Debt & Ownership
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- čas přidán 31. 05. 2024
- "And we've created this quite interesting set of financial outcomes where we've really, really rewarded people who took quite risky economic actions, which is to take on huge amounts of debt and to buy huge amounts of assets and take huge amounts of price risk but they have made money because prices have gone up."
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Performed by Gary Stevenson
@garyseconomics
Produced by Simran Mohan
@mohanmedia
TIMESTAMPS
00:00 - Snippet Introduction
00:23 - What is Debt?
04:16 - Who Owns the Debt?
08:58 - Debt is a Form of Ownership
14:00 - Who takes the Price Risk?
17:13 - Debt has Devalued
21:13 - Who Really Owns Things?
Public debt is private savings
And don't forget around a quarter is owned by the Bank of England!
Thats super interesting. Wonder what your thoughts are on investing on gold?
@@missma7882 History has proved gold is inherently dis-inflationary which is why it makes a poor currency standard and investment.
@@magiteker so are you saying investing in gold is not a good investment .
@@missma7882 investing in gold is a misnomer, gold is a store of value, not a investment.
Interesting thing to look into is, house prices historically Vs kilos of gold!
I understand all of this stuff but struggle to explain it clearly to people, they usually just think I’ve lost my mind. You did a great job!
Understanding is at a lower level than explaining. I find that it wasn’t until I had to try and teach someone a subject sis I actually begin to deeply know it myself. - try it. Pick anything & assume your gonna give a talk on it to the uninitiated. By the time you feel ready to. You will know that subject backwards 👍🏻
@@T1tusCr0w I agree 100%, and it's a theory I am familiar with. In my case it's more to do with my comfort with numbers and discomfort with words!
if you can't explain it then you don't understand it
@@bobd7307so someone with no tongue can’t know anything? Obviously choosing an extreme counterexample, but some people just aren’t gifted with words, or get flustered trying to explain concepts to people when they don’t know their base knowledge etc.
How can we invest the little we have to stay afloat?
there is an unspoken hidden slavery aspect to this as well. in enforced slavery the slave owner tells the slave which field to work in. in debt slavery the debt owner just tells the slave to work, the slave get to choose how when and where to work, but work he must. so in essence our masters use debt to own us, hence the adage "beware he who has nothing to lose".
You need help
@@Fouraday thank you for the nice words
@@Fouraday No he doesn’t, he’s just exposing the clear and obvious nature of the debt based currency system we live in. The ‘What is money’ podcast has a series on the masters and slaves of money in our economic system. Broaden your horizons dude.
@@captaindifferent7871 slavery? What an insult to those who experienced it. If you don’t want to be in debt don’t do it.
@@Fouraday good point
If we listened carefully, over the last couple of weeks we have realised that (a) the person creating the video footage is actually a dentist and (b) he's called Simran. He's probably a mate in the same block doing a favour (or at mates-rates) rather than an external and faceless hired production team. So, hats off Gary AND Simran for producing useful information in your own time!
Hi Sham, we've been mates since we were 11!
Big up Simran!!🎉
Man like Simran.
@@simran07 you are so lucky to have such a friend!
15:03. The real reason why people prefer to buy their own homes even though it means they will have to pay mortgages off over a long period of time is that once the mortgage has been paid off they own it. It means the cost of paying a large chunk of their money to someone else won't be part of their lives anymore. For someone who is retired it means they don't need to worry about giving up a chunk of their meagre pension to keep a roof over their head and heating in winter. It's security
That's exactly why I wanted to buy. I have no plans on ever releasing the equity in my home. I have no kids to pass an inheritance into so that was never a consideration. I have plans to live for as long as possible on as little money as possible. Rents only ever seem to go up and a lot of the rentals I have lived in have been poorly maintained: no hot water for months, damp, mold, insect infestations. So I'm investing in a safe place to live out my days. I'll gladly take on the cost and responsibility for repairs because I know I'll get them done for the sake of my health and my safety. I don't trust a landlord to care about my wellbeing or happiness.
Umm quite right until your no longer able to take care of yourself and care home rates will turn the tables on you. Security without Health is a dead man walking.
@@minecraftleo If you need to go into care you can sell your house if you have one. If you don't have one to sell you're dependent on the good will of your government unless you have sizable savings and/or investments.
Hahaha your last line the was killer blow 😂 I come from a corporate background working within the big4 as an auditor and have had a very similar background to you where you were raised in a working class set up! It’s music to the ears when you articulate yourself so well on the correlation between debt/money and it’s true ownership…and your doing a great job shedding light on it as most ordinary folks are selling their souls to the devil without actually realising that devil couldn’t give two shits if one defaulted on their repayments..
Audit is one of the job sectors which is a real meritocracy. Have you made it to partner within big 4? I’m in the same profession with a similar(ish) background but in a mid sized firm
The bank doesn't worry too much about individual defaulters, but they worry a great deal if there are a large number of defaulters.
Love how Gary uses analogy that people who took debt shorted the money market.
Love the final line, ‘but don’t worry because property prices always go up’
*except they don’t and if the population birth rate keeps falling we could have a situation with lots of empty houses and not enough buyers, right now it’s the opposite for in 20 years time it might be different causing the property market price crash.
One of the only content makers I won’t leave my sofa to make a cup of tea for. Wisdom.
I think you've skipped over the fact the conservatives have imported one million individuals, mostly from the third world, into the UK each year since the start of covid. These people not only have to live somewhere but much higher birthrates. Effectively the not so slow motion demographic destruction of the nation. And no, England was not "a nation of immigrants" for anyone with a genuine understanding of history.
Good point. I've been contemplating how population collapse feeds into the property market as well. It's gonna be interesting for sure
I’ve often wondered this, but there are lots of houses sitting empty where I grew up. Nobody wants to live there. If you buy a house in London it will always be in demand, even if the population was to massively drop. I suppose it depends where you live more than the actual number of houses that there are in the country versus the population. Populations want to live near their work, friends etc
It doesn’t matter is the population collapses, the money is still there. When you think of the 1%, think of 1% of China and India, they are the ones who will own the property of the UK as our population shrinks and gets poorer. We have no option, because we send all our money there to buy our goods, so we will have to let it come back (in the form of asset ownership).
@@MrRobsroom that's a really good point. God, what a mess
thats a really great way to put it that people who made money on house prices essentially shorted the spending power of the pound
Right, for me there are bigger differences between renting and mortgage payments then stated here. I understand the similarities but
1. Mortgage payments are finite, renting is until you are dead
2. If you are dead money can go to your children, which never happens if you only rent
3. Mortgage payments are for me fixed for 25 years, so I know what I will be paying the next 25 years. If I accumulate some extra cash, I can shorten the time that I pay rent. This can't be done with renting.
How did you get a 25yr fixed rate mortgage and more importantly from which lender?
@@JCJW101 I'm from Belgium, common practice here to have fixed mortgages
@@zordledd2 I'm in Au.
Don't you mind asking what is the interest on this fixed mortgages?
@@lillysnet9345 I arranged them just before the Ukrainian war, I have two one for 214k with 1,25% and one for 125k for 1,17%
Property taxes
,maintenance fees, etc, are not finite
Irrespective of how much property prices increase, one house in Ealing is worth one house in Ealing. You are not getting wealthier if the value rises. You only see the benefit if you have more than one house in Ealing and even then if you sell it it's gone, you have the cash but you're unlikely to be getting another house in Ealing ever again.
Call me naive, but I genuinely feel there's no agenda and little ego at work here, I feel like this isn't even really content creation persae, it's a person doing a genuine kindness for others and his main goal is sharing knowledge. Thank you Gary, subscribed.
Well, he very clearly states that there is an active political agenda: raise awareness and political pressure to tax the wealthy.
It’s more accurate to say there seems to be no hidden or alternate agenda.
I concur. He's made more than he can spend in intense and volatile environments, satisfying the greed for cash and attention. Saying it like it is. Grateful for the clarity, Gary.
You have not mentioned fractional reserve banking. In other words if the bank has, for example, £100 Million of assets, and this is a 10% fractional reservice, the bank can then create money from nothing as a multiple of their assets & lend it to us. You may have covered this in other video's! I am finding your stuff very interesting. Thank you.
CZcamsrs discuss now fractional gone. Now no reserve required US banking. It’s mental. Big US and Pan Internatonal banks must be owned global elite. I don’t know. It’s such an odd time
Fractional reserve banking no longer exits. Commercial banks create credit money when someone takes out a loan.
E aptly what I was thinking but I guess that just makes the bank the creditor.
That’s what I’ve always thought, owning a flat/house with a mortgage is just another form of being a tenant, just with better terms and conditions in the contract. Unless it’s mortgage free/debt free, it’s not yours, in a true sense.
Unless their are mass protests and a mass revolution, I just don’t see a way out of this.
The rich will try their luck and politicians of any flavour, will let them get away with, some parties overtly, and some covertly.
Same. I have always called our mortgage payments......paying the rent.
That is a great attitude.
Always treat a mortgage like it was the rent.
In fact I would even go as far as to say check out the rentable value of your property & go out & out to pay the higher amount.
Did this in 2009 when mortgage rates were 3%. Instead of paying taking 15 years to pay off £65,000 I did it in five at a equivalent interest rate of 12%.
OK the car went from a 6 years old to a well cared for 10 year old. Even still managed to holiday abroad twice a year & build up a third pension for myself on my terms.
Hello 👋🏽 Gary. I really like your educational videos. Coming from a science background I don’t know much about economics at all but am learning from your videos. Hope you have an amazing week 😊
If you have a scientific background you understand more about economics than economists do. They have zero understanding about variables and have zero understanding of genuine empiricism (which is a difficult thing to verify even given ideal and controlled circumstances). They prance around pretending that they have measurable answers to things that are not quantifiable. Any scientist is a better economist than any economist.
Economics as taught these days is nothing less than neoliberal dogma. It relies on assumptions that are flawed at their foundation. The (rare) good economist understands this; the vast majority employ circular reasoning to justify their own flawed outlook.
Economics is a social science; ala history or anthropology. Economists do not have an empirical authority regarding the *way things actually work in reality* and they never have. They often have an ego that does not wish to be challenged on such views, also.
Mate, it's great that you have ended up at a place like this on CZcams. A lot of people end up getting exposed to misleading content. That needs to stop. Gary's channel is one of the few genuine ones.
The one thing you didnt mention is you eventually own the home, which means at some time in the distant future you will not pay rent or a mortgage. Not everyone is looking at an investment they are looking for security for there retirement. As much security as you can expect nowadays.
Brilliant video.
Will need to watch a couple of times. Especially the 2nd half.
You said ordinary people probably think aliens control debt.
I think ordinary people think the banks have the money sitting there Gary. I used to think this before watching your videos. This stuff needs to be taught in schools.
Keep it up!!!
Loooooots of misconceptions about banks going around. Banks are intermediaries essentially, but total debt ALWAYS equals total credit, and the vast majority of the credit is held by the rich.
@@garyseconomics what about interest, which increases debt - that extra money has to come from somewhere (where?)
@@aliasgharkhoyee9501 think of who gets it? The money supply is increased, but it is still as a form of debt or debtor. If there is interest you as a debtor owe the money lent & the new money created. So it’s still debt. If you are the creditor you receive the money lent plus interest. So it’s a larger pile of debt you are owed or if paid back you receive.
In this way the currency is being slightly enlarged as well as when new money is created when the government creates debt.
I thought debt was created by banks and not always backed by assets or gold unless it was actually secured debt, for example if a bank has 1 million in deposits, that enables it to create 10 million in loans, it doesn’t have 10 million but issues IOUs to the debtor who receive the loans
There seems to be a link between privatisation and government debt.
I first found out about you through your interview with James O’Brien.
Thank you so much for all of the absolutely amazing content you are providing. Everything you are talking about is exactly what I am fascinated, and you elaborated in the way a simpleton such as myself can understand. I’ve been on a small property journey, and it’s not been as lucrative as I thought it would, and this explains everything perfectly. I’ve even decided to take a house off the market and keep hold, hoping it will go up in the future. Regardless of anything, the education you are providing is 2nd to none and I really appreciate it. Keep it coming. Best regards, Henry from Norwich.
This is invaluable! Thanks Gary. You are arming those of us with an instinctive idea that something may be wrong but who lack the ability to articulate the chance to express ourselves mindfully. Legend
This is one of those things on my "if EVERYONE knew and internalized this, the world would change overnight" list.
VERY crisply explained, Gary. Thanks!
Super interesting. The source of government debt is never explained beyond that they issue government bonds. This whole issue of who we (as tax payers) owe all this money to is kept so opaque so this is a helpful insight. Thanks @garyseconomics
Frfr
You have to remember so much is a distraction. Yes we owe money to foreign investors but so much of national debt is money government invests in infrastructure, the NHS, education, local government etc, etc. Sweeteners for foreign companies, bailing those same companies when they go bust. The list goes on
What is worrying is the further rise in interest rates by the Bank of England! Given the energy price hikes and food price inflation as well, many people will struggle even more, many more will lose their homes! Is this the plan? I've come across customers who are now on edge and not managing, some getting angry at the self-scans because of the inflated cost of groceries! One customer was very stressed, he kept swearing at the machine! I went over to him and asked if he was alright. He said point blank "No! I'm stressed!" When he finished scanning his items, it came to around £30, he said, "Look at that! £30! Thirty fucking pounds!" I said I know, it's tough. I didn't know what to say. I felt sorry for him. I feel sorry for us all.
I bet he was a brexit and tory voters as well.
The WEF already told you that was the plan - you will own nothing and be happy
As far as I understand it, raising interest rates is the only way to bring inflation down. Raising the interest rates is done to incentivise people to lower their spending, thereby bringing down demand. The lack of demand will then bring down inflation. Problem is, now we have both high interest rates and high inflation, which hits like a double punishment to the ordinary person.
@@julie3686 I love how the people think they are an ordinary person if they have debt. Only the rich have debt, so until you have no debt, you are not poor!
@@Shaggy-8392 pipe down lefty
Most debt is created by banks to lend. They create the money as needed to lend. They don't have a source of money they lend. It is simply created.
Indeed,
"Fractional reserve banking" - or gambling on how much you can squeeze out of somebody to buy a house.
@@hlund73 but aren’t the “banks” taking the risk if they’ve only got 5% of the assets they’ve loaned out? Until of course they re too big to fail and the tax payers have to bail them out.
Yes, with fractional-reserve-banking, you don't need to have the money. But it's still written as money that needs to be paid. Also, since the reserve bank also controls the money supply, they can just print the money when new loans are granted. And that's all OK in terms of debt and money coverage.
The problem is where this new money goes. It's going to the banks and not the common folk. Then banks are more likely to lend it to rich people because they have more assets as collateral. So not only are rich people paying less taxes and living off investments like parasites, they also are indirectly responsible for inflation.
With all that money coming their way, they then directly influence the economy production chains when they start spending.
When you look on our economy from afar a well known pattern emerges, a group of owners (or aristocrats) and a group of workers (or peasants). That system was called Feudalism. Sadly current economic system has devolved back to its roots.
Some people argue that capitalism is fundamentally broken and always leads to feudalism. I'm not sure about that, but saving capitalism would require radical changes to the current economic model. Changes which nobody is willing to make. Everybody wants a change, but not if they themselves are affected.
Two words: compound interest
@@kokokokow1760great take! I think this is the general direction the capitalist world is heading.
Spot on. Clearly explained. The term of "landed gentry" is now also "housing gentry". House ownership is being bought out by the "rich". The problem we have there is still a large proportion of home owners. They will not tolerate the value of their home going down. We are therefore stuck in second gear of inequality increasing. How does this potential blow decrease for home owners while trying to reduce inequality? Labour is saying "build the economy". Wow that is new to me , most of the British debt is owed to British people. The way to decrease inequality is to build social housing and properly invest in the NHS. Society's mental and physical health improve. Rent prices go down. Less walfare and more people active in the economy. Look after second world war.
Good video, but a couple of nuances; when one takes on debt to buy a house, gradually the debt is paid off, so at the end of the mortgage term, one owns the asset debt free - NOT the same as renting, where rents generally go up and after 25 years, one owns nothing. An asset can be borrowed against to fund further property purchase or business purchase, thus allowing accumulation of assets (wealth). Bond holders are NOT the same as shareholders - they are lower risk as they are higher up the pecking order to be paid i.e. before a share of the profits (dividends) or if the company folds. Prices of both shares and bonds can fluctuate, the former according to the economy and company performance and both according to prevailing interest rates.
Unless its credit suisse!
Amazing video mate. Mind blowing explanations of the relationship between money and debt. And that extra bit at the end - wow!
This explains leverage, risk, price of money, asset ownership and more all in one video so I'm going to switch to recommending this rather than particular books for those who want to know this concept alone. Great stuff.
So, those who own assets with debt did well and continue to do well. Guess who else owns assets with debt, the government. They are using leverage to devalue their own debt by devaluing the currency through inflation. Difference is, they have the power to decide how much inflation. This is why I believe owning assets and having a healthy amount of debt therefore aligning yourself with the government is a good thing to do, doomsday everything goes wrong and you're the one with the risk considerations aside.
Thanks. It's probably worth recognizing that most western governments (especially the UK) are losing their assets though, while their debt grows, and also that the huge increase in COVID debt did not come with an increase in government asset ownership (instead it led to private accumulation)
@@garyseconomics Both points true and important to think about. I do hold the view that the government will always do what is in its interest however our political system makes this interest consistently relatively short term which has its own issues. Using your points, if the government has less and less assets but more debt, their interest will be more towards what's good for them in that market which is more debt based. I'm no expert but I can certainly see consistant inflation (not too high) being a good thing to a government with a large debt as growing the economy in real terms is a challenge.
Always good to hear your view on things!
I agree with all your ideas, only that you are missing the main reason people like to own their own property vs renting is that with ownership after the debt is paid you keep the asset, whereas renting you get nothing at the end, and that with ownership you get a clearer idea of future monthly repayments.
Your channel is one of my new favourites. Keep up the good work, thanks
Wow, it blew my mind the way you describe it Gary. I had the thought already that its impossible for someone to be rich without someone also being poor and vice versa, but your description is better.
I was very lucky i bought my flat when i grew up in Jersey worked my ass off 7 days a week to save deposit. Covid happened and i sold it made around 90k over 2 years. Moved up to the Scottish Highlands bought my new house which is half the price of my Jersey flat and have kept some money for emergencies and bought aome gold etc! I come from humble beginnings single mum life of debt etc and have never wanted to have the life that my mum had to live. I am a postman and my mrs is a nurse. The word rich is thrown around a lot these days we have a cheap mortgage and living our dream with no debts apart from our small £300 mortgage. People need to aspire to stay away from constant crippling finance and learn to live below their means. Love the videos keep up the amazing work.
Great video and I'm loving your content. One additional note is that banks / financial institutions have accepted the mantra that prices will usually go up. Otherwise they would not lend people 3x, 5x or Nx their income to buy a property. The banks can check that the asset exists and are convinced that - no matter the fecklessness or diligence of the borrower - that they will always get their money back in a way that avoids the problems of stock market value collapses. So the debt is real but different. This is all relevant to the 2008 collapse which differs from the 1991 recession where house prices actually fell and negative equity was real. It was a conundrum that we did not see a similar value collapse post-2008 and you explain it incredibly well. Thanks :)
Great videos, Gary. Thank you for informing us. All the very best.
This video is fascinating to me! Thank you for this explanation.
Really superb, Gary. Thank you. 👍
Good point, Gary. Properties are simply another thought of going up rather than stocks. I bought a B2L last year and will likely buy another one next year, buying stocks alongside them. It just means that if stocks go down; properties are more stable and are another way.
I took debt on a mortgage so that one day I'll own it and be debt free but with ownership of an asset, and a roof over my head. I rented for years and paid off other people's debt.
Owning your own home is just another form of investing in yourself and your future
You might as well if you can, but many can’t afford the deposit
rent vs mortgage is a very simple question. Are mortage *interest* (i.e. without principal) payments less than rent payments (without utilities)? If yes, then get a mortgage. If no, invest your savings into smth else...
@@Ubeogesh Savings generally don't give good returns on your investment, assets tend to gain in more value. Look at the UK housing market. Your house makes more in a year than your occupation earns you. Savings are at 5%
@@silvafox7719 did you watch the video? Stocks gained more value than homes historically
Really enjoy your videos, Gary. It never struck me that debt is ownership, but after your explanation it makes perfect sense. Always appreciate your work!
Odd, it never occurred to me to think of it the other way.
I’ve always felt that if I’m paying a car note, I don’t own my car, the bank does. I only own it once that final payment is made-which is why that’s when you get the title.
Same for a house, business loan, or anything done with a small personal loan.
So I also found this eye opening, but in reverse lol.
You are amazing Gary. Thank you for all you're doing. I will buy your book and encourage others to do so. I support everything you are doing.
Well done👍
Brilliant explanation! So eye opening. You articulated thoughts which I had only feel intuitively.
Wonderful champion of the underdog. Simple, authentic and true. No BS.
Compound interest grows exponentially, productive capacity doesn't.
The debt service payments can be greater than the ability to pay from the real actual world, but payment must be made. Somehow.
Creditors extract more than they produce, by treating interest as if it is a real thing, real money, before it is actually paid... from somewhere in the existing money supply.
Inventing new money/debt with exponential growth, exponentially extracts wealth from the majority of people, and sends it to the creditors.
This whole system is fkn stupid and needs to end. It is an inequality machine which must eat the world for profit and subjugate all people... because they owe something which was invented.
Similar to how i have always understood it. Debt has to be repaid to the Creditor. Plus Interest, which adds to the overall debt. Extra debt. If it is indeed a balance. Debt = Credit. and Credit = Debt. What does the extra Debt we call interest come from as it unbalances the equation being an "addition" on top of the original Debt.
If you follow this all the way to the bottom, to the conclusion eventually that Interest cannot be taken from any Pot, no Peters left to pay Paul and someone is eventually left holding all those Debt Liabilities.
Kinda like Musical Chairs.
Its not exponential its compound. Which means it changing yes but not exponentially. That would be insane. Lol!
@@bigdaz7272 Marx starts his analysis with "labour value". If we accept money is only worth what we can buy with it, then it's ultimately the human labour invested in making our purchase possible.
Charging Interest doesn't add any labour value, but paying it takes more. So we have to balance the equation somehow:
The debtor can work longer, creating more labour value than they took - deflationary.
They can charge more for their labour - inflationary.
They can be more productive, increasing their labour value.
We can can use taxation to redistribute wealth.
No. Money that is borrowed has two important values; the value of the money being lent, and the risk the borrower takes on by lending, which is taken as either interest on the loan, or a share in the thing the money is being spent on (e.g. shares in a company). Without interest, mortgage borrowing goes to zero (because no lenders - its no longer worth their while), or you end up with borrowers having a permanent share in your house.
In all investments, there is always the amount put up, and the risk associated with it. If you think you can borrow without interest, then it stops working as soon as you get past borrowing 5p from your mate in playground so you can buy a mars bar from the tuck shop
@@shambhangal438 totally. Who would gove you their money for absolutely no benifit to them..not me thats for sure it may as well be in my pocket as be in yours if youre not going to give me anything for handing you my money.
Gary, you should look into NHS and hospital ownership. I think the properties are owned by private companies and rented by the NHS.
Always bringing the most informative, the most well explained and relevant information.
Truly doing Gods work Gary making it clear how and why our system is so unfit for purpose for 90% of us.
This system has allowed businesses to grow and lots people to be employed, why is that unfit for purpose?
@@MRW515 Have you not watched any of Gary's videos?
The system is designed to Hoover up more wealth from an ever growing portion of Society making them poorer and deliver that Wealth to an ever smaller portion of Society who are already extremely wealthy making them even more obscenely wealthy.
We are rapidly heading to a Society that more resembles the stratification of ancient Egypt with Pharaoh's and Slaves than a functioning Modern Democratic Society with a healthy Middle Class, social mobility, Liberty and a genuine accessible path to the pursuit of happiness.
@@bigdaz7272 I watch lots of videos about personal finance and macroeconomics.
I would recommend people learn about assets and liabilities, good vs bad debt and how to minimize tax payments by holding assets in a company.
It is up to the individual to educate themselves.
@@MRW515 Would you not say that it is upto our Education system to educate us about our system that is based on Debt? I don't remember any mandatory Civics classes at School which went into any of this to any degree at all. Maybe University sure, if you can afford it and if you have a Professor who teaches you what you need to know, Gary has talked at length about going to some of the best Universities in this Country to study Economics and said Professors teach utter nonsense based on Models that don't even include Debt.
We are clearly mis-educated and mislead at every turn so most will become trapped in debt or make the wrong decisions for themselves but the right decisions from the perspective of those that make the rules.
@@bigdaz7272 it is, but it doesn't does it!
This scheme of raising prices can't go on forever. I've read that in 2080 for example in Italy and many more European countries, 73% of people will be older than 65. It's mind blowing. So when they die how much will the property be worth then. My guess is nothing or almost nothing. What then.
Terrific analysis and clear explanation. Well structured and accessible. Definitely thinking allowed.
Gary, this is brilliant. Thanks very much.
It annoys the f*ck out of me when channels have that side angle thing rather than direct to camera.
I get that it's to hold attention but really, if you need that, you have even bigger problems.
Thank you Gary for amazing and much needed content.
Great video Gary. The principal financial incentive for me personally in choosing to own my house with debt is that once that debt is repaid I won’t have the worry of paying rent in retirement. I know there are other ways of investing to cover for this - but if asset prices continue to grow as you predict (and in turn rents), then not having to worry about paying to live in my house in retirement gives me the most comfort.
I think people generally take on debt (mortgage) to own a house because A. Pensions don't allow you to rent when you're retired and B. You want something solid to bestow to your kids. This last reason however is coming to and end as we are being told we can only leave 14.5 k with the rest going toward our care.
there's ways round that thou, trusts if your rich enough, or put it in a limited company, then give the company to your kids and pay rent to the company, your now a renter not a home owner your not renting from family your renting from a company and they can not take your home for care costs.
@TCJones Fair enough but this notion of turning regular butchers bskers and candlestick makers into financial gurus to get around a disgusting system that should be ripped down.
Hey Gary Banks don’t loan others credit - they hold these as assets - which of course is others debt. They create (money/debt) which they issue as loans which we promise to repay. They reduce their debt holding risk by issuing bonds. Trouble is many private banks are over leveraged (assets don’t match debts) hence bank failures.
Over leveraging is a topic that @garyseconomics should cover in more detail.
Amount of knowledge in this video ..
I love all your videos Gary but keep coming back to this one ..
Whenever somebody mentions debt,
I try to recite some of the things you mentioned
This channel is GOLD for understanding today's problems.
brilliant - thanks
Those who have a living wage can get wealthier. Those without, who need debt to pay for necessary expenses, can not.
Although asset wealth is in various things a lot of investment is confused with consumption. Corporate share buybacks are not investments and corporate consolidation are not increasing the productive capacity and should not be considered as investments. If a corporation borrows funds to pay a dividend then this debt is financing consumption and not investment.
glad I found your channel, you have a great way of explaining these concepts
I was high when i watched this and it blew my mind. Then i watched it sober and it still blew my mind. I worked on wall st for 8 years but was not a macro guy, and never had time to explore he bigger picture. This was fascinating, looking forward to your next vidoe. Just one think, i don't know if if you were being flippant or just english ( dry sense of humour ) but housing prices do go down. It happened in 2008 !!! You know the meltdown...........
Yes it was kind of tongue in cheek. They've gone down in the last 6 months!
@@garyseconomics Yeah i know, just wanted to give props to the nation with the dryest sense of humour in the world!
Rising interest rates, lower house prices? Doesn't really matter, blackrock bought about 40% of the houses in the usa. These greedy bastards have no bounds.
Excellent video explanation. Thanks Gary as always
Thanks Gary. I have come across you in the past month, so catching up with the education you are providing. It's a hard listen to be honest, because you let us have it all both barrels. But it's so refreshing, along with Jame's Brian's message. Keep up the great work but look after yourself along the way. JOE
Always informative & on point. You should be the chancellor mate. No joke
Economic investigator Frank G Melbourne Australia is still watching this very informative content cheers Frank ❤
Class video - makes you see the world with more clarity
The last few minutes of this video were gold!
13:00 with all that talk of risk you could throw insurance in to the mix - another earner for the super wealthy.
I don't know why I watch these videos, being well informed just leads to depression when there's seemingly fuck all you can do about any of it! The only way the massive inequality gets solved is when enough people have nothing left to lose and revolution begins, doubt that will happen in my life time so i'll just go on, breaking my back in some piece of shit job making someone else far richer than i'll ever be
I began investing during a period of higher inflation, and while it seemed daunting at first, I learned to navigate it by consulting with Joseph Sullivan Anderson, an investment analyst, who devised a strategy to shift my fixed-income investments that wouldn't provide sufficient returns to a diverse portfolio that would provide higher returns.
With the current inflation rate of 4.3%, I really need to find more productive ways to put my stagnant savings to work. I looked up Joseph Sullivan Anderson on the internet, and his credentials appear to be solid. I'll get in touch with him.
I believe I read about this analyst in a business journal, he has a good reputation and good insight when it comes to amassing returns from economic swings.
I wish I had started investing earlier in my life. Seeing the compound interest at work is amazing, and it has made me realize the power of investing through Mr Joseph Sullivan Anderson a financial professional. I have amassed about 150k
It's a good thing I'm not alone on this. It's good to know Mr. Joseph has had an impact on others other than myself. Inflation can be unpredictable, and it's essential to conduct thorough research and seek professional advice before making any investment decisions.
Always some tit selling financial services on CZcams these days it seems...
Very good
Renting a home..straightforward transaction.
Having a mortgage = renting the money ...(the interest paid each month on the mortgage debt is effectively 'rent' payments)
if you fail to pay the 'rent' on that mortgage debt you will be evicted just the same as if you failed to pay rent to your landlord/lady .
i wonder how many 100% interest only mortgages are ever paid.. or is the debt just sold on and sold on. my minds blown. lol
Would love a vid on the history of debt jubilees and your thoughts on that! Great vid!
Great video/channel. People also prefer to buy instead of rent because they will own the property after 30 years. Plus banks will lend you $1m to buy a house, but won't lend you anywhere near as much to buy shares or the like.
Hi Gary, I have one major and possibly disturbing worry. What will happen when the method of paying a debt, working. Does not exist. I your life Gary, you will see the concept of work go. Anyone with a job that pays a mortgage will be in the minority. Ps your uploads are bloody fantastic.
Thanks geeza. If it makes u feel any better, I have a lot of disturbing worries too!
@@garyseconomics 😕😟😢😫
The way housing prices are going, I will never be able to save up for a down payment.
Even if I keep all the money in my savings account it will depreciate due to inflation, that's why I am learning about investing, started passive investing, moving towards active investing and keeping my extra savings in US Govt T-bills to avoid losing it to inflation.
Amazing Gary! As always.
Thank you Gary 😊
When you talk about the devaluing of money/debt causing assets to go up in value, I largely view that as the intended function of inflation. So if you are asset rich either directly or via debt you are getting rapidly richer when inflation is high like now.
After thinking about it, I can see why Gary says home ownership is now a form of rent. In the old days, people could realistically pay off the house in 30 years on an average primary breadwinner’s wage. But in our time rich people are so rich that there is a huge amount of credit chasing after assets, which has driven up the price of assets. So it may be that at the end of a high value loan term on average wages they will have to pay the bank a lump sum or downshift to a much smaller place. Or it may be that the majority of people buying houses will eventually be investors with a lot of credit, intending to rent them out.
So the average family from the younger generation will not even be able to afford to take a mortgage at all and will permanently rent. I see this happening in Australia too.
Good to see the audio is much improved 👍
Great podcast. I would just say that property continues to be a good investment for most people. That is simply because our population is growing and demand exceeds supply.
Debt and ownership are two ideas which can effectively enslave people for their entire lives.
It's worth noting that in reality, when you die, you cannot take anything you think you own, or repay any debt which you think you owe to others.
it is extreme folly to consider either money or debt as being "Real". they are ideas, often associated with tokens (paper or coin)
if governement and banks collapse or fail, where would the value of money or debt go. ?
Not sure I've heard someone spell it out quite like that. Thanks Gary, that was a good one
The secondary reason to buy a house is to insulate you from the private rental sector. 5 years ago renting my flat would have cost £550 a month. A mortgage costs £450 a month. Today my mortgage is still £450 whilst renting my flat would cost £900 a month.
Ironically ive never been able to accumulate any personal debt as ive not been able to get a loan out of even a single £1 since i turned 18. Im destitute with many ideas that with debt could of made me rich but i was arbitrarily cut off from anything that could provide it. Now im 28 and poor and at the bottom of society for no reason.
Yes ordinary people are not allowed to have 2 mortgages let alone 4 so are prevented from making wealth via assets that way also.
@@rattylol strange I know several people with 2 mortgages and a couple of people with three
Gary, I'd love to see a longer video that brings all these key things togetjer to create a full picture. Covering money, debt, intlation and interest, or something like that
Your videos are amazing. Thanks and please don't stop making them
Brilliant video again Mr.
You don't get how private banks are creating money. Debt is not equal to zero and lent money is not equal to owed money.
Excellent video. Long term buying your home makes sense…..I’ll be 47 when my house is paid however I’ll need a 10k loan to fix bits, so another 5 years after I’ll be all good🤞
Really great explanation making it simple and clear.
A couple points worth noting
1. Central banks such as the Fed expanded their balance sheets a lot during covid, technically this is basically debt owned by the government since the profits of the Fed get paid to the treasury so you need to account for that in the equation. It doesn't destroy the point you're making but it is part of the total equation and yet assets of the central bank don't get considered as offsetting the government debt
2. There's a root cause not being accounted for here, which is if you took all the total wealth and distributed it evenly across the population a decade later you'd have big differences in the distribution of that wealth.
We see this a lot with much of the covid stimulus. Countries like Canada accumulated debt by giving many of the poorest $2k/mo. Fast forward 2 years and most of those now have none of that money and it has cycled through to a relatively small % of people.
So until you address that root cause of cycling negatively for a fairly large share of the population you're going to have a declining middle class. It doesn't really matter if you expand or contract the money supply because the cycle effects will lead to the same place.
My second video im watching of yours, already have DOUBLED my previous knowledge
Interesting content, well done! Would love to see some references\graphs on screen to back up claims or for further research.
Actually, the government has sold a lot of the public buildings and pays rent now. They also got private companies to build some new buildings
Yup, and quite a few of the school buildings and lands are not owned by the government, but by churches and similar. That has massive impacts on the national curriculum, who is sitting on school governor boards, and more.
100% Gary. One thing I think you are wrong about is that house prices will carry on going up in the long term. Just like house prices went up for 40 years, they will go down in real terms for 40 years. Cycles High inflation followed by interest rates are here to stay because of deficit spending in the west. When the mother of all crashes happens they choose who pays for it via a reset. I.e will be ordinary mugs, us.
Apart from the face touching and one auto focus glitch that was perfect. Lovely camera position.
Felt personal. Do this more it looks really professional. You have expressive hands that work beautifully when away from your hooter😂
Thanks for the explanation that I agree with ; most of people here will never fully own the property due to prices and massive amount of debt and I truly feel for young people; one thing I would mention also is access to education; the inequality will never change unless access to good quality education is truly free as a lot of young people end up with massive loans when they finish uni; we both come from working class background but we were able to move up because of free education in Poland for us and our parents
It is true in many EU countries like in Denmark - you can study for free and get even money from govt if you work a min 10hrs a week ; here in UK we want more equal society but UK said no to EU so it will be ruled by wealthy upper class that creates laws for themselves
Thanks for your videos Gary. It is indeed strange times, especially comparing ourselves to our parents.
Living near London, after working there for over a decade, and with a 2 year old, we are just about to do the mortgage jump. For us, we have no family connections here, no roots, and frankly we started from ground zero during covid times in terms of our own ltd company. Our main goal is to leave something for our little one for her future. Hence we are about to take this massive debt (probably a 30 year mortgage)
I can understand what you mean by actually using that money to make more money, but perhaps it is our narrow mind, or perhaps it is our lack of wanting to take risks that we are going down this path. Regardless, I am worried every night about the future =)
Keep up the good work, there is a need for videos like these. Love your style.
S
Could you do a video on the benefits and negatives of bringing utilities into public ownership. Labour have said it's too costly (a debt), yet isn't it actually a balance on the budget sheet due to it being a primary need which people use?
I tell u what I should have addressed this in the video. Under the current setup, if the government nationalized the utilities it would largely do this via debt and would, in a sense, have to run the companies at a profit in order to pay the interest incurred.
That's not at all to say that I'm against (or pro) nationalisation, but rather I think people assume the government will simply "take" the assets, whereas in reality it's more of a debt-for-equity swap that may or may not financially benefit the taxpayer. In general, the government tends to get bad deals for this sort of thing, so it could end up coming at a net cost.
Really, what you need, is a real transfer of wealth from the very rich, to ordinary families AND the government - the exact reversal of what we've seen in the last few decades and especially the last few years.
@@garyseconomics great subject for the next video, Gary! 👍
@@garyseconomics in order to finance such debt, the public will definitely gets shafted. Either poor service or higher tariff, or worse, both.. Public utility service has never been a profitable business (in terms of cashflow). Most of its expenses are servicing debts undertaken to finance the massive CAPEX to build those utility infrastructures
Hi Gary, thank you for another great video.
you made a comment about money being devalued, and the people that bought property, effectively shorted the value on money. You then went on to say that those same people would have made money if they had have borrowed money and put it into the stock market. However, i challenge this comment. These very same people (the small landlord) would never have been able to borrow money to put into the stock market and also someone else (their tenants) covered the cost of the interest on the debt.
Yeah the big thing about housing is it allows people to take a huge amount of debt. Stock market investments would also cover interest though, through dividends.
Gary - of course this is true because you really know your stuff but the issue you avoid - frankly - is age. The "problem" is that those drawing their pensions today have done 40-45 years of often backbreaking work in crappy conditions that don't even exist any more.
The real struggle is that no-one wants to do that any more and also the other major predictor is class (which you do talk about a fair amount, in fairness)
Not many could, even if they wanted to. So much has been automated, we've had to invent new ways of to earn a crust. What hasn't been automated has been offshored to where workers don't have to support the value of your nest egg for you.
@@hlund73 I'm not sure the data actually bears that out though? Generally, with progress, newer, better, lower physical effort jobs have been created. We had these conversations in the 70s and standard of living is considerably improved since then alongside life expectancy. The trend at the moment is onshoring rather than offshoring
Good to see u again
Good content. Best wishes ❤️