Quote from: TiagoTiago on April 29, 2013, 05:38:02 AM

Quote from: bitchess on April 28, 2013, 09:48:47 AM

...

...If you can't afford one now, what makes you think you can afford two in 24 years?

....

If you won't be able to afford it in 24 years, how do you plan to pay the loan in the first place?

The definition of getting a loan is you receive not pay money on day 1. If you expect the value of money to be higher in the future, that means your loan gets exponentially more expensive to pay back.

Also, one thing that I didn't mention is whenever the rate of deflation increases, the value of all your outstanding debt goes up in value accordingly. What this means is if you already owe $100,000 on your mortgage (perhaps you took out the loan when there was steady inflation). Then if the environment shifts toward deflation, you find that your wages are going down, buying houses now are much cheaper in nominal terms, eg the resale value of your house is dropping, yet you still owe the same $100,000. Because of this event, your net worth decreases in real terms. Furthermore, if you think more deflation is to come, you immediately do everything you can to pay off the loan now. (& that action contributes to decreasing overall money supply which propagates a deflationary spiral.)

The main point is, in a deflationary environment, it is irrational to take out any loans or leave pre-existing loans outstanding. In an inflationary environment or exact money stability, loans are ok to initiate or leave open.