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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

#61

Post by maxxxxx »

wernercd wrote: post #36
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-…

Nobody takes about "taking from rich and giving to the poor". How about at least stopping giving more and more to the rich?

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

#62

Post by saint_fiasco »

anigbrowl wrote: post #53
wernercd wrote: post #36

Earlier quoted context omitted.

> 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-…

Nobody forced the banks to participate in those markets. The government interference has been limited to demanding that banks treat the public equally instead of reinforcing structural discrimination.

If they have to treat people equally then they are forced to either participate in "those markets" or not participate in any market.

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

#63

Post by anigbrowl »

SilasX wrote: post #54
anigbrowl wrote: post #51

Earlier quoted context omitted.

One big issue is that there are other people on the other side of those debt cancellations that would get hurt. A risk they assumed when they decided to put their capital to work. I don't actually have any debt myself so I don't have a dog in this fight, but if you have the money to purchase risky assets in expectations of earning a coupon then your necessities are already covered. Between people who don't have enoug…

No, they didn't assume a risk of "oh, let's just forget the whole debt thing, who cares about that stuff anyway".

Yes they did. Default is a real thing and that's the risk you earn a premium for taking. On equity the price of the asset can change, on debt you either secure it or charge a rate of interest that reflects your assessment of the risk. Hence the shitty rate of interest on savings accounts - your principal is guaranteed up to a fairly large amount so you earn less.

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

#64

Post by anigbrowl »

roymurdock wrote: post #55
anigbrowl wrote: post #51

Earlier quoted context omitted.

One big issue is that there are other people on the other side of those debt cancellations that would get hurt. A risk they assumed when they decided to put their capital to work. I don't actually have any debt myself so I don't have a dog in this fight, but if you have the money to purchase risky assets in expectations of earning a coupon then your necessities are already covered. Between people who don't have enoug…

I don't think you understand...normal people are both the creditors and the debtors. Banks are just the intermediaries that take a cut from the normal people on both ends for "efficiently allocating assets that would otherwise accrue suboptimal rates of interest." The real problem is that the banks are allowed to take risks without paying the price for these risks when they do not pan out. We have set a precedent tha…

I understand fine. I just don't fully agree with your point of view.

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

#65

Post by anigbrowl »

saint_fiasco wrote: post #62
anigbrowl wrote: post #53

Earlier quoted context omitted.

Nobody forced the banks to participate in those markets. The government interference has been limited to demanding that banks treat the public equally instead of reinforcing structural discrimination.

If they have to treat people equally then they are forced to either participate in "those markets" or not participate in any market.

/world's_smallest_violin

You don't get to take advantage of structural discrimination and then whine about how hard it is to have to treat people fairly. If that's a problem for a bank then they should find another asset class to invest in.

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

#66

Post by gozur88 »

Frondo wrote: post #25
jasode wrote: post #21

Earlier quoted context omitted.

>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…

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…

>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.

It's a "cruel error" to lend somebody money?

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

#67

Post by gozur88 »

anigbrowl wrote: post #52
forgetsusername wrote: post #39

Earlier quoted context omitted.

> 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?

You know what, fuck the creditors. Let them feel what it's like to have no money coming in for a while. If they don't want to lend any more they can spend down their capital or go and get jobs. The society we've built around the premise of mortgaging the future is not so fabulous that it can't be improved upon.

>You know what, fuck the creditors. Let them feel what it's like to have no money coming in for a while.

I'll bet most of them already know. Start with nothing, work hard, save money for retirement, lend it to entitled students and have them not only stiff you, but also spit in your face.

That seems fair.

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

#68

Post by throwaway2048 »

gozur88 wrote: post #67
anigbrowl wrote: post #52

Earlier quoted context omitted.

You know what, fuck the creditors. Let them feel what it's like to have no money coming in for a while. If they don't want to lend any more they can spend down their capital or go and get jobs. The society we've built around the premise of mortgaging the future is not so fabulous that it can't be improved upon.

>You know what, fuck the creditors. Let them feel what it's like to have no money coming in for a while. I'll bet most of them already know. Start with nothing, work hard, save money for retirement, lend it to entitled students and have them not only stiff you, but also spit in your face. That seems fair.

most of the rentier class knows what its like to "start with nothing and work hard"?

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

#69

Post by ChuckMcM »

Reminds me of the joke, that if you can't pay your $100,000 loan you have a problem, if you can't pay your $100,000,000 loan then the bank has a problem. But it captures the scale of things.

For literally decades people have suggested that China's economy (GDP) wasn't growing, it's money supply was. And as a result there would be a time when even with relaxed credit you could not justify adding any additional debt. At which point that particular path would be cut off and a more accurate picture of the economy would emerge. Which seems to be happening now.

What would be useful, but no doubt hard to get, would be a list of Chinese firms which are currently technically in default on their loans and so at risk of dissolution. And even more useful would be an understanding of how the Chinese government would treat them (would they bail them out like our government did for GM, or let them fail like Lehman Brothers?)

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

#70

Post by roymurdock »

anigbrowl wrote: post #64
roymurdock wrote: post #55

Earlier quoted context omitted.

I don't think you understand...normal people are both the creditors and the debtors. Banks are just the intermediaries that take a cut from the normal people on both ends for "efficiently allocating assets that would otherwise accrue suboptimal rates of interest." The real problem is that the banks are allowed to take risks without paying the price for these risks when they do not pan out. We have set a precedent tha…

I understand fine. I just don't fully agree with your point of view.

Fair enough.

Perhaps we can agree that there isn't enough transparency on the creditor side. You and I are creditors in that we have 401ks or money in pension funds. Do we know what is happening with that money? Not really.

Is it then fair that we have to take a haircut on our (guaranteed safe) savings if a bank screws up our investments?

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