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Trillions in Bad Loans May Sap World Economy for a Long Time

nytimes.com

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Re: Trillions in Bad Loans May Sap World Economy for a Long Time

#31

Post by krapht »

cylinder wrote: post #29
ihsw wrote: post #12

Why not forgive the loans? The negative affect of debt on people's capacity to contribute to the world economy is high, and I think it stands to reason that people would contribute more for the duration of paying off their loan if the loan wasn't hanging over their head. The banks would scream bloody murder, obviously, but their slack policies got us into this mess in the first place. The intention is to throw people…

Read here, http://blog.mpettis.com/2016/01/will-chinas-new-supply-side-... tl;dr is China will need to eventually give in and do debt forgiveness. there's strong historical precedent for it.

Is there a mirror? My corporate firewall is blocking your link.

Re: Trillions in Bad Loans May Sap World Economy for a Long Time

#32

Post by awqrre »

krapht wrote: post #31
cylinder wrote: post #29

Earlier quoted context omitted.

Read here, http://blog.mpettis.com/2016/01/will-chinas-new-supply-side-... tl;dr is China will need to eventually give in and do debt forgiveness. there's strong historical precedent for it.

Is there a mirror? My corporate firewall is blocking your link.

Does Google cache work in that case? http://webcache.googleusercontent.com/search?q=cache:ZFFaYjV...

Re: Trillions in Bad Loans May Sap World Economy for a Long Time

#33

Post by sbierwagen »

golergka wrote: post #27
ihsw wrote: post #12

Why not forgive the loans? The negative affect of debt on people's capacity to contribute to the world economy is high, and I think it stands to reason that people would contribute more for the duration of paying off their loan if the loan wasn't hanging over their head. The banks would scream bloody murder, obviously, but their slack policies got us into this mess in the first place. The intention is to throw people…

What about the people who put their money in the bank, the money that was used to give those loans? People who are relying on their pension plans? Life savings? What you're saying is that we should _just take money from people_, without expectations to give them back anything directly.

Savings accounts are FDIC insured up to $250,000.

Many retirees hold government bonds, which aren't going to default.

A consumer-debt jubilee mostly affects investors, and maybe pension funds.

Re: Trillions in Bad Loans May Sap World Economy for a Long Time

#34

Post by TheOtherHobbes »

jasode wrote: post #26
Frondo wrote: post #25

Earlier quoted context omitted.

This is a really good point. My gut tells me that if the old people were relying on the massive indebtedness of today's college attendees, then that has been a cruel error on their part, an injustice that should be righted. Also, the artificiality of the debt--and the idea that a jubilee won't really hurt the creditors--is put into striking relief by the Rolling Jubilee. Right now, people are already buying that bad…

>if the old people were relying on the massive indebtedness of today's college attendees, then that has been a cruel error on their part, Oh no no... I don't want people to picture an old hag sucking the blood of infants. To clarify, I was using "grandparents" as a single example to humanize what a "creditor" was. We have met the creditors and they are us. [0] When society complains about the unfairness of student lo…

No, this is incorrect.

Firstly, the debt burden is only diffused because those "mustache twirling CEOs' decided it should be.

Pensions used to work just fine before they were financialised by sharks. So did insurance.

No one sane should be trying to increase the returns on a pension fund by gambling on student debt, on real estate loans, or on consumer credit.

That was exactly the approach that caused the implosion of 2008 - or more specifically, it was "mustache twirling CEOs" hiding the fact that the investments they were selling as a sure thing were junk loans with a cheap wood veneer.

Secondly, even if this wasn't true, the social and economic costs of an economy that runs on usury instead of productive investment are so predictably crippling that the hair cut, with associated uncontrolled demolition, will happen anyway.

A debt jubilee would do a lot to restore confidence, because everyone will be able to stop looking nervously at everyone else's obligations and wondering if they're going to be able to meet them. Instead, some realism will be restored to book values.

This would still be cataclysmic, because the financial industry needs to understand that it can no longer run on cocaine and bullshit.

But it won't be the financial equivalent of a self-inflicted nuclear strike, which is a real possibility as things stand today.

Re: Trillions in Bad Loans May Sap World Economy for a Long Time

#35

Post by jsprogrammer »

jasode wrote: post #21
ihsw wrote: post #12

Why not forgive the loans? The negative affect of debt on people's capacity to contribute to the world economy is high, and I think it stands to reason that people would contribute more for the duration of paying off their loan if the loan wasn't hanging over their head. The banks would scream bloody murder, obviously, but their slack policies got us into this mess in the first place. The intention is to throw people…

>Why not forgive the loans? The idea of a "debt jubilee" is definitely something that's been discussed before by economists and philosophers. One big issue is that there are other people on the other side of those debt cancellations that would get hurt. For example, it's terrible that young adults have massive college loans to pay back. Some are kicking around the idea to forgive those loans. But there are also credi…

>But there are also creditors as well. Think of grandparents who have a 401k for retirement. Through the interconnectedness of the financial system, a component of their retirement income will depend on payback of those "bad" college loans.

Do most 401Ks really invest in student debt?

Re: Trillions in Bad Loans May Sap World Economy for a Long Time

#36

Post by wernercd »

ihsw wrote: post #12

Why not forgive the loans? The negative affect of debt on people's capacity to contribute to the world economy is high, and I think it stands to reason that people would contribute more for the duration of paying off their loan if the loan wasn't hanging over their head. The banks would scream bloody murder, obviously, but their slack policies got us into this mess in the first place. The intention is to throw people…

> The banks would scream bloody murder, obviously, but their slack policies got us into this mess in the first place.

So, your solution to "the banks" slack policies - which were actually caused by government meddling: Affordable Housing Act, guaranteed student loans, etc...

Your solution is more government meddling? Forcing the banks that didn't want to give out loans... to lose money on those loans?

How about stay-out-of-the-way economics?

Socialism - take from the "rich" and give to the "poor" - disincentivizes people from working and being productive. Why work hard, when the trash down the street lives better by being worthless?

I mean... it just blows my mind that people see these issues... issues caused largely by interference... and so many think that the answer is more interference.

Re: Trillions in Bad Loans May Sap World Economy for a Long Time

#37

Post by Retric »

jasode wrote: post #26
Frondo wrote: post #25

Earlier quoted context omitted.

This is a really good point. My gut tells me that if the old people were relying on the massive indebtedness of today's college attendees, then that has been a cruel error on their part, an injustice that should be righted. Also, the artificiality of the debt--and the idea that a jubilee won't really hurt the creditors--is put into striking relief by the Rolling Jubilee. Right now, people are already buying that bad…

>if the old people were relying on the massive indebtedness of today's college attendees, then that has been a cruel error on their part, Oh no no... I don't want people to picture an old hag sucking the blood of infants. To clarify, I was using "grandparents" as a single example to humanize what a "creditor" was. We have met the creditors and they are us. [0] When society complains about the unfairness of student lo…

Wealth is less diffuse than your suggesting. But, it's also more global.

As it stands, money never really sits around doing nothing. It's on some banks balance sheets and so it's loaned out, then repackaged and sold to organizations seeking safe places to park money. This repackaging of debt has been a huge boon to the US economy in the short term. But, it's only a long term gain if people actually default otherwise it's just a long term drain for a short term boon.

The wider problem is there is more 'money' than productive usage for that money which means bad loans, and wealth destruction. Arguably the solution is to have money sit around without being loaned out.

Re: Trillions in Bad Loans May Sap World Economy for a Long Time

#38

Post by kolbe »

nickff wrote: post #23
kolbe wrote: post #15

Earlier quoted context omitted.

On top of that, instead of getting rid of the people who issued bad debt ten and twenty years ago, and let new people into the banking system, we instead kept the same inept cleptocratic money managers in charge, but gave them more firepower.

We also left the same regulators (who did nothing to forestall the Great Recession) in place for good measure!

The definition of insanity...

Re: Trillions in Bad Loans May Sap World Economy for a Long Time

#39

Post by forgetsusername »

TheOtherHobbes wrote: post #34
jasode wrote: post #26

Earlier quoted context omitted.

>if the old people were relying on the massive indebtedness of today's college attendees, then that has been a cruel error on their part, Oh no no... I don't want people to picture an old hag sucking the blood of infants. To clarify, I was using "grandparents" as a single example to humanize what a "creditor" was. We have met the creditors and they are us. [0] When society complains about the unfairness of student lo…

No, this is incorrect. Firstly, the debt burden is only diffused because those "mustache twirling CEOs' decided it should be. Pensions used to work just fine before they were financialised by sharks. So did insurance. No one sane should be trying to increase the returns on a pension fund by gambling on student debt, on real estate loans, or on consumer credit. That was exactly the approach that caused the implosion o…

>A debt jubilee would do a lot to restore confidence, because everyone will be able to stop looking nervously at everyone else's obligations and wondering if they're going to be able to meet them.

Oh yeah, I'm sure the creditors will be highly confident about future lending after a jubilee, because they went from wondering if debt will be repaid...to knowing it won't.

Where do people come up with this stuff?

Re: Trillions in Bad Loans May Sap World Economy for a Long Time

#40

Post by forgetsusername »

sbierwagen wrote: post #33
golergka wrote: post #27

Earlier quoted context omitted.

What about the people who put their money in the bank, the money that was used to give those loans? People who are relying on their pension plans? Life savings? What you're saying is that we should _just take money from people_, without expectations to give them back anything directly.

Savings accounts are FDIC insured up to $250,000. Many retirees hold government bonds, which aren't going to default. A consumer-debt jubilee mostly affects investors, and maybe pension funds.

>Savings accounts are FDIC insured up to $250,000

So? Do you think that this sort of insurance is free, and can be called upon without economic consequence?

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