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age of inflation continued exposes criminal monetary policies of us federal reserve phần 4

hơn tiền thuê nhà, ông sẽ phải trả tiền nếu anh ta được thuê nhà. Đòn bẩy tài chính nợ này cũng hoạt động theo hướng ngược lại. Khi vụ nổ bong bóng và giá nhà đất điều chỉnh, nhiều chủ sở hữu mới mất đầu tư toàn bộ của họ. Giảm mười phần trăm giá lau ra mười phần trăm vốn | Age of Inflation Continued than the rent he would have to pay if he were to rent the house. This leverage of debt financing also works in reverse. When the bubble bursts and housing prices readjust many new owners lose their entire investment. A ten percent decline in prices wipes out a ten percent owner equity a thirty or forty percent decline which is rather common in a bubble crash not only stamps out his investment but also may inflict additional losses unless he walks away from his house and thereby shifts the losses to the financial institution that granted the loan. When the decline is severe and many owners choose to unload their losses on creditors the crash may jeopardize the solvency of financial institutions that financed the bubble. Despite such occasional reversals our age of inflation has made ownership of a home the most effective way to increase personal wealth. While inflation tends to raise interest rates by adding the anticipated depreciation rate to the basic timepreference rate it also lowers the debtor s risk premium which may offset the higher depreciation rate. The owner s equity increases in step with the rising price of the house which simultaneously reduces the risk to the lender. Before the age of inflation a home buyer needed a down payment of 30 to 50 percent of the purchase price the age of inflation gradually reduced this rate to 20 or 10 percent but sometimes 3 percent or less. The lender s price risk is minimal the buyer may just sit back and let the bubble increase his equity. Politicians and government officials look with favor on home ownership as they themselves benefit from such favors. Home buyers enjoy big tax breaks. They can deduct property taxes and the interest on their mortgages from their taxable income. And when they sell their homes they may exclude up to 250 000 in capital gains from taxable income married couples may deduct 500 000. And they can do this again and again as long as they live in the home for two of .