From: yar@cs.su.oz.au (Ray Loyzaga)
Subject: Re: Negative Gearing
Reply-To: yar@cluster.cs.su.oz (Ray Loyzaga)
Organization: Basser Dept of Computer Science, University of Sydney, Australia
Date: Fri, 20 Nov 1992 06:05:07 GMT

In article <1992Nov20.000100.22566@trl.oz.au> c.oneill@trl.oz.au (Chris O'Neill) writes:
>In article <1992Nov19.071027.16215@cs.su.oz.au> yar@cs.su.oz.au (Ray Loyzaga)
>writes:
>>In article <1992Nov19.034509.11169@trl.oz.au> c.oneill@trl.oz.au (Chris
>O'Neill) writes:
>>There are
>>very few interest only loans out there.
>
>There were a lot of businesses in the eighties that had steadily increasing
>debt.  The interest only loan example was chosen as being more conservative
>than these.

Most of the problems happened because businesses revalued their assets
during the late eighties and banks lent them more money against these
inflated assets, most businesses could make the payments until
interest rates climbed to 20% then the problems really started.
The banks should have been more conservative with the valuations on
these assets, they would have detected that these businesses could
not really afford the loans but they kept lending them money,
that is how the loans grew, not by lack of payments, but by
making more loans.
The banks instead of doing some damage control foreclosed, then
they found that the assets that they controlled were not worth
the amount that they had leant, bingo instant Westpac.

>>This stuff is still based on the belief that interest payments are
>>not a genuine business expense, which is not the law and hence there
>>is no loss by the tax office, they aren't entitled to it.
>
>Look, all I did was show the difference it made to the tax office when someone
>made this investment.  You tell me how the tax office is better off.  I said
>absolutely nothing about believing that interest payments are not a genuine
>interest expense.  Any conclusions regarding the tax deductability of the whole
>of interest payments came later.  So far there has only been a calculation of
>the effect on the tax office.

No you used the term "negative gearing" which has nothing to do with it.

>>You are picking on negative gearing, but the same effects occur
>>with positive gearing, just in smaller amounts, what you are
>>arguing for is that interest payments should not be tax deductable,
>
>I am not arguing that interest payments should not be tax deductable.

Oh, yes you are...

>I am arguing that negative gearing should not be allowed against income which
>is independent of the loss.

Negative gearing implies that there is no income except from other sources.

>
>> And yes I see your point about why we are
>>going down the gurgler, 
>
>Yes, you're good at seeing points.
>
>>it is because most people can't understand
>>the simplest of economic arguments, 
>
>Some people don't realize when they are leaving themselves wide open to being
>accused of the same thing that they are accusing others of.

Agreed.

>
>>and even those that can get part
>>of the maths right can't get the underlying argument right.
>
>or have trouble getting it understood.
>
>>>The horrible realization is that what happened in the eighties can happen all
>>>over again, maybe not as severely but enough to ensure that Australias
>>>distorted investment problem continues.
>>
>>Yup, and it has nothing to do with negative gearing.
>
>HA HA HA HA HA HA

Like I said, since negative gearing is the bogey in your eyes, how come
it only caused a problem in the late eighties???? Oh it was the high
inflation ..., I guess the whole of the seventies and early eighties
were just an aberration ... or maybe your little idea needs a bit more
refinement. Now I know why you a laughing .... it was all a big joke!
Newsgroups: aus.politics