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

Re: Croatia just canceled the debts of its poorest citizens

#281

Post by calinet6 » Mon, Feb 02, 2015, 1:53 PM UTC

radisb wrote: post #272

bjt wrote: post #220

Earlier quoted context omitted.

The obvious possible failure is that these people may find it hard to get credit in the future, as described in the last paragraph: > Some economists, among them Baker, are skeptical whether the scheme will succeed: "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. If you were a ban…

3 years ago, in Cyprus, the reverse happened (savings were cut off) but people still deposit money into their bank accounts without getting increased interest, despite this precedent. Why should a loan writing off cause loan interests to go up?

Exactly because the situation is reversed: the banks are much more likely to be strategic and self preserving than the general public, due to concentration of power and many other factors.

Re: Croatia just canceled the debts of its poorest citizens

#282

Post by mfringel » Mon, Feb 02, 2015, 1:57 PM UTC

ahomescu1 wrote: post #183

karmacondon wrote: post #164

Earlier quoted context omitted.

Others have pointed out some of the flaws in this reasoning, but I want go over some of the obvious critiques again: 1 & 2) There will be no "full stop" on lending money to poor people. If you're a bank and you're managing say $1B, some percentage of that is allocated to high risk loans. Your job is to make money from lending money, and there are only so many borrowers. Banks don't lend money to poor people out of al…

> In short, the Croatian government and their finance ministers/advisers probably aren't stupid. They have actual data and a knowledge of their own people and situation to go on. They aren't just playing armchair economist. And though I couldn't name one of them, I'm willing to bet that they thought this move through. Doesn't mean that there won't be any of the dire consequences that you've predicted here, but they'v…

Alternately, one could embrace the power of "and."

Re: Croatia just canceled the debts of its poorest citizens

#283

Post by blcArmadillo » Mon, Feb 02, 2015, 2:33 PM UTC

rfrey wrote: post #8

failed_ideas wrote: post #4

In 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…

Do lender's get paid interest in compensation for risk? If I'm not mistaken, lenders get paid interest because a dollar today is worth more than a dollar tomorrow.

Re: Croatia just canceled the debts of its poorest citizens

#284

Post by ctdonath » Mon, Feb 02, 2015, 2:37 PM UTC

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…

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 have to wonder the same about the US banking system about 8 years ago: the aforementioned subprime problem apparently led to top bankers literally being brought into a room and told in no uncertain terms they would agree to the planned solution to the problem; what was actually said remains unknown and rather...intriguing.

Re: Croatia just canceled the debts of its poorest citizens

#285

Post by rospaya » Mon, Feb 02, 2015, 2:54 PM UTC

bnt wrote: post #114

Croat here: This is BS. They canceled peoples phone & other commodity debt. This is basically rewarding people for being financially irresponsible. I could have easily taken 5 phones on 2 year contracts, decided not to pay and gotten that written off with this law.

> I could have easily taken 5 phones on 2 year contracts, decided not to pay and gotten that written off with this law.

Not really, since the law only covers people who have no savings, no propery and earn a third of the minimum wage. You have to be seriously poor to get your 5 phones for free.

Re: Croatia just canceled the debts of its poorest citizens

#286

Post by rospaya » Mon, Feb 02, 2015, 2:58 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…

You're wrong on almost all points because you're not seeing the primary reason this measure went through - the banks, telecoms and utility companies would never see the money anyway. This covers only people in crushing poverty and then just a fraction of them.

Most importantly, the companies agreed to this, it wasn't forced by the government.

Re: Croatia just canceled the debts of its poorest citizens

#287

Post by dragonwriter » Mon, Feb 02, 2015, 3:03 PM UTC

ctdonath wrote: post #284

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…

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 have to wonder the same about the US banking system about 8 years ago: the aforementioned subprime problem apparently led to top bankers literally being brought into a room and told in no uncertain terms they would agr…

There's a thing here -- with widespread bad debts, its generally not in the interests of lenders to write them off individually (because it means that those likely to default are attracted to those lenders that seem most willing to do that), but when there is a major wave of them, its in the interest of the lenders for them to be addressed en masse so that the system as a whole is dragged down by the burden those debts put on the consumer market.

Re: Croatia just canceled the debts of its poorest citizens

#288

Post by josephlord » Mon, Feb 02, 2015, 3:37 PM UTC

runj__ wrote: post #279

josephlord wrote: post #274

Earlier quoted context omitted.

> Land Value tax makes the rich pay a lot but hits the poorest really hard since the threshold to owning land (and creating wealth) is substantially raised. That seems a bizarre statement. Firstly I don't see any connection between owning land and creating wealth . Secondly taxing land value is a deterrent to land ownership and should reduce the desirability of owning land and reduce the price of land. This will make…

What I'm trying to say is that social mobility will be severely stunted. We can agree that the reason for owning land is to make money, yes? Planting crops would take a couple of months to return the initial investment. If I planted a forest it could take years. If this investment possibility is removed from everyone without (massive amounts of, if the tax is high enough) capital it's going to create a further wealth…

Land can make money purely by rising value over time so people can speculate by owning land. There may be little incentive to actually use the land.

The ROI on a forest takes years whether or not the land value is taxed. You also said earlier that it was a tax on land value so presumably much lower for forestry land than urban land.

The primary impact of a land value tax is likely to be on the price of land itself because land will be less profitable. Introduction or increase will hurt those who own land (and its abolition would benefit land owners).

If we assume that the cost of access to land (rent) is set by the free market then we can assume that demand is essentially unchanged and the supply of land would if anything be increased (if some speculators sell or start to rent out their land) so access to land for the less wealthy should be cheaper.

I think your assumption that ownership is the way that less wealthy access land is fundamentally wrong. I think that this will also apply to the effect on prices of things made on the land on which I expect little impact (although there may be side effects on the rental market that make this more complicated).

Re: Croatia just canceled the debts of its poorest citizens

#289

Post by intopieces » Mon, Feb 02, 2015, 4:09 PM UTC

adventured wrote: post #154

ptaipale wrote: post #145

Earlier quoted context omitted.

Just nitpicking one thing: > taxes are very high Doesn't seem so: Croatia's tax to GDP ratio is 26.6 %. Compare that to 46.8 % in Belgium, 43.4 % in Austria, 40.6 % in Germany, 45.8 % in Sweden. 26.9 % in U.S. which is internationally known as a low-tax regime. Surely some taxes are high, and taxation is not necessarily fair, but I'd say that Croatia's taxes overall are not high. I would also expect that the "black m…

The US is not regarded internationally as a low tax economy, it's regarded as a medium tax economy. There are about 110 countries with lower tax takes per GDP than the US. Singapore (14% of GDP) and Hong Kong (13% of GDP) are low tax economies. Japan and Australia are similar to the US, and are not considered low tax countries. The US and Japan also share the distinction of having among the highest corporate tax rate…

>The US and Japan also share the distinction of having among the highest corporate tax rates on earth.

This is an often-repeated myth that doesn't hold up when you consider the tax breaks afforded to corporations in the U.S.

The corporate tax rate is high in number, but when you factor in exemptions, the U.S. is quite competitive in this regard. Reuters reported in 2013 that corporations utilized $180B in tax breaks. [0]

[0] http://www.reuters.com/article/2013/04/15/us-usa-tax-corpora...

Re: Croatia just canceled the debts of its poorest citizens

#290

Post by velcro » Mon, Feb 02, 2015, 4:42 PM UTC

ptaipale wrote: post #145

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…

Just nitpicking one thing: > taxes are very high Doesn't seem so: Croatia's tax to GDP ratio is 26.6 %. Compare that to 46.8 % in Belgium, 43.4 % in Austria, 40.6 % in Germany, 45.8 % in Sweden. 26.9 % in U.S. which is internationally known as a low-tax regime. Surely some taxes are high, and taxation is not necessarily fair, but I'd say that Croatia's taxes overall are not high. I would also expect that the "black m…

Taxes really are quite high - not sure how good of an indicator for this is tax to GDP ratio though.

A lot of the people frequenting HN are (usually) well off IT workers - so I find the following list quite telling - it shows an effective income tax and social security rates on USD $100,000 of gross income (based on KPMG 2012 global tax rate survey): http://imgur.com/MUZlz