Consumer Borrowing Deprives Society

Borrowing money to overpay for a house on the bet that a greater fool will be around to pay even more, which was common practice during the recent housing bubble, is speculation and obviously not recommended, as I discussed at length in previous artilces on the housing bubble.

Auto loans may or may not make sense, depending on the situation. To the extent public transportation is impractical and a car is needed to get to and from work, an auto loan can be viewed as a productive investment, since loan payments are covered by wages that could not be earned without it. The same logic would not justify borrowing to purchase a luxury car, however, when an economy car can transport its owner to and from work just as effectively. Luxuries of any sort should always be paid for with cash.

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