Distilling things down, ultimately someone had to save in order to lend? Somewhat of a chicken and egg argument might ensue with this.

Our current banking and financial system is ultimately based on “faith” though, right? Over short periods of time, more faith may be loaned out than has been accumulated, but the “short period of time” is relative, and in absolute may be longer than my life.

In other words, how long will it take you to make the $90k necessary to be free of the need to work so your $300/mo housing is paid for? If you’re just starting out in life, that’s a good reason to sponge, er, frugally live with the parents a while longer. If you’ve been on your own for awhile now, then it should be adequate motivation to lower your housing costs and/or increase your savings rate.

Are you a fan of Peter Schiff? He said a lot of similar things in his speech “Why the Meltdown Should Have Surprised No One”:
http://video.google.com/videoplay?docid=3915119166991168859

I disagree with this idea. I contend that the pay-as-you-go lifestyle is perfectly sustainable within reason. Defining the limits of reason seems to be the ultimate problem here. In my opinion you suggest boundaries that are far too narrow.

The key is simply to consume (spend) less than or equal to what you produce (earn). Or for those of us aiming for extreme early retirement to consume extremely less than we produce. But it is not necessary to create the imbalance toward productive abundance that you suggest (however wise). After all, subsistence is sustainable.

However, as someone who worked for many years in forestry, there are many more trees now than 100 years ago… It’s called grassland encroachment and it’s due to fire suppression.

It has caused extensive complications… So much for outsmarting the environment.

What the producer has done is to delay his consumption to invest and in turn he is paid by others who consume before they have produced. It is the same thing with college educations, housing for the children, etc.

It is physically impossible for EVERYBODY to use debt or a pay as you go basis. Somebody HAS to take the other side and either save to lend the money or invest to provide the service.

Since it is physically impossible, the part of the economy which is just a bunch of conventions e.g. fiat currency and stock market prices must revert to what is real. One way or the other.

I also disagree with the contention that one shouldn’t have housing until he has 300x the monthly payment in savings.

To me, this seems like saying no one should spend a night in a $30 per night hotel without having $270000. On a per-month basis, to reliably sustain your stay indefinitely you need $270k. But, you don’t need to stay indefinitely, you only need a night, so why not pay the $30? You can pay up front for the usage.

If you have earned $30, have you not produced enough to justify one night in a $30 hotel?

In theory, there is no reason that one couldn’t pre-pay $300 rent in 5 or 10 year blocks for far less than $90k. In reality people do pre-pay rent for a year (I have) in certain instances.

The contention that you can live somewhere else prior to building up your $90k, further supports the notion that you do not have to pre-pay your housing for your entire lifetime before assuming residency. Since one can exist without paying for housing for some period of time, it doesn’t really matter if that period of time is before or after a pre-paid rental period has been consumed.

As an extra, for perspective, the majority of people on this planet won’t make $90k in their lifetime (OK, they also won’t be looking to spend $300/mo on rent).

Sadly, I don’t think things will change – once the economy rebounds it will be back to spend, spend, spend.

The crux of your statement is “Never ever use something you can not afford.” Then you suggest that affordability is determined by possession of sufficient assets to sustain the cost. I think you create an artificial dependency between the two concepts.

How many people in their late teens/early twenties actually have parents with sufficient capital to cover all household expenses? If your parents do not, then living with them until you do is simply transferring the burden and thus avoiding the problem.

I moved out of the house five months after graduating college and have been on my own for two years now. I depend upon my salary to cover my expenses each month, but so do my parents depend upon theirs. My moving out did not change this, but neither would my continuing to live there (especially without paying some form of rent).

According to your point, neither I nor my parents can afford our lifestyles because we do not have sufficient capital income to cover all our expenses. There is no way out of this other than a reversion to abject poverty (and attending lack of feeling secure in my basic needs) or the acceptance of the fact that atleast for a while we must use what we “cannot afford”.

The important question is … should anyone live in a place that they have not produced enough to build? It is impossible except through the use of some kind of liability.

When the U.S. Treasuries started paying almost no interest, foreign money went into real estate “investments” in this country, which were being packaged by financial interests as the next big money maker, and definitely paying more than treasury bills.

Of course, inflated housing was a Ponzi scheme. Had to keep getting more people to buy in at the bottom for the impossible housing market to continue. Isn’t unaffordable housing an oxymoron?

To postphone the inevitable collapse, warm bodies were being given mortgages without any documentation required. Job? Didn’t matter. Income-to-debt ratio? Credit worthiness? Didn’t matter. The paperwork was what paid off, and then the paper was passed down the line, and divided into zillions of pieces as it were.

Even the organizations that rated credit worthiness were being paid off to shill for questionable institutions.

Who pays in the end? The average American who played by the rules.

In response to #2 of your last points, the overall point is well taken, however, those of us just starting out have had no chance to accumulate the required $90,000. Getting there as fast as possible though! Perhaps in another year or two.