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Croatia just canceled the debts of its poorest citizens

washingtonpost.com

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Re: Croatia just canceled the debts of its poorest citizens

#51

Post by sergiosgc »

gmunu wrote: post #19
rfrey wrote: post #8

Earlier quoted context omitted.

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…

This is a very interesting comment and I used to think similarly, but Matt Levine over at Bloomberg convinced me over several articles (couldn't find exactly which ones on a casual searching) that it's a little more subtle than that. In contracts between big companies, this is absolutely true. Financial institutions expect that companies will act as rational economic actors and discharge their debt when it's benefici…

You make a common economy error. You are assuming the price of a good or service is defined by its cost. This is only true in very liquid (competitive) markets. Banking is no such market.

You make a perfect case of justifying that the cost of providing the lending service would be higher. However, prices are not defined by cost. They are defined, loosely, by what the market can bear. The cost is a lower limit, but nothing more. Namely, it does not define the price.

For the price of a good or service to approach cost of goods, you need very strong and constant competitive pressure. The banking market, in most countries, is not nearly competitive enough.

Re: Croatia just canceled the debts of its poorest citizens

#52

Post by bsaul »

popee wrote: post #45

Hi, croat here. Just one detail, this year there will be elections in Croatia and current gov didn't do anything useful for our economy, so this is kind of popular measure. Don't get me wrong, it's always nice to help, but situation is little bit complicated, taxes are very high and in some way this is not fair to people that are paying everything. Also, there are huge number of people living and exploiting social me…

Your comment made me realize a more appropriate title would be : "Current croatian government cancels poor citizen's debts one year before election".

But that would probably cast a VERY different light on the event. The original intent was probably to give the (positive i guess) impression that the greek trend of not paying debts is spreading.

Re: Croatia just canceled the debts of its poorest citizens

#53

Post by Yetanfou »

reqres wrote: post #10

While i applaud the motivation behind cancelling the debts of Croatia's poorest citizens, the way it was done is likely to hurt them more in the long run. Forcing banks to absorb the losses of this write-off will likely make it harder for the poorest to access credit in the future. Banks are not social institutions - they're pathological profit making entities. They will have no qualms with raising interest rates or…

With a bit of luck the least well off will end up seeing the truth in the money game - they can't win, no matter what they do. This actually goes for many (maybe even most?) people, except for the small_number%. The best way to play the game is not to play it at all - avoid loans, avoid debt, avoid a dependency on money whenever possible. Use the money you make to reduce your dependence on future money by acquiring means to increase your independence. For some this will be hard - if you live in a city there is only so much you can do - while for others it is easier.

Barring a revolt of some kind (war, revolution, catastrophe, take your pick) or a radical change in the concept of money, more and more wealth will be concentrated in fewer and fewer hands. Increased automation will reduce the number of ways a large part of the population will be able to make even a semblance of a living wage. If there is no system in place to take care of these people - most likely in the form of a base living wage provided by some authority - they'll revolt before they starve. And who are they? Are you one of them? If not now, maybe soon?

So... like Tic-Tac-Toe, the outcome of the money game is known before the game starts. They who make the first move, win. You probably did not make the first move, so you won't. Best not to play, then? This does not mean you should avoid money at all cost, it just means you should not follow it. Don't count on making more tomorrow than you do today. Don't base your plans around the money you'll make or that which you accrued. If you have money, use it to reduce your dependency on future money. Buy land if possible. Use money to become energy-independent. Try to become less dependent on automotive transport. Don't get insurances for anything which you can do without. Learn to produce, not consume. Be creative. Entertain yourself instead of being entertained.

Re: Croatia just canceled the debts of its poorest citizens

#54

Post by wtbob »

falcolas wrote: post #29
Sandman wrote: post #22

Earlier 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.

Plus, saving up the 10-50 thousand dollars (say, to start a restaurant in the US) required to start a business would take a significant chunk of someone's working lifetime. To use a more concrete example, you can't make money weaving cloth when you can't afford a loom.

I think your numbers are off by an order of magnitude, which makes it even harder to do for someone with few resources.

Re: Croatia just canceled the debts of its poorest citizens

#55

Post by failed_ideas »

Frondo wrote: post #48
failed_ideas wrote: post #42

Earlier quoted context omitted.

Just to respond to all at once, I'm looking for fairness here, not to punish those that couldn't pay debts. There isn't anything 'bad' about not being able to manage debt in and of itself. However, if you took 3 jobs to make ends meet and the neighbour simply took a third mortgage and smoked pot all day on pogey, it isn't fair. And this action doesn't install any sense of responsibility. All this does is encourage th…

There are much bigger things that aren't "fair" to be judgmental about than your neighbour on pogey. If you want to worry about other people ripping off society in some way, it might be a good idea to worry about the people who are pulling the big cons, not the hypothetical lazy neighbour.

I worry about that too, but that isn't the topic being discussed. Life isn't fair, but I believe we should as humans strive to make it as fair as possible.

Re: Croatia just canceled the debts of its poorest citizens

#56

Post by reinhardt »

alextgordon wrote: post #40
rfrey wrote: post #2

The 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 situ…

> 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.

If only that was true. The top countries by home ownership are Romania, Lithuania and Hungary, while UK and US are in the 33st/34th position and Germany/Switzerland 10 positions below: http://en.wikipedia.org/wiki/List_of_countries_by_home_owner...

Re: Croatia just canceled the debts of its poorest citizens

#57

Post by oldpond »

This is great news, and I hope the world follows suit. Debt amnesty is indeed a time honored solution to the current crisis. When a person goes into debt they sell their future wages. When a government goes into debt they sell future tax revenue. Now all the future wages and tax revenue that can be sold are in the hands of the banks. (Sure, governments could keeps selling future tax revenue from future citizens who haven't been born yet, but let's pretend they don't.) So the banks are in a bad spot; no more debt to buy. If they stop lending, the money system dries up and everyone loses their jobs (happening now). If they try to raise the interest rates (effectively zero now) nobody will be able to afford the payments on their debt and everyone goes broke. So, the whole system needs a big reset. Hence the need for debt amnesty.

What we do after debt amnesty is critical. Do we just start the same old cycle over again? Or do we take this opportunity to make a fundamental change. The government is the only body that can legally create money, but they don't. They create the money in the banks and then borrow it back at interest essentially giving the banks control of the currency. We need to take back control of our currencies and declare general debt amnesty for all governments and citizens at all levels. Business can carry on as usual; they get to keep their debt. Governments should never be in debt again.

With governments out of debt the economy starts moving again. In Canada, the largest employer in the country is the Government of Canada, and in each province the largest employer is the respective provincial government. Not hard to see the benefits of a government able to spend enough money to fix the roads, schools, parks, and all the other shared services we use.

Of course the banks won't like this idea. However, if the government creates enough money ONE TIME to cover the debts that are being erased then the banks are made whole. Basically, the banks get one chance, just like everyone else, to sort themselves out and figure out how they plan to operate post-amnesty. But they won't rule the world anymore.

Re: Croatia just canceled the debts of its poorest citizens

#58

Post by kaonashi »

oldpond wrote: post #57

This is great news, and I hope the world follows suit. Debt amnesty is indeed a time honored solution to the current crisis. When a person goes into debt they sell their future wages. When a government goes into debt they sell future tax revenue. Now all the future wages and tax revenue that can be sold are in the hands of the banks. (Sure, governments could keeps selling future tax revenue from future citizens who h…

> When a government goes into debt they sell future tax revenue

This depends entirely on which government.

It's true in the case of California or Greece, but not Australia or the U.S., for example.

Re: Croatia just canceled the debts of its poorest citizens

#59

Post by yottah »

Croatia doesn't even have bankruptcy laws yet which is awful, and the political class is so bad and incompetent that I don't see Croatia experiencing any growth in the next 20 years. If you're a young and intelligent person in Croatia, you should move to some place where you wont be oppressed.

Re: Croatia just canceled the debts of its poorest citizens

#60

Post by riffraff »

bsaul wrote: post #52
popee wrote: post #45

Hi, croat here. Just one detail, this year there will be elections in Croatia and current gov didn't do anything useful for our economy, so this is kind of popular measure. Don't get me wrong, it's always nice to help, but situation is little bit complicated, taxes are very high and in some way this is not fair to people that are paying everything. Also, there are huge number of people living and exploiting social me…

Your comment made me realize a more appropriate title would be : "Current croatian government cancels poor citizen's debts one year before election". But that would probably cast a VERY different light on the event. The original intent was probably to give the (positive i guess) impression that the greek trend of not paying debts is spreading.

> the greek trend of not paying debts is spreading.

I don't think that trend exists (yet) but _canceling_ debt (creditor) and not paying debt (debtor) are quite different.

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