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Author! Author! See other Author! Author! Articles Title: Dakmar's Semi-Serious Economic Rescue Plan Was sitting at working today stewing over my 401k losing enough overnight to buy a cheap new car, and enough in the past two weeks to buy a faster car (still new) than I have now. Started wondering if borrowing against said rapidly deflating account to pay off balance of mortgage might be feasible, at least I'd own home outright. I understand all the mainstream arguments for putting money into 401 and not borrowing from it, but the way things are going it looks like my retirement will consist of a raisin and any paperclips I might find. Anyway, borrowing against my 401 also entails paying it back, back into the same hands that lost me a V8 Mustang so very recently, only for them to gamble it away again. Anyway, here's my proposal: Allow workers bees to withdraw from their 401k account explicitly to pay off or down their mortgage. It will put liquidity into the hands of responsible lenders while investing in the American Dream of home ownership. No penalties shall apply, and the transfer shall be taxed at same rate taxpayer is currently paying. In other words, as long as this money is used to pay mortgage balance, it does not count as extra income for the year. Please feel free to debate pros and cons of my idea, you cannot hurt my feelings.
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#8. To: Dakmar (#0)
Actually, that reduces liquidity. Paying off debts (fractional reserve bank orginated loans) takes money out of the money supply and back into 'thin air' whence it originated at the Fed. It does free up reserves (base money) in the amount of the fractional 10th originally reserved when the loan was advanced, but the Fed can (and has been) pumping the base money supply far more than honest borrowers ever could. That said, I agree you ought to be able to draw down and/or reallocate your 401K without penalty, recapturing only whatever tax-credit was earned when the same amount was put into the 401K. Everyone should be able to invest in the American Dream of V8 Mustang ownership :)
I finally read the rest of your post and got your gist about fractional reserve banking, thanks for pointing that out.
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