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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

#61

Post by rch »

wtbob wrote: post #54
falcolas wrote: post #29

Earlier quoted context omitted.

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.

Not really - I know someone in the town where I went to school who opened a coffee shop using a combination of cash and credit cards at that level. She now owns the building the shop is in and a home in Hawaii. Not VC riches or anything, but not bad either.

Re: Croatia just canceled the debts of its poorest citizens

#62

Post by Shivetya »

my understanding is that Croatia doesn't have bankruptcy laws similar to some Western countries so once you cannot pay simple debts, like bills for utilities, your bank accounts can get frozen by the state?

As for it being unprecedented, nah, many near failed states will do about anything to prop up the popularity of the ruling class.

Re: Croatia just canceled the debts of its poorest citizens

#63

Post by riffraff »

reinhardt wrote: post #56
alextgordon wrote: post #40

Earlier quoted context omitted.

> 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.wikipe…

notice that ex-warsaw-pact countries all have high home ownership due to having expropriated property and having had large "social building" projects (which also lead to some horrible places though).

Re: Croatia just canceled the debts of its poorest citizens

#64

Post by velcro »

Note that the amounts in the article are not factually correct. Its really not $138. Its actually:

A.) max. 2500kn (croatian kuna) or $367 USD for singles B.) max. 1250kn or $183 per household member (so for families of 4 it would be $183 x 4)

This is obviously for the poorest of the society that have had their accounts blocked for debt longer than 360 days. Most working people in Croatia would not be able to meet that criteria - minimal state-imposed gross salary for 2015 is 3030kn ($445 USD). People also tend to mix net and gross amounts (everything salary-related in Croatia is usually presented as a gros amount - while in the US/EU its usually net). Not an insignificant difference because Croatia has some of the highest taxes in the world.

Source: https://servisi.fina.hr/otpis-duga-javna-objava/info

Re: Croatia just canceled the debts of its poorest citizens

#66

Post by falcolas »

wtbob wrote: post #54
falcolas wrote: post #29

Earlier quoted context omitted.

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.

To quote a TV personality:

"How were you able to start this with only $20,000?"

The restaurant business is particularly hard to break into: you need to rent the space, purchase all of the equipment (each piece of industrial kitchen equipment can run from the single to double digit thousands), furnish the interior, get certified, hire employees and stock perishables (including dishes), all before you can even serve one customer.

Re: Croatia just canceled the debts of its poorest citizens

#67

Post by rhino369 »

rch wrote: post #61
wtbob wrote: post #54

Earlier quoted context omitted.

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

Not really - I know someone in the town where I went to school who opened a coffee shop using a combination of cash and credit cards at that level. She now owns the building the shop is in and a home in Hawaii. Not VC riches or anything, but not bad either.

A coffee shop isn't a restaurant.

Re: Croatia just canceled the debts of its poorest citizens

#68

Post by scotty79 »

I have trouble understanding this.

> the program is expected to cost up to 210 million Croatian kuna ($31 million),

> "I am not sure that this is the best way to help low-income people. If lenders think this can happen again they will charge very high interest rates to low-income borrowers," Baker said.

Will the money be paid for debtors or not at all? (in case of those lenders that did not agree to forget the debt)

Re: Croatia just canceled the debts of its poorest citizens

#69

Post by dingaling »

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…

> The middle classes throw their weight around to prevent new houses being built

Most middle- class folk I know are too busy cutting expenses to clear their mortgage sooner than to care about the ability of other people to buy houses.

Why would they care? You pay off your mortgage and you're done.

Re: Croatia just canceled the debts of its poorest citizens

#70

Post by scotty79 »

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…

Forget the 1% of most likely noncollectable debt and get 60 thousands customers instead? That seems like no-brainer. I don't think banks needed much convincing.

Poor people will repay their debt in trick fees for the banks in no time or just become indebted again.

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