Jerry Pournelle:
“What is so Special about the 30 Year Mortgage” by Peter Williams in today’s [Feb 1, 2011] Wall Street Journal dispels some myths and raises interesting questions. The United States has for a long time encouraged people to buy their homes. This is a good idea: rule by the middle class, ‘those who possess the goods of fortune in moderation’ (Aristotle) requires that there be a middle class, and that they have property. Alas, the implementation did not leave them much of a property stake. People who owe more than the property is worth not only do not own property, but have a strong motive to shed themselves of the very idea that they ever owned it. The long time mortgages with low down payments do not build property ownerships.
Now, our home is paid for. Was a fifteen year mortgage to begin with, and we had EVERY intention of making it wholly ours from the beginning. Paid it off early. And when we bought, we bought a home that was less than we could have gotten, deliberately. Indeed, we’ve mostly, for quite some time now, made it a practice, in general, to live under our means, providing a greater cushion for emergencies and potential income losses or other changes of circumstances.
Major purchases, other than this house–cars, appliances, electronics, whatever: saved for and paid for in cash or cash equivalent (check or debit card).
“[T]he goods of fortune in moderation” is key to a solid middle class, and a solid middle class is even key to long-term wealth for the putative upper class, for without such a middle class, the means to assure long-term wealth become shaky in a republic. Of course, our republic is trending toward an oligarchy (rule by an elite) with a veneer of democracy (rule by mob), and the oligarchs seem to have little interest in even their own grandchildren’s future, “planning” ahead only so far as their next short-term “killing”.
Well, as usual I’ve wandered off the reservation a bit. *heh* Pournelle’s original comment, and his recommended reading material (I fixed his link to point to a non-registration reproduction of the article) are worth reading.