In the 1970s, when this all started, the government was rationing everything from food to fuel. Then, in the 1980s, prices started to rise and the government began to ration everything from milk to toilet paper. This was pretty drastic at the time.
As an example, a car that was 25 years old in 1971 would cost the government $2,000 as of 2012. If this car were 20 years old in 1971, it would cost the government $750. So a 20 year old car would cost $12,750 in 2012, or $2,500 in 1971.
This is a similar problem to the one we face in the financial markets today. If you are buying a car less than 21 years old, you are buying it at a discount because of the government’s policy. If you are buying a car 21 years old, you have to pay full price for the car.
Now let’s look at capital rationing in the financial markets. Back in 1971, if you bought the car 20 years old, you could afford it for 3 years. In 2012, you have to buy it at the discount rate for 2 years, then pay full price for the third year. So you have to pay full price for the car for a little over two years, and then pay full price again for the next 2 years.
This is called “capital rationing”, and it has been used for decades. The reason this works is that it is very convenient for banks to make loans that are long-term. So if you buy a car with a 5 year loan at a discount, you can quickly get out of the car, but if you buy the car 4 years old and pay full price, you have to pay full price for the car for the next 10 years.
The same goes for capital goods. When you buy a house, you have to pay full price for a while, but in the meantime you can pay the monthly amount that the mortgage company is willing to give you for the first year. But to get out before the mortgage company can make you an offer, you have to pay down the mortgage as much as possible. This is called capital rationing.
The process of renting out your home is called capital rationing. You can pay month-to-month to rent out your home, but unless you have a high net worth, you can’t buy a home for less than what you pay for it. You can also buy a home at a discount but you’re not allowed to rent it out.
The reason to rent out your home is because a mortgage company wants to be able to control your income. If you want to pay your mortgage, you have to pay rent. If you don’t have enough money to pay the rent then you can’t pay it.
So how does capital rationing work in real life? Well for starters, you need to rent your property out at a certain rate. You then have to pay rent every month to get the rental rate. Next you have to be able to pay the rent, which means you have to be able to pay some of your monthly rent. Then you have to pay your mortgage payment, and then your rent every month.