> OC is generally well managed Lol, it looks like the bankrupts are allowed to write HN comments from bankruptcy court.
What information in his comment do you disagree with?
Puerto Rico files for biggest ever U.S. local government bankruptcy
351–360 of 481 posts
Re: Puerto Rico files for biggest ever U.S. local government bankruptcy
#352Earlier quoted context omitted.
That interest rate doesn't in any way relieve you of your moral responsibility to pay back that loan, in my opinion, just because you run into financial trouble. People defaulting just because it's legal causes interest rates to rise on others, and imposes costs on the rest of society. Of course, it's important for social reasons for there to be legal ways to get out of inescapable debt, but you're not off the hook m…
If a bank is making loans at rates that do not cover defaults they should go out of business because they are crappy at their job. If I take my car to a mechanic am I expected to know as much about my car as the mechanic? Do I tear down and redo/inspect any work they do to my car? If I go to a mechanic and ask them if it's okay to do something dangerous to my car and they go ahead and do it, I'd say the mechanic is w…
I would say that your asking for a $1M USD mortgage with a $20k income would be reckless at best, and dishonest at worst. Yes, they're also at fault, but you're not blameless in that case. You have a personal and societal responsibility to spend within your means. To do otherwise causes damage to the rest of us.
Re: Puerto Rico files for biggest ever U.S. local government bankruptcy
#353Earlier quoted context omitted.
That's true in any individual case. But if we make it our social norm that bankruptcy is nothing to be ashamed of and to be taken lightly, won't it change the equilibrium for future generations of lenders and borrowers such that an inefficiently low amount of lending goes on? If everyone has the expectation that the lenders and borrowers will try their best to live up to the contract they made in good faith, wouldn't…
> But if we make it our social norm that bankruptcy is nothing to be ashamed of and to be taken lightly I don't know about "taken lightly" but bankruptcy and defaulting on a debt should not be something to be "ashamed" of, for an individual, a company, or a government. Default is an option specifically written into every debt contract out there. There should be no more shame in choosing to default as there would be f…
> If there was zero risk there should be zero premium.
Suppose someone living the HN dream makes a bunch of money from his startup, and decides to pay off his mortgage. It might be structured as a loan from his company to himself, which then has zero risk.
A bank processing an FHA loan has zero default risk, since the government steps in to pay them. And they often sell the loans to a government-run company anyways.
A bank giving a conventional mortgage will often require 20% down, and again they resell the loans to a government-run corporation after a few years anyways. If you default in those first few years, they effectively get a 20% discount on the original purchase price of the house when they take it. Not zero-risk, but the 2008 financial crisis appears to have only had a 30% drop in house prices. (Obviously, subprime lenders can't resell their loans to the government, and didn't require a heavy down payment)
Generally speaking, the idea that interest mostly pays for risk assumes that there is no 'low-hanging fruit' where guaranteed returns are possible if only there was money. Paying down high-interest debt is one form of guaranteed return, so theoretically there shouldn't be such a thing as high-interest debt if the market was mostly efficient.
I guess the conclusion of your view is that: If people were more diligent about handling their money, banks wouldn't make as much risk-free money.
Re: Puerto Rico files for biggest ever U.S. local government bankruptcy
#354Earlier quoted context omitted.
> We owe money to the creditors... and what you do with a debt is to you pay it off. That's not the case. Sometimes, you pay your debt off. Sometimes, you default, and file for bankruptcy. For lenders, it's the cost of doing business. If they don't want to deal with the possibility of bankruptcy, they shouldn't lend out money. Lenders charge creditors a premium, because of the risk of default. It's as much on them to…
That's true in any individual case. But if we make it our social norm that bankruptcy is nothing to be ashamed of and to be taken lightly, won't it change the equilibrium for future generations of lenders and borrowers such that an inefficiently low amount of lending goes on? If everyone has the expectation that the lenders and borrowers will try their best to live up to the contract they made in good faith, wouldn't…
Shame is not the word I'd argue is important here, even if it is a factor. But reputation matters.
With governments, it's a lot about the credibility. You could say that it was wise economically for e.g. Argentina to default on its loans in 2001 given the circumstances; however, the default and the associated political rhetoric have cost a great deal to the Argentinian government and people, and it continues its decline, although it was a very wealthy country 80 years ago and effectively avoided the Second World War. The economic and political institutions in the country are not trusted.
I live in Finland, which in 1918 suffered a famine after a bloody civil war. The new government took a loan from U.S. creditors in 1919 to buy food. Many other countries who took similar loans at the same time defaulted them at the Great Depression or the following years in 1930's. Economically, that would have made a lot of sense.
But the Finnish government kept paying it back, even during the beginning of World War II while being attacked by U.S.S.R. This gained a huge positive reputation which helped the country a lot. After the war, the old loan was eventually converted to a fund whose payments were given as university grants and stipends to students coming from Finland to U.S. universities.
It would have been quite easy to default in 1920's or latest in 1940, and most modern economists would have advised for it, but not doing that was a good move.
The loan was eventually finished back in 1984, but the process attracted donors who gave further funding so that the stipend/grant system still exists.
Re: Puerto Rico files for biggest ever U.S. local government bankruptcy
#355Earlier quoted context omitted.
There weren't any public pension funds at the start of the 20th century. If we instead look at time periods during which the industry average was considered to be 8%... https://dqydj.com/dow-jones-return-calculator/ 1960-1990 = 9.5% average return. 1960-2000 = 11.5% average return. It's largely pointless to talk about inflation-unadjusted average-rate-of-return for long time periods. A 12% YoY return when inflation i…
You're overfitting. This is exactly the problem I'm describing. Case in point, you've omitted 2000-2010. Real (CPI as inflation) averaged annualized return on the DJIA 2000-2010: -2.219% This is with relatively mild inflation. Of course, 1960-2000 looks better when you literally put in the apex of the software bubble when P/E ratios shot skywards...part of which corrected over the decade following. Expecting a 8% nom…
Were pension fund managers in 2010 predicting 8% growth? I have my doubts about that.
Re: Puerto Rico files for biggest ever U.S. local government bankruptcy
#356Earlier quoted context omitted.
That interest rate doesn't in any way relieve you of your moral responsibility to pay back that loan, in my opinion, just because you run into financial trouble. People defaulting just because it's legal causes interest rates to rise on others, and imposes costs on the rest of society. Of course, it's important for social reasons for there to be legal ways to get out of inescapable debt, but you're not off the hook m…
While I agree we should do our best to pay our debts, morality shifts with circumstances. If I have an enough debt where it is affecting the lives and future of my children and I have an option to declare bankruptcy to give them a better life, am I not morally obligated to do so as a parent? I would argue that I am. Morality is a human defined concept. We also only seem to apply it to individuals, a company declares…
Morality is human defined, but it's the set of ideas that, along with a society's institutions, distinguishes a well functioning society from a corrupt and dysfunctional one. It's the set of memes that allows us to function at the massive group scales that we operate at, that allows us to trust strangers to run things that are vital to our own survival. And when that breaks down, and people start acting in their short-sighted self interest (or you think you see them doing that, anyway), you start seeing that trust crack. I think we've been seeing that happening in the US for a while, and I think corporatism separated from a sense of decency and personal accountability while at work is a large part of the cause.
I don't think that it's right for a company to do what you describe wantonly. I absolutely think we should shame companies when they mistreat people.
And what you're describing with your children is selfish, but it's an understandable selfishness - your children are of course going to be a higher priority to you than society at large, as it is with almost all parents.
Anyway, my idea about the obligations of fulfilling one's debts seems to be an unpopular one, and I'm sure I won't change anyone's mind, especially if they've chosen to take on a lot of debt themselves, so I'll stop here.
Re: Puerto Rico files for biggest ever U.S. local government bankruptcy
#357I have lived all my life in Puerto Rico, and as you can imagine, this issue is quite controversial. We owe money to the creditors... and what you do with a debt is to you pay it off. Yet the amount is so staggering, that I wonder if it's actually possible. As is typical, decisions by politicians placed us in this situation. Decade after decade, 4-year term after 4-year term, the government has spent money it does not…
I am happy to hear the decisions of voters - putting corrupted populist in charge over and over - has nothing to do with the situation. Bad bad politicians!
Re: Puerto Rico files for biggest ever U.S. local government bankruptcy
#358Earlier quoted context omitted.
The EPA is going to spend millions of dollars to clean up Flint, Michigan's water supply lines; you don't get a say in that either. "Representation" is a bit of a vague concept in US governance.
I am fine with bailouts as long as systems are being put in place to avoid repeating it in the future. That's for Flint, pensions or banks. Obviously the prevention step never happens....
Bailouts create more bailouts because people know they are going to get bailed out.
Re: Puerto Rico files for biggest ever U.S. local government bankruptcy
#359I'm not super knowledgeable, but this seems to me like a good thing. If investors lend money to a government that can't repay, they should lose some of that money. I don't think whole economies should remain in a state of economic slavery.
Is there some way in which this move might turn out bad for the people of Puerto Rico, aside from it probably being more difficult to raise debt in the future at a reasonable rate?
Re: Puerto Rico files for biggest ever U.S. local government bankruptcy
#360Earlier quoted context omitted.
I think there a "tragedy of the commons" sort of moral responsibility here to only take out loans you have a good chance of paying off as you theoretically raise interest rates for everyone else.
But everyone is definitely not lumped together into a commons. If their is information to delineate people, it will be used. That is what credit scores are used for. Also, of some interest, it was when banks sullied the information, that the housing market really went off the rails. BTW: We've got to watch out for these financial guys, they'll try it again if they have the chance.
It's not the "financial guys" forcing everyone to sign up for the huge amounts of per-capita debt we're now up to. People are doing that themselves out of their utter lack of self-discipline to save money instead of buying a stupidly overpriced SUV or pickup truck.
And the housing market really went off the rails because people were making stupid bets. Does the casino enable stupid bets? Damn right. But we don't blame them when a gambler loses all their money on a stupid bet.
I'm as pissed as anyone that bankers didn't go to prison en masse, but what they did was package mortgage debt up as more safe than it was. It was home buyers eating up easy money with no restraint that caused the pricing to hit bubble territory.