman, its somehow more manly)

Also, it depends on the type of investment. Some can be sold off later for a profit while others can generate profits in a way that is continually paid out.

 

[Aunt Spiker]

LOL - sans "N" Progman.

But - investing is risky business. . . its' more akin to gambling. I would only count profit-post-debt if the debt is truly erased, leaving the profit behind.

 

[Gabriel]

hrm.. well, if everyone were to go pay their debt off we'd run out of money.

 

[MKULTRABOY]

My family is less in debt than the average family, yet I see other people my age with much nicer cars etc. So I put 'other'.

 

[tacomancer]

LOL - sans "N" Progman.

Nah, now I really like the idea of being megaprongman.

But - investing is risky business. . . its' more akin to gambling. I would only count profit-post-debt if the debt is truly erased, leaving the profit behind.

Agreed, but as long as its yours, its wealth.

 

[Aunt Spiker]

Nah, now I really like the idea of being megaprongman.

Agreed, but as long as its yours, its wealth.

If you have to pay it back to someone - it's not wealth.

 

[tacomancer]

If you have to pay it back to someone - it's not wealth.

Somewhat, yes, again, I think it depends on the situation and nature of the investment.

 

[Gabriel]

If you have to pay it back to someone - it's not wealth.

Well a debt is a perceived value or worth by the institution making the investment on whatever it might be. Since the bank really does make the loan out of thin air the value of the loan is determined by a subjective value of the borrower. Clearly the loaner believes the individual making the loan is able to pay back more then they borrowed. The real asset is obviously the borrower and their promise to pay it back. So debt may be a reflection of financial value of said thing.

EDIT: Further it maybe veiwed that the institution making the loan believes the borrower is worth more then the amount owing .. so debt is not even a full recognition of the actual value of the borrower.

 

[Gabriel]

hrm.. well, if everyone were to go pay their debt off we'd run out of money.

This is because the bank charges interest mainly.

 

[Harry Guerrilla]

Do you agree with this statement - "The more money you borrow, the wealthier you are."

There are only a few instances when debt will lead to wealth.

Investment in appreciating assets and investment in money saving assets.
That's really it.

Wealth is not a measurement of how much stuff you have.

 

[jujuman13]

prongman? That is truly awesome :lol: (seriously, I like prongman better than progman, its somehow more manly)

Also, it depends on the type of investment. Some can be sold off later for a profit while others can generate profits in a way that is continually paid out.

Every little helps.

 

[Kandahar]

Do you agree with this statement - "The more money you borrow, the wealthier you are."

Depends what you're spending the money on, and why. If you're borrowing money for something worthwhile (e.g. college education, a cheap car to get to work, starting a business, investments that pay a higher interest rate than your cost of capital) then yes, it will make you wealthier. If you're borrowing money for consumer goods (e.g. a trip to the Bahamas, a brand new car, a big-screen television), then borrowing money will financially ruin you eventually.

 

[obvious Child]

If I borrow at 2% and earn at 6% (and assuming adequate cash flow to meet debt servicing time lines) am I better off?

Absolutely.

 

[Gabriel]

OK.. serious business here... If no one had any debt no one would have any money.

Where do you think money comes from? Some magical thing that exists on it’s own? Poof.. suddenly people just have money.

 

[Harry Guerrilla]

OK.. serious business here... If no one had any debt no one would have any money.

Where do you think money comes from? Some magical thing that exists on it’s own? Poof.. suddenly people just have money.

Well it depends on what kind of money system your talking about.
With fractional reserve lending removed, yea our currency would deflate heavily.
But there would still be money, less of it and more valuable.

 

[teamosil]

Borrowing money has no effect on your wealth. Wealth is your assets minus your liabilities. So, say you borrow $10k, your assets go up by $10k, your liabilities go up $10k, and it's a wash.

Now, that said, a decision to borrow can certainly indirectly effect your wealth over time. If you are doing something with that money that is generating a higher rate of return than the interest payments on the debt, then it increases your wealth. If you are doing something with that money that generates a lower rate of return, or if you're using the money on stuff that has no return, you're obviously losing wealth. If you take out a loan to expand your business, or potentially to renovate your home even, it may well be a very smart move. If you take out a loan to pay for your cable and a trip to Hawaii, it is not a good move in terms of your wealth.

 

[Lord Tammerlain]

Answer is other

It all depends on what the money borrowed was used for

Used to purchase a rental property that generates enough cash flow to cover the mortgage and other associated costs of the rental property then yes you will be wealthier (provided things go reasonably well.

If you use the money to go on a world wide vacation, you will have a wealth of experiences, but be far worse off in monetary wealth

Overall like most things debt can be good or bad depending on how it is used, and how much of it you have

 

[Gabriel]

Well it depends on what kind of money system your talking about.
With fractional reserve lending removed, yea our currency would deflate heavily.
But there would still be money, less of it and more valuable.

hrm.. interest makes it impossible to pay off more then you borrowed.

EDIT: that would also include the government paying it's debt off.

 

[Mell]

Do you agree with this statement - "The more money you borrow, the wealthier you are."

No, I dont agree, unless you find a way to use the money you borrow to make more money than the interest you will have to pay for borrowing it.

 

[peepnklown]

I’m wealthy!
I have 600,000 in debit and I make 10,000 a year, YAY! :doh