Tuesday, Jan 20, 2009
Last laugh for property debtors?
Guardian: The nuclear options
The latest bank salvage is plainly not enough. Soon we might be looking at a huge write-off of debts ... So what's the catch? The obvious one is that for every debt, there is a saver. Where would that leave pensions - or in fact the whole system of capitalism? Until confidence was restored, firms and individuals would have to learn to live without investment, relying on cashflow to fund growth. It might delight Marxists, but it would be a socially retrograde step, entrenching the wealth gap in non-financial assets like property.
Posted by quiet guy @ 08:39 AM (768 views) Add Comment
9 Comments
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1. paul said...
Okay, just to clarify for those owning property rubbing their hands with glee at the thought that their mortgage might be cancelled - your debts are your banks assets. So if that debt is cancelled, you cancel bank's assets.
Creditors can margin-call on those debts, or directly re-possess them (re-assume ownership of their asset) - what will stop creditors from doing that which is their legal and inalienable right?
No, you can't cancel debt without fundamentally tearing up the rules on what constitutes ownership.
This is nothing more than a flight of fancy - mortgagees debt can't be cancelled, but your bank's intra-bank debts might be.
2. tudorian said...
@Paul
I haven't a mortgage..I've not got any debt really, but what about those with unsecured loans, credit cards, overdrafts, sole trader business loans. ?
Are the truly feckless going to be extending these types of borrowing in the hope of a amnesty?
3. paul said...
Exactly - this stuff is the lifeblood of the economy.
This is why the idea of a debt jubilee is nothing more than a jounralist's flight of fancy.
4. tudorian said...
@ paul
common sense told me that the idea of cancelling all debt must be whimsy. The outrageous unfairness of even suggesting it ! ....
5. drewster said...
Cancelling debt would cause a collapse in confidence in the pound. We'd never be able to import anything. The City financial sector would be ridiculed. In the words of an earlier post, London = Iceland-on-Thames.
6. Mark Wadsworth said...
"entrenching the wealth gap in non-financial assets like property" ???
Nonsense. Stricter lending reduces house prices, so the wealth gap between owners and non-owners is narrowed.
7. stillthinking said...
Cancelling debt absolutely won't happen, but modifying that debt retrospectively is already happening. The government needs to alter the terms of the debt to make it smaller in real terms, and as you point out this will reduce the value of savings in real terms. The real horror story at the moment, UK deflation aside, is the loss of sterling value which reflects a loss of savings value essentially. Certainly the banks will be forced to limp on, insolvent or not. The only problem would appear to be the external debts, i.e. not uk saver or uk debtor.
In the same way that the savings of the factory worker are muddled together indistinguishably with the false profits of the banker, they are also mixed with these external liabilities.
8. goweresque said...
Copy of what I posted on a similar thread:
Money is debt. And vice versa. Wipe out the debt, and your savings in the bank are wiped out too. So far so good. But where does money come from if there is no debt? Real wealth, which probably means gold, or productive assets. There's not much of either about so living standards would plummet. Mad Max style economy I reckon.
9. d'oh said...
I'm happy for anyone to have their mortgage debt cancelled - provided the ownership of the asset is transferred to the government (or similar) and they then end up in the modern version of a debtors prison (not physical, but tax wise): i.e. no more credit, ever, and they pay higher taxes until the unpaid debt written off by society/the government is cleared.
Seriously, if debt was written off, I would be out in the streets spending my money on milk bottles and rags. I'm sick to f***ing death of bailing out the feckless, both personally and as a taxpayer. Why should the prudent have to pay? Enough is enough!