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December 13, 2007 – Comments (4)

 In "Biggest Sucker of All Nations" in the comments Craig, aka TMFspreadsheet, mentions that he has read that the non-deductibility of interest payments on a mortgage is one of the reasons other nations have higher savings rates.

I would suggest it also distorts people's thinking about debt by giving the illusion of getting something for nothing by having debt.  A tax break is a reward.

The link below is an interesting comparison of Canadian vs US mortgages 

 http://research.cibcwm.com/economic_public/download/cwcda-070316.pdf

 In my six degrees of leverage series I tried to show the difference in the nature of low interest debt versus high interest debt and reduced leverage consumers face in terms of trying to get ahead.  I didn't really think about deduction of interest and how that would "justify" higher percent of income to debt.  It doesn't justify it, but it does probably mean that US borrowers are in more trouble because borrowers have leveraged their debt with the tax deduction.

Six Degrees of Leverage Part I

Six Degrees of Leverage Part Il

Six Degrees of Leverage Part Ill

Six Degrees of Leverage Part IV

Six Degrees of Leverage PartV

Six Degrees of Leverage Part VI

4 Comments – Post Your Own

#1) On December 13, 2007 at 3:30 PM, floridabuilder2 (99.34) wrote:

man dwot, your blogging so fast i can't even keep up...  instead of going back into an old blog, i will continue the discussion here about water supply.... i agree with you 100%... but as you know americans never worry until the problem is big!!!!

In caps I identified an ETF called PHO that is water resource related...  I was going to research the top 10 holdings this weekend and if the market corrects some more buy in.... 

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#2) On December 13, 2007 at 6:52 PM, dwot (97.03) wrote:

Yeah, I did a lot of writing on the weekend and I didn't even get to where I was trying to get...  I find writing about something helps me to understand it better.

So, liquidity crisis for another then?

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#3) On December 13, 2007 at 11:19 PM, abitare (58.10) wrote:

dwot,

Check out this site. It has some good market information. 

http://bespokeinvest.typepad.com/ 

The internet has so much good information, it is tough to limit what you have time to read.  

Also have you seen Ron Paul yet?

http://www.youtube.com/watch?v=FG2PUZoukfA 

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#4) On December 14, 2007 at 6:09 PM, dwot (97.03) wrote:

Abit, I avoid videos.  I used $60 of internet services in 6 days when I first got it and I was mostly browsing, although I did view "Bubbleman" a couple times.

Bespoken is on my watch list, they are good. 

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