YOUR THOUGHTS ON DE-ESCALATED DEPRECIATION (RATE OF PAYMENT)

mike montagne · **Joined:** 24 Jan 2008, 8:33 pm **Posts:** 492

The following tables propose tangible models for what I've long simply called "de-escalated depreciation," or de-escalated rates of payment, and what you've interpreted as you will. The involved processes are readily worked out at any time, but I've decided to do so now, to ask for consideration and feedback in preparation for our constitutional amendment drive.

"De-escalated rates of depreciation" are higher than the linear rate of depreciation in the initial phases of an asset's lifespan, and lower in the later phases. By intention, de-escalated calculations match perceived consumption and remaining value across the lifespan, whereas linear depreciation only expresses the overall cost and rate of payment, the implementation of which would make it unrealistically undesirable to purchase depreciated property at periodic costs which would be indifferent from new property. De-escalated rates of depreciation therefore are intended to reflect perceived rates of consumption and remaining value which are generally consistent with the intentions of purchasing an asset of any serviceable age. Thus approved de-escalated rates of depreciation for various classes of property prescribe governing rates of payment under mathematically perfected economy™, with the remaining balances and patterns of payment comprising appropriate influences toward buying new or aged property; for preserving existent property to the full extent of potential service; and for consuming the full worth of property, as opposed to wasting wealth.

The following tables are examples of de-escalated depreciation requiring an inital payment of 3% of a $100,000 home with a 100-year lifespan and expressing periodic rates of payment as a multiple (Lin X) of the linear rate of depreciation:

Column headings:

1. Q : "quarter" of the lifespan (0...4);

2. TO YR (END) : year (of the 100-year lifespan) in which the specified period/rate of payment ends;

3. Lin X : specifies the rate of payment in terms of the linear rate ("Lin") times "x", with the linear rate for this example being our familiar $1,000 per year or $83.33 per month;

4. ANNUAL : expresses the resultant annual rate of payment for the period;

5. MONTHLY : expresses the resultant monthly rate of payment for the period;

6. ACTUAL RED FROM PREV : expresses how many dollars per month the rate is reduced from the previous rate per month;

7. PERCENT REDUCTION : expresses what percentage the previous rate was reduced for the subsequent period;

8. BAL, END : is the balance at the end of the period (graphed);

9. PCT PAID : expresses the percentage of the balance paid at the end of the period.

The following chart graphs the remaining balances or value of these schemes together:

Each of these hypothetical schemes requires a relatively major initial payment of 3% (3 years of a hundred year lifespan) of a $100,000 home. For the first 12.5 years of Proposed Process 4, the rate of payment thereafter is 2.6 times the linear rate of depreciation ($83/month), or $217/month. As you can see in the tables, each scheme 1..3 is a moderation of Proposed Process 4, with each process scaled to pay the overall/linear rate of depreciation in the second quarter of the lifespan, paying increasingly more for consumption in the preceding quarter, and paying decreasingly less in the subsequent quarters. The first and fourth quarters are further broken into halves, emphasizing the curvature/pattern of de-escalation. From this explanation, I expect the remaining de-escalated rates of payment should be clear from the second and fifth columns of data.

The one aspect of the philosophy which I will explain at this initial stage of discussion is that while the general concept of depreciation tends to fit a curve or arc, an approximation of such an arc as represented by these linear segments provides for us to readily understand and account for consistent payments across the duration of a period, as we necessarily do in budgeting.

Understand however that higher initial and reduced later rates of depreciation can be said to impose a "greener" standard. That is, they discourage neglect of property and encourage preservation of property, which of course at the same time is "economical." In weighing the different scenarios, what you want to do is ask yourself whether the remaining value (balance) of the resultant data yet best reflects perceived depreciation of newer and older property throughout the lifespan of your chosen/preferred process. That is, are the initial rates of depreciation sufficient to discourage reckless spending on new without penalizing for spending on new — is the remaining value a just reflection of consumption of new value? Likewise, are the later rates of depreciation sufficient to encourage preservation of property without so awarding owners of older property, that it makes little sense for them to dispense (sell) relatively unused property to those who might make better use of it?

Regardless of the remainder of underlying reasoning, what I'm asking for is candid initial impressions of the rates of payment over such durations, not just for the home, but for virtually/prospectively anything. That is, you can input different lifespans and values to examine resultant rates of payment for anything from trinkets to cars, planes and homes, or if you don't have the software to operate on the model, yet you can appraise how this one pattern may fit/apply to anything and everything conceivable — whatever your anticipated exceptions.

The basic questions are:

A. With this hypothetical $100,000 home and ostensibly demonstrable, expected 100-year lifespan, how well does this pattern match your interpretations of real depreciation of *perceived value*; and

B. What are your concerns with whatever impact you anticipate this pattern may have on anything at all? In other words, how do you believe it may wrongly or rightly affect you or anyone else?

Any suggestions for further processes such as requiring say 3% of the lifespan at the current rate of depreciation to purchase the home at any later stage may best be posted to the forum.

Much thanks to all for your consideration.

Wayne Lajoie · **Joined:** 10 Mar 2010, 8:59 am **Posts:** 2

how would you calculate certain variables such as how the value of a certain thing changes over time... for instance a victorian home over a hundred years old... in most peoples eyes their value hasn't depreciated at all, I haven't done the math, but I think it's fairly safe to say that well maintained ones have appreciated... same with a lot of products we call antique or classic... on the flip side of that you have homes built in the 70's that because of their design make them less desirable today... also what about maintenance and improvements... if a home is well built, well maintained and kept modern... shouldn't it's value depreciate slower or even appreciate? I personally find older wood and wine more valuable... some things grow finer with age. in other words isn't value relative? would you have to refinance everytime you put a coat of paint on a home? does not that variation in a percieved value of a good or service inherently cause inflation or deflation as that perception changes? if so how would that be regulated? and by whom? I'm new to your version of economics... even though it seems very similar to some others I have studied... just trying to understand, thanks...

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