Monday, January 16, 2017

Ending Mortgage Debt Slavery

This is part of a series focused on technologies and systems.

Houses could be traded on a futures exchange. If this was combined with a 100% tax on the profits from the sale of a home, (whatever you make after paying the debt you own is confiscated), then a society could be created that was virtually mortgage free. Furthermore, because you make an exception for builders and architects, you can still have housing development. And because you have a house trading system in the form of a housing futures market, people can still move out of their homes or leave the equity to their children.

The reason housing and apartments are so expensive is because homeowners lobby local governments to restrict the supply in order to raise its price. All other things being equal, anything that restricts supply of a thing results in a price increase. They do this for racial and crime reasons. We will have to address that in a separate article. For now, our goal is to abolish the debt slavery to banks that everyone deals with if they want to buy or sell a home.

The mortgage stimulates Americans to go into debt. It incentivizes people to treat their homes as a bank account. It causes people to lobby governments to screw renters by restricting the supply of housing and accomplishing a de facto transfer of wealth from renters (mostly the poor children of the middle class) to home owners, (mostly their parents). The high cost of a mortgage is dysgenic, causing the best families to delay reproduction. The mortgage boom and bust cycle is corrupting to politics. The act of paying a mortgage makes you a wage cuck until the day you die. The very existence of the mortgage has caused the size and cost of homes to increase through induced demand, and therefore the length of debt service to increase. Originally, mortgages were for only 6 years and covered only half the cost of your home.

Every time you move you get trapped by a new mortgage. The fact that you can cash out the equity in the old mortgage encourages people to be financially undisciplined. Lastly, being tied to a location decreases ones job prospects. Employees who can move are more likely to have higher pay and lower unemployment levels. However, one should not move for money. One should live where family is, and a mortgage can prevent family regrouping.

The mortgage is the perfect obscenity for the democratic man and his throw-it-away/strip mall/planned-obsolesce-high time preference R selected shite culture. It is improper for any reactionary economic system that follows in the wake of democracy.

The housing futures market works as follows; when you want to move out of an old home and into a new one the value of your home is assessed. Then a banker broker for the market issues you a pile of call options equal to the value of your home. Let's say you home is worth $230 thousand dollars. He gives you 230 one thousand dollar call options. Additionally, he loans you an additional 50 call options so you have some wiggle room to buy a more expensive home, (230 + 50 = 280). So now you have $280,000 in equity to purchase your next home with. You locate a new house worth equal or less than that amount. You have up to 90 days to vacate. If you go over that time, daily penalties accrue.

So you find another home, say it is worth $270,000. 10K in call options is refunded to your broker. 270 in call options are used to pay the seller. The seller, in turn, receives 270 put options, which can be cashed out (upon vacancy of the property), applied to any mortgage debts remaining, (upon vacancy), or converted to call options, (to move into another house).

The whole market is structured this way. The less debt you have the easier it is to move because you aren't having to finance part of the transaction or apply a portion of your equity to the debt. Less debt simply gives you more room to do what you want. More equity gives you a bigger house.

And you can pass the equity onto your heirs by leaving them equity certificates. So there is no need to haggle over who gets the house. Upon your death the market will simply sell the house, (in accordance with your will), and hand equity certificates to your heirs. They have 90 days to pack your stuff, or a fee is charged against the equity, and a moving company does the packing for them, and places it in storage for a proscribed amount of time, say 6 months. The equity certificates are reduced according to the fee amount as proscribed by will.

There is also a tax on speculation.

So how is this different than right now? Well, for one, you only finance the difference between homes. So that saves you a lot of money if you own your home free and clear. Second, since no one can profit from the sale of equity there is a tremendous incentive to minimize debts and maximize equity. So everyone in the market is frugal. Third, since you cannot cash out your equity you have no real reason to have too much. You want enough equity to buy the house of the size that you like. Fourth, if the market goes "upside down" all that means is that you need to trade into a smaller home. If you still own money on a part of your home you might abolish that debt by trading into a smaller home of less value and applying the surplus equity to the debt. So when the market is "down" there is an increased demand for small homes and when the market is "up" for large homes. Fifth, you are not nearly as bound to a particular location. You are both more able to move away from family (bad) and more able to move towards family (good). So in a way this accelerates exit and makes attempts to bar exit meaningless. Lastly, without profits from the sale of equity every person simply leaves their equity to their children. This give capitalism a profoundly feudal component, and encourages massive hoardings of equity in trusts controlled by families. Unlike the property of the feudal past, these estates are mobile. A whole extended family with a trust might buy 20 homes in one area and relocate everyone there only to pack up and move the entire family someplace else a few years later. It enables families to practice a kind of band-level nomadic tribalism in a landscape of capitalism. It is an ultimate exit technology.

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