Croatia just canceled the debts of its poorest citizens • Hacker News Board

Re: Croatia just canceled the debts of its poorest citizens

#121

Post by nickthemagicman » Sun, Feb 01, 2015, 6:52 PM UTC

byoogle wrote: post #106

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…

Interesting, this quote comes to mind: “The American Republic will endure until the day Congress discovers that it can bribe the public with the public’s money.” – Alexis de Tocqueville

The term, bribery, is extremely subjective in this context.

It's the same ephemerality as saying someone is a hater of "Freedom".

It makes an easy soundbite but what does that even mean?

Re: Croatia just canceled the debts of its poorest citizens

#122

Post by [deleted] » Sun, Feb 01, 2015, 6:52 PM UTC

byoogle wrote: post #106

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…

Interesting, this quote comes to mind: “The American Republic will endure until the day Congress discovers that it can bribe the public with the public’s money.” – Alexis de Tocqueville

[deleted]

Re: Croatia just canceled the debts of its poorest citizens

#123

Post by acdha » Sun, Feb 01, 2015, 6:57 PM UTC

byoogle wrote: post #106

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…

Interesting, this quote comes to mind: “The American Republic will endure until the day Congress discovers that it can bribe the public with the public’s money.” – Alexis de Tocqueville

That quote appears to be the creation of an editorial writer in the 1950s:

http://en.wikiquote.org/wiki/Alexis_de_Tocqueville#Misattrib...

Re: Croatia just canceled the debts of its poorest citizens

#124

Post by walshemj » Sun, Feb 01, 2015, 7:04 PM UTC

jljljl wrote: post #93

TheOtherHobbes wrote: post #83

Earlier quoted context omitted.

Paying off your mortgage is a significant drain on resources when house prices have been driven through the roof by speculation and inflation. (See also the Bay Area.) Disposable income drives the economy. If people are cutting instead of spending everyone loses - except property loan lenders. Affordable housing frees up money for new businesses. Second to education, it's one of the strongest prosperity generators.

If you are in the middle of paying your mortgage, and housing prices rise, you actually benefit, because the equity of your home will increase. It's new homeowners who will struggle to pay.

As long as you have a reasonable level of inflation.

Re: Croatia just canceled the debts of its poorest citizens

#125

Post by acdha » Sun, Feb 01, 2015, 7:05 PM UTC

JoshTriplett wrote: post #94

narag wrote: post #84

Earlier quoted context omitted.

And how do you expect to afford a loan if you don't have money to put aside?! The trick is you need to live somewhere. If you can't have a loan, the money goes to rent.

> The trick is you need to live somewhere. If you can't have a loan, the money goes to rent. The difference is that a landlord wants a tenant who can actually pay the rent, but banks often hand out loans that are far more than the new homeowner can afford. If a tenant can't pay their rent, the landlord will have to go through a long and painful process to remove them and find another tenant, and they'll likely be out…

> The difference is that a landlord wants a tenant who can actually pay the rent, but banks often hand out loans that are far more than the new homeowner can afford.

That's actually pretty rare – and the problem wasn't the load but the fact that the banks which engaged in those practices for a historically brief period of time were allowed to shift the cost to other people.

I've applied for mortgages three times – 1998, 2008 and 2011. In 1998 and 2011, everyone did their due diligence correct. In 2008, the credit union and the New England regional bank both behaved responsibly while Bank of America simply confirmed my employer and pre-approved me for loan over 3 times higher than I was asking for.

Guess the only one of those three which had any problems whatsoever with loans? The other two had default rates which didn't significantly change throughout the crisis.

Re: Croatia just canceled the debts of its poorest citizens

#126

Post by refurb » Sun, Feb 01, 2015, 7:07 PM UTC

sergiosgc wrote: post #51

gmunu wrote: post #19

Earlier quoted context omitted.

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 no…

The banking market, in most countries, is not nearly competitive enough.

You don't think money lending is competitive enough? You can get loans for houses, cars and school at just a few points over the risk-free rate.

I'd say the banking market is very competitive since they are all offering the same thing, money (a commodity).

Re: Croatia just canceled the debts of its poorest citizens

#127

Post by stefantalpalaru » Sun, Feb 01, 2015, 7:12 PM UTC

bmmayer1 wrote: post #116

Let's just look at the predictable consequences of this move: 1) Banks and other corporations will never lend money to poor people again. Full stop. If there is a chance that the government will write off that debt (effectively stealing future earnings from banks) for these loans, banks just won't issue them. Say goodbye to educational loans, healthcare loans, car loans. Say goodbye to home loans and mortgages. If yo…

> Say goodbye to educational loans, healthcare loans, car loans.

Say hello to life outside the US. In most of Europe you don't need loans to get an education, healthcare or to buy a car.

Re: Croatia just canceled the debts of its poorest citizens

#128

Post by acdha » Sun, Feb 01, 2015, 7:12 PM UTC

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.

Just to support what other people are saying about you being correct but insufficiently pessimistic, this has been discussed a lot here in Washington DC in connection with licensing for food trucks. There's a huge amount of interest in the trucks because they're what you can get if you can save/borrow $50K. Here's an article from a few years ago which leads with an example of an experienced chef trying to get a venture off the ground and looking at well over $750K just to open the budget version of his restaurant:

“If anyone can understand the tension between brick-and-mortar restaurants and the mobile army of food trucks that has stormed D.C. in the past year, it’s Stephan Boillon. After he lost his job at Dino in Cleveland Park in 2008, the veteran chef sought to launch an upscale sandwich shop on Connecticut Avenue NW. His plan was to offer only cold sandwiches, which would enable him to build a restaurant with no burners, no oven, and no deep fryers.

But even Boillon’s stripped-down concept was going to cost $750,000 before the doors opened—a figure that didn’t include rent, utilities, insurance, advertising, taxes, labor, association fees, or any of the other overhead it takes to operate a business in a neighborhood that expects a lot from its entrepreneurs.

So with credit tight and investment money scarce, Boillon found a cheaper way into the gourmet sandwich business: a food truck. For $50,000, one-fifteenth of the price to build his brick-and-mortar concept, Boillon started El Floridano, his rolling unit dedicated to home-made roast-pork Cubans and other bread-driven bites. Boillon had traded a restaurant’s higher profit margin for a truck’s lower start-up costs.“

http://www.washingtoncitypaper.com/articles/39815/inside-dc-...

Re: Croatia just canceled the debts of its poorest citizens

#129

Post by _delirium » Sun, Feb 01, 2015, 7:13 PM UTC

Moru wrote: post #82

bsaul wrote: post #52

Earlier quoted context omitted.

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.

Greek trend? I can remember quite a few american banks doing just this recently.

And applied to regular people, it's already been quite legally enshrined in the U.S. for a long time. The U.S. has forgiving bankruptcy laws (which are incidentally often partially credited for its entrepreneurial culture). Croatia doesn't, so debts are hard to discharge. In a system with a forgiving bankruptcy system, this kind of one-time amnesty wouldn't be necessary, because someone who has no assets, very low income, and high debt would simply declare bankruptcy and have the debt discharged.

Re: Croatia just canceled the debts of its poorest citizens

#130

Post by papaf » Sun, Feb 01, 2015, 7:14 PM UTC

bmmayer1 wrote: post #116

Let's just look at the predictable consequences of this move: 1) Banks and other corporations will never lend money to poor people again. Full stop. If there is a chance that the government will write off that debt (effectively stealing future earnings from banks) for these loans, banks just won't issue them. Say goodbye to educational loans, healthcare loans, car loans. Say goodbye to home loans and mortgages. If yo…

Say goodbye to educational loans, healthcare loans, car loans

You make a good point and I do not want to undermine it. However, it is worth pointing out that people don't have to take out educational and healthcare loans in most of the civilised world (Croatia included).