Isn't that what declaring bankruptcy is for? Does Croatia have bankruptcy laws?
Croatia just canceled the debts of its poorest citizens
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Re: Croatia just canceled the debts of its poorest citizens
#32Earlier quoted context omitted.
" allowing the middle class to own property, start businesses, etc," Well, there's this crazy concept called "saving money" where you don't borrow from a bank but rather put some money aside every month to be able to afford something expensive I wonder what would happen to property prices if lending was severely restricted, maybe then the value would actually be affordable and not a lifelong debt that becomes unservi…
Well, there's this crazy concept called "saving money" where you don't borrow from a bank but rather put some money aside every month to be able to afford something expensive Yeah. Unfortunately this only works if you have enough money after you pay the bills etc. to put aside.
"if you have enough money after you pay the bills etc. to put aside."
And how do you expect to afford a loan if you don't have money to put aside?!
(excluding the rent to mortgage case, obviously)
Re: Croatia just canceled the debts of its poorest citizens
#33In part, I love this idea. However, as someone who struggles with debt, I've worked to the point of causing serious health issues just to keep my head above water, so if Canada were to do this, I'd be more than ticked. The slacker next to me gets a clean slate, and I get an early grave.
I totally understand your sentiment, but to me this reflects one of the biggest scams that has ever been pulled on the "average guy" - the notion that debt has moral weight. I was taught by my parents, and by the books I read and TV shows I watched, that "paying your debts" made you a good person. If you don't pay your debts you're slacking. We've all heard the parables of the great person who went broke, but managed…
I agree that paying debts is deeply engrained as a moral issue. Although I think this is more cultural and is persistent across many cultures, not necessarily something conjured up by lenders. There is a distinction between personal debt and debt tied to a business venture.
How would you feel if your parents passed away with unpaid debt? Although not legally obliged to pay it, many people do [0]. I, personally, would feel a little sadness to know that my parents had unpaid bills. Nor would I abuse the system by taking out large debts on my death bed.
[0] http://www.nytimes.com/2009/03/04/business/04dead.html?pagew...
Re: Croatia just canceled the debts of its poorest citizens
#34Earlier quoted context omitted.
" allowing the middle class to own property, start businesses, etc," Well, there's this crazy concept called "saving money" where you don't borrow from a bank but rather put some money aside every month to be able to afford something expensive I wonder what would happen to property prices if lending was severely restricted, maybe then the value would actually be affordable and not a lifelong debt that becomes unservi…
Well, there's this crazy concept called "saving money" where you don't borrow from a bank but rather put some money aside every month to be able to afford something expensive Yeah. Unfortunately this only works if you have enough money after you pay the bills etc. to put aside.
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Re: Croatia just canceled the debts of its poorest citizens
#35A similar method of helping the impoverished, one which has strong support among at least some economists (and maybe more widely), is cash transfers directly to the people who need it. That is, don't fund a service for those in need, fund the people directly and they can buy what they need. GiveDirectly is a leading implementation of this idea: https://www.givedirectly.org/ It was founded by economists, and their blo…
I argue, albeit inexpertly, that TARP money given directly to homeowners to make payments on their toxic mortgages would have been of infinitely better societal good than handing b(tr?)illions to banks without any oversight at all.
But you are morally bankrupt for taking out a mortgage difficult for you to pay. The bank, however, doesn't have such moral failings for they are not people.
Wait...
Re: Croatia just canceled the debts of its poorest citizens
#36Earlier quoted context omitted.
Well, there's this crazy concept called "saving money" where you don't borrow from a bank but rather put some money aside every month to be able to afford something expensive Yeah. Unfortunately this only works if you have enough money after you pay the bills etc. to put aside.
"if you have enough money after you pay the bills etc. to put aside." And how do you expect to afford a loan if you don't have money to put aside?! (excluding the rent to mortgage case, obviously)
The greatest boon of credit is the generation of new businesses. IE, you fund a venture through a loan, which upon its success becomes a thriving business.
Beforehand, you could not save or afford the cost of the loan. Afterwards, you will make more than enough to pay it back.
Which is also the implicit risk credit is meant to impose on financers, which is why most countries have regulatory bodies that try to incentivize these kinds of loans. You put what you have up as collateral to try to make significantly more, but if you fail you lose a lot of ground and have to start over.
Re: Croatia just canceled the debts of its poorest citizens
#37Is not this called bankruptcy?
Re: Croatia just canceled the debts of its poorest citizens
#38The article says the government "convinced" banks and other companies to cancel the debts, but the lenders will not be compensated. It's left as an exercise to imagine how the lenders were convinced. I can see the benefits of getting a large number of people out of what must be a terrible situation - the numbers suggest most of the people affected probably didn't have enough income to even service their debt. But I w…
" allowing the middle class to own property, start businesses, etc," Well, there's this crazy concept called "saving money" where you don't borrow from a bank but rather put some money aside every month to be able to afford something expensive I wonder what would happen to property prices if lending was severely restricted, maybe then the value would actually be affordable and not a lifelong debt that becomes unservi…
> Well, there's this crazy concept called "saving money" where you don't borrow from a bank but rather put some money aside every month to be able to afford something expensive
I think the point here is opportunity. You might be able to afford it in X years and pay no interest, which of course is better, but you may also have to act "now". This is where credit is adequate and needed.
Re: Croatia just canceled the debts of its poorest citizens
#39In part, I love this idea. However, as someone who struggles with debt, I've worked to the point of causing serious health issues just to keep my head above water, so if Canada were to do this, I'd be more than ticked. The slacker next to me gets a clean slate, and I get an early grave.
I agree. We should do away with the idea of a limited companies entirely.
On a slightly more serious note, I do think that too many people forget how much society invests by allowing limited companies, and (in my opinion) how much those companies "owe" society as a whole.
Re: Croatia just canceled the debts of its poorest citizens
#40The article says the government "convinced" banks and other companies to cancel the debts, but the lenders will not be compensated. It's left as an exercise to imagine how the lenders were convinced. I can see the benefits of getting a large number of people out of what must be a terrible situation - the numbers suggest most of the people affected probably didn't have enough income to even service their debt. But I w…
> But I wonder how this will affect the ability of non-elites to borrow in the future. Although we all like to hate our financial institutions, they really have been an incredible force against class structures over the last 100 years or so, allowing the middle class to own property, start businesses, etc, by gradually extending credit to more and more people. (I recognize it's not been perfect .) Reverting to a situation where only the rich and connected can get loans would be a negative consequence. I hope the government of Croatia can counter that.
I have the opposite reading of history. Mortgages have been a force of social stagnation in the developed world[1].
What mortgages have done is create lots of middle class property owners. These people have a strong interest in keeping property prices high. Politicians are only too happy to oblige them.
Thus society has bifurcated into the "have houses" and the "have nots". The middle classes throw their weight around to prevent new houses being built, as every new house decreases the price of the houses around it.
Unlike the developing world, the developed world is perfectly capable of building a house for every man, woman and child. If it did, poverty would all but disappear; it's hard to be poor when you have your own house.
But the financial institutions have tied enough of the population into mortgages and home ownership that developed world poverty cannot be eradicated without a serious amount of middle class hurt.
[1] (I can only speak for the UK but I guess Croatia, like all countries, will end up in this situation eventually)