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

Re: Croatia just canceled the debts of its poorest citizens

#171

Post by WildUtah » Sun, Feb 01, 2015, 8:22 PM UTC

baddox wrote: post #157

hellbanner wrote: post #146

Earlier quoted context omitted.

Public transportation is quite good in Europe compared to say, the USA, where car companies purchased intranational train tracks, dismantled them for highways http://en.wikipedia.org/wiki/General_Motors_streetcar_conspi...

I suspect Europe's population density being 3 times that of the USA doesn't hurt either.

National population density is irrelevant. US population is just as urban as Europe. The lower USA average mostly reflects the southwest deserts and Alaska where very little rural population exists.

The low density of car-oriented US suburbs was mandated by socialist central land use planning from Washington and the motorcar industry that wanted to require Americans to each own a car. Standards were written centrally and local governments were required to make them law with grants, national bank regulations that required them for lending, and professional standards organizations that made civil engineers agree to them for licensure.

The more market driven land use in European cities promotes walking and transit more than personal motoring.

Re: Croatia just canceled the debts of its poorest citizens

#172

Post by JetSpiegel » Sun, Feb 01, 2015, 8:24 PM UTC

bko wrote: post #33

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…

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…

> How would you feel if your parents passed away with unpaid debt?

It depends. If they owed a real human being, I would probably pay it. If it was a faceless corporate conglomerate, or a bank that reported millions in profits on the last quarter, I wouldn't bother.

Re: Croatia just canceled the debts of its poorest citizens

#173

Post by JamisonM » Sun, Feb 01, 2015, 8:27 PM UTC

swatow wrote: post #161

JamisonM wrote: post #136

Earlier quoted context omitted.

Most of this is fairly incorrect. The risks involved lending money to poor people are largely unchanged by this and the bottom lines of all of the businesses involved are essentially unchanged. All of these outstanding amounts are delinquent as the people being relieved of these debts have to have been in financial trouble for at least 12 months by the conditions set out in the program. This means that all of these d…

The economic gain of writing off this kind of debt has to be balanced against the moral hazard effect on future borrowers. Also, it's not clear that you are correct that this debt was largely written off. Certainly the banks didn't expect 100% recovery, but perhaps they expected a nontrivial amount. I'm not an expert in these tradeoffs, but the one economist interviewed in the article said: I am not sure that this is…

The debts have to be over a year old, by any reasonable banking standards (even unreasonable ones) those are NPAs, by any accounting standard they are deemed receivables that will not be recovered. They've been written off. This is why I contend that Mr. Baker's statements are likely incorrect. The fact that these receivables/debt would be written off is essentially written into the law.

Most here also do not note that the balances here are also, by design, small as well.

One can argue that there might be some fear that next time the income requirements will be higher, the debt threshold increased, to make a future forgiveness a problem for companies that carry these assets. I accept that this has some merit but I think most overstate it. (Offsetting this risk in large part is the fact that Croatia has joined the EU recently, foreign banks and companies will have recourse should such a thing happen in future and if such a measure were to hurt them no doubt they would use it.)

Re: Croatia just canceled the debts of its poorest citizens

#174

Post by briandear » Sun, Feb 01, 2015, 8:30 PM UTC

BSousa wrote: post #132

bsaul wrote: post #107

Earlier quoted context omitted.

Debt cancellation indeed has always existed, greeks just bringed it to another level, with their magic combo : fraud the state's accountings, get as much as you can from the eurozone before the crisis, get as much as you can from other european countries after the crisis, and then 2 years later when things start to stabilize, declare unilaterally that you're not going to reemburse people, and party in the streets ove…

Geesh. I'm no Greek and not fond of Syriza, but god damn, the brainwashing is strong here. a) fraud the state's accountings: True, but the difference was minimal (2.7% or so to 3.07%, and by fraud you mean they accounted for the expenses on arrival and not when ordering, not cook your books). Also, this was well known by all the other countries and none of them made a peep at the time b) get as many as you can before…

And why is Greece in bad shape? Mightn't the deficit and fiscal mismanagement be the problem? How else should they solve it?

Re: Croatia just canceled the debts of its poorest citizens

#175

Post by riffraff » Sun, Feb 01, 2015, 8:41 PM UTC

bsaul wrote: post #104

riffraff wrote: post #60

Earlier quoted context omitted.

> 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.

I don't know the details but i suppose the debts weren't owned by the state (nobody borrows from a state) but rather by credits corporations or banks.

yes, but that doesn't change the fact that the croatian government would have persuaded/forced the banks to cancel the debt, it's not the people with a loan who decided not to pay.

Re: Croatia just canceled the debts of its poorest citizens

#176

Post by ptaipale » Sun, Feb 01, 2015, 8:42 PM UTC

ivanhoe wrote: post #141

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.

Actually, this law was proposed way before the elections in Greece were held, so it wasn't related in any way.. except that Croatia and Greece are in a similar positions debt wise, so similar political moves can be expected

However, there is the significant difference that Croatia has its own currency, so it has one tool that Greece does not: devaluation.

It's of course like pissing in your pants when it's cold - only a temporary relief - but it may help sometimes.

Re: Croatia just canceled the debts of its poorest citizens

#177

Post by ricardobeat » Sun, Feb 01, 2015, 8:45 PM UTC

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…

These exact same words could come out of a Brazilian. Word by word. I don't know about Croatia, but in that case they are only half-truths. The idea that there are 'people who pay for everything' is usually misguided. There are the exploited, and the less exploited. Both pay in one way or another, and only a very small elite group is actually well off.

You say "the situation is complicated" and "this is not fair", but how exactly do you think this measure will fail? From a distance it sounds like it would boost the economy by allowing people to prosper, while debt is written off mostly by private entities, not the tax payers directly. Even if it was, it might still be a win.

Re: Croatia just canceled the debts of its poorest citizens

#178

Post by BSousa » Sun, Feb 01, 2015, 8:46 PM UTC

briandear wrote: post #174

BSousa wrote: post #132

Earlier quoted context omitted.

Geesh. I'm no Greek and not fond of Syriza, but god damn, the brainwashing is strong here. a) fraud the state's accountings: True, but the difference was minimal (2.7% or so to 3.07%, and by fraud you mean they accounted for the expenses on arrival and not when ordering, not cook your books). Also, this was well known by all the other countries and none of them made a peep at the time b) get as many as you can before…

And why is Greece in bad shape? Mightn't the deficit and fiscal mismanagement be the problem? How else should they solve it?

There are various reasons, and I never said that it wasn't their fault they got into this mess. But lets not pretend it was ALL their fault.

But independently of whose fault it is, there are two options:

a) try to get to an agreement that can get Greece back into shape, even if it means postpone debt payments, restructuring, haircut, etc where it is beneficial for all parties

b) continue to blame them for this situation and use every opportunity to punish them with more and more austerity measures while 'feeling good' about dishing out the punishment and calling them 'lazy greeks'

Also, pre-crisis, the greek debt wasn't that bad (high, but stable) [1] compared to other countries. Spain and Portugal also had levels similar to Germany until 2008, which is interesting since it was at this time that the EU stimulus plan came to effect [2] and if you see the measures, some could say it benefitted German and French industries (cars and green tech)

1: https://www.google.pt/publicdata/explore?ds=ds22a34krhq5p_&m...

2: http://en.wikipedia.org/wiki/2008_European_Union_stimulus_pl...

Re: Croatia just canceled the debts of its poorest citizens

#179

Post by riffraff » Sun, Feb 01, 2015, 8:48 PM UTC

briandear wrote: post #174

BSousa wrote: post #132

Earlier quoted context omitted.

Geesh. I'm no Greek and not fond of Syriza, but god damn, the brainwashing is strong here. a) fraud the state's accountings: True, but the difference was minimal (2.7% or so to 3.07%, and by fraud you mean they accounted for the expenses on arrival and not when ordering, not cook your books). Also, this was well known by all the other countries and none of them made a peep at the time b) get as many as you can before…

And why is Greece in bad shape? Mightn't the deficit and fiscal mismanagement be the problem? How else should they solve it?

you can negotiate the option to pay the debt in 30 years and avoid shutting down public healthcare, or you can fire a million people and try to pay it in 3 years.

The common feeling is that the "shock cure" has not been effective in any way, cause it in turn has caused a spiraling recession.

I'm not defending either position, but it's something that has been debated ad nauseam.

Also consider that a lot of the policies post 2008 have been influenced by the "expansionary austerity" thing that has been proven to be effectively bonkers.

Re: Croatia just canceled the debts of its poorest citizens

#180

Post by swatow » Sun, Feb 01, 2015, 8:50 PM UTC

JamisonM wrote: post #173

swatow wrote: post #161

Earlier quoted context omitted.

The economic gain of writing off this kind of debt has to be balanced against the moral hazard effect on future borrowers. Also, it's not clear that you are correct that this debt was largely written off. Certainly the banks didn't expect 100% recovery, but perhaps they expected a nontrivial amount. I'm not an expert in these tradeoffs, but the one economist interviewed in the article said: I am not sure that this is…

The debts have to be over a year old, by any reasonable banking standards (even unreasonable ones) those are NPAs, by any accounting standard they are deemed receivables that will not be recovered. They've been written off. This is why I contend that Mr. Baker's statements are likely incorrect. The fact that these receivables/debt would be written off is essentially written into the law. Most here also do not note th…

Where are you getting your claims about the recovery rate on these debts?

>Most here also do not note that the balances here are also, by design, small as well. Can you explain how you think that relates to this discussion? If the debt is small, wouldn't that imply that the person was more likely to pay it off, at least in part?