Monday 3 May 2010
Harry and the Homeowners "As long as homeowners owe significantly more than the value of the house, it makes no sense for them to faithfully pay down the mortgage, because they can never hope to accumulate positive equity. In these circumstances, millions of homeowners are quite rationally walking away, and finding rentals."
Quite right. When I said I wanted to buy this house at this price because I was betting that the value would go up, and you said "okay here is my money, as long as you agree to pay me back," I didn't mean that I would give you your money back if I lost my bet. Now that I have lost your money, it is not rational for you to expect me to pay you back - my best course is to stiff you and wait a few years until some other sucker will loan me money to bet with. I hope, next time, I will win the bet and, if I do, I promise I will pay the next loaner back. Of course, if I lose again, I will stiff him too.
Quite right. When I said I wanted to buy this house at this price because I was betting that the value would go up, and you said "okay here is my money, as long as you agree to pay me back," I didn't mean that I would give you your money back if I lost my bet. Now that I have lost your money, it is not rational for you to expect me to pay you back - my best course is to stiff you and wait a few years until some other sucker will loan me money to bet with. I hope, next time, I will win the bet and, if I do, I promise I will pay the next loaner back. Of course, if I lose again, I will stiff him too.
# posted by Had It in Holland Park @ 19:53 
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