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It seems (to me) that if everybody received the same amount of money then the health of the global economy would not be affected.
Any other ideas?
Any other ideas?
My idea is that you should study some basic economicsBob Walance said:Any other ideas?
good analogyJT Smith said:Isn't this an economic version of a perpetual motion machine?
In order for one person to be in debt, another person has to have lent them money. What sort of impact do you think debt forgiveness would have on the lenders? Both in terms of their current economic health and their future likelihood to lend people money?Jarvis323 said:I think that most wealth is held up in complex systems of debt. A lot of stimulation could be achieved by unlocking some of that potential through debt forgiveness.
See post #5Jarvis323 said:I think that most wealth is held up in complex systems of debt. A lot of stimulation could be achieved by unlocking some of that potential through debt forgiveness.
Guess any job what earns less than that would be just abandoned right away.Bob Walance said:It seems (to me) that if everybody received the same amount of money then the health of the global economy would not be affected.
I think that's an oversimplification at best and maybe the opposite of the truth. The system nearly collapsed because of high level economic crimes. People were lending money that didn't exist and the economy was essentially operating like a pyramid scheme. Then they were using non existent money to encourage regular people to go into debt by giving out large fraudulent loans without guarantees. Those people who were loaned money that didn't exist in turn couldn't pay it back.russ_watters said:In order for one person to be in debt, another person has to have lent them money. What sort of impact do you think debt forgiveness would have on the lenders? Both in terms of their current economic health and their future likelihood to lend people money?
Hint: 10 years ago, the entire economic system of the developed world almost collapsed because of your idea.
Caveat: Debt is not wealth. Wealth is positive money, debt is negative.
That's just not how it works, and if there were a significant number of crimes, it would be provable and you or someone (the feds) could point to them and prosecute them. What you are saying is basically made-up conspiracy theory. It's popular for people to assume the crisis was caused by crimes, but it just isn't true*.Jarvis323 said:I think that's an oversimplification at best and maybe the opposite of the truth. The system nearly collapsed because of high level economic crimes. People were lending money that didn't exist and the economy was essentially operating like a pyramid scheme. Then they were using non existent money to encourage regular people to go into debt by giving out large fraudulent loans without guarantees. Those people who were loaned money that didn't exist in turn couldn't pay it back.
Well, yeah, of course: in order to forgive a loan you first have to make a loan. Whether the loans are forgiven voluntarily or involuntarily, it's the same thing. I have no idea why you think there's a difference between this and what you are suggesting. What loans, exactly, are you suggesting be forgiven?It was actually caused more by debt creation than forgiveness.
A large number of investors never got their money back, but surprisingly, the government bailout turned a profit for the government/taxpayers. It didn't cost taxpayers anything.The people who caused the whole thing then used the crisis to take over their smaller competition, and recovered their losses with taxpayer money.
russ_watters said:That's just not how it works, and if there were crimes, it would be provable and you or someone (the feds) could point to them and prosecute them. What you are saying is basically made-up conspiracy theory. It's popular for people to assume the crisis was caused by crimes, but it just isn't true*.
At its basic level, when one person deposits money in a bank, the bank turns around and lends that money to another person. What you are calling "large fraudulent loans without guarantees" was primarily mortgages taken out by regular people, who couldn't afford to pay them back. The "debt forgiveness" was those people defaulting on their loans.
Secondarily, the banks/investment companies treated those mortgages like investments and bought/sold them to each other. When the mortgages were "forgiven" (defaulted), that market collapsed.
People like to believe that the core issue is that greed causes bankers to act illegally when the reality is primarily that greed causes them to act stupidly.
Well, yeah, of course: in order to forgive a loan you first have to make a loan. Whether the loans are forgiven voluntarily or involuntarily, it's the same thing. I have no idea why you think there's a difference between this and what you are suggesting. What loans, exactly, are you suggesting be forgiven?
A large number of investors never got their money back, but surprisingly, the government bailout turned a profit for the government/taxpayers. It didn't cost taxpayers anything.
*If there were any crimes, it would have been the rating agencies who rated loans/investments as more solid than they really were. But that's a tough one, because the government actually encouraged giving mortgages to people who's reliability wasn't good, under the political/social idea that basically everyone should be able to buy a house. Still, again, this is your idea in action: give a mortgage to someone so they can buy a house, then "forgive" it.
A large body of empirical research has now convincingly documented how mortgage fraud contaminated all portions of this supply chain (Griffin and Maturana, 2016; Piskorski, Seru and Witkin, 2015; Garmaise, 2015; Jiang, Nelson and Vytlacil, 2014; Black, 2013; Ben-David, 2011). This research has shown how these mortgages were originated with fraudulent and negligent practices, and how these abusive practices were then concealed from and misrepresented to investors who purchased securities based on these mortgages.The private label originate-to-distribute supply chain consisted of institutions which originated mortgages and then sold these loans to investment banks for distribution. Investment banks then packaged mortgages into securities, obtained ratings from ratings agencies, and sold the securities to investors. Finally, a servicer would process loan payments and manage defaults on behalf of the investors. Often a single large institution, such as Wells Fargo, would be responsible for all parts of this supply chain, but it was more common for these functions to be handled by separate institutions.
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What sellers of MBS concealed from investors was a wholesale breakdown in underwriting standards at origination, which included outright falsification of borrower financial information. However, the sale of loans that were originated with fraudulent practices, or simply negligent underwriting, typically violated market regulations and contractual obligations. These rules require the accurate disclosure of loan quality. Of course, if these practices were disclosed, the securities would obviously not have been marketable. Loan officers and underwriters who originated loans for private securitization used a variety of techniques to falsify borrower financial information such as inflation of appraisal values, failure to report second liens, income overstatement, and misreported owner occupancy status. This was done to qualify borrowers for larger loans than they would otherwise be able to obtain and had the effect of making loans more risky by increasing borrower leverage.
The direct falsification of borrower financial information was largely committed by loan officers and underwriters within the industry, who coached borrowers on the specific ways to falsify their information, rather than by borrowers who defrauded otherwise honest lenders. For example, based on investigations and fraud reports, the FBI found that 80% of fraud cases involved collusion or collaboration with industry insiders (FBI, 2007). For example, a loan officer from Ameriquest explicitly described deceiving borrowers who were not comfortable with falsifying their information. He stated that, “Every closing was a bait and switch, because you could never get them to the table if you were honest,” and further elaborated, “There were instances where the borrower felt uncomfortable about signing the stated income letter, because they didn’t want to lie, and the stated income letter would be filled out later on by the processing staff.”[2] Perhaps most infamously, workers at another Ameriquest branch dubbed their break room the “Art Department” because it contained all the tools needed to falsify documents (Hudson, 2010).
Agreed, so let's simply/get back to the primary topic:Jarvis323 said:Overall, the crisis was incredibly complex.
So, how is this not your suggestion in post #8 in action? And if not, please be specific about what debt you would forgive, that you are referencing in post #8.I meant fraudulent in the sense that the banks were giving loans out to people that they knew couldn't pay them back...
You could call it debt forgiveness, but people also lost their houses after years of paying towards them.
I think that the Bank of England presented a good, and to me surprisingly frank, explanation of the money supply that goes well beyond the overly simple model of banks lending out deposited funds:russ_watters said:That's just not how it works, and if there were crimes, it would be provable and you or someone (the feds) could point to them and prosecute them. What you are saying is basically made-up conspiracy theory. It's popular for people to assume the crisis was caused by crimes, but it just isn't true*.
At its basic level, when one person deposits money in a bank, the bank turns around and lends that money to another person. What you are calling "large fraudulent loans without guarantees" was primarily mortgages taken out by regular people, who couldn't afford to pay them back. The "debt forgiveness" was those people defaulting on their loans.
Secondarily, the banks/investment companies treated those mortgages like investments and bought/sold them to each other. When the mortgages were "forgiven" (defaulted), that market collapsed.
People like to believe that the core issue is that greed causes bankers to act illegally when the reality is primarily that greed causes them to act stupidly.
Well, yeah, of course: in order to forgive a loan you first have to make a loan. Whether the loans are forgiven voluntarily or involuntarily, it's the same thing. I have no idea why you think there's a difference between this and what you are suggesting. What loans, exactly, are you suggesting be forgiven?
A large number of investors never got their money back, but surprisingly, the government bailout turned a profit for the government/taxpayers. It didn't cost taxpayers anything.
*If there were any crimes, it would have been the rating agencies who rated loans/investments as more solid than they really were. But that's a tough one, because the government actually encouraged giving mortgages to people who's reliability wasn't good, under the political/social idea that basically everyone should be able to buy a house. Still, again, this is your idea in action: give a mortgage to someone so they can buy a house, then "forgive" it.
Agreed, but I wouldn't let off the hook the people who recklessly took out loans they couldn't pay back. Much of that recklessness was built into the law/policy/ethics of the situation was done for their benefit, and they both contributed to the recklessness and profited from it:sysprog said:Regarding whether crime led to the housing market crash, I think that at least morally it certainly did; however, the ability of large financial interests to influence regulatory legality can pay of quite well in reward and impunity for financial wrongdoing.
It wrong for investment mangers to take excessive risks, and when they encounter the downside of those risks, simply get bailed out at public expense...
Their reward/profit for their recklessness was living in a house for years, that they never should have lived into begin with. That was a major prong of the government policy that led to the crisis.Jarvis323 said:...but people also lost their houses after years of paying towards them.
russ_watters said:Agreed, so let's simply/get back to the primary topic:
So, how is this not your suggestion in post #8 in action? And if not, please be specific about what debt you would forgive, that you are referencing in post #8.
That's not debt forgiveness, that's issuing fewer loans, but fair enough, I agree with that.Jarvis323 said:(1) prevent even more unmanageable debt that cannot be realistically paid back from piling up...
That's too vague to respond to well. There are certain types of loans that I would agree are predatory, such as payday loans, and I would support outlawing them and in some cases shutting down the loan companies(2) Be fair; so that debt accrued through predatory lending practices, or that is piling up exorbitant costs far beyond what was borrowed in the first place is prioritized (people being ripped off essentially).
I'm not sure how one would do that, because it's not a coherent class of debt. Some is on credit cards and some is on mortgages, for example. And some is just unpaid bills. Do you still literally mean forgiving this debt or are you thinking more in terms of just handing out money to pay it back, per the OP's suggestion?(3) Debt resulting from medical costs; just cause it's the right thing to do.
There's a variety of entities that hold student loan debt. Forgiving it would mean harm to banks and more debt for the federal government.(4) Student debt to a limited extent.
Sure, and it gets into a matter of personal politics. When a debt is forgiven, someone gets hurt. Support for such ideas is largely about hurting the right people. However, I suspect that in a lot of cases the secondary and tertiary harms aren't well considered:There are economists who agree with me that debt forgiveness can help us (or may be necessary) to recover from the current crisis. But there are economists who disagree as well.
Because it was reckless of you to be responsible with your money your entire life, and you need to be punished for that. And people who were reckless should be rewarded and encouraged to be more reckless in the future.Vanadium 50 said:If we have "debt forgiveness", that means I don't get my money back. I may lose my house, and my retirement will not be very nice. Why is it fair that I lose my house so that other people can keep theirs?
It isn't the investment managers' money, it's the money of everyday people like you and me. Those loans/bailouts didn't bail out the investment managers, they bailed out us.sysprog said:It [is] wrong for investment mangers to take excessive risks, and when they encounter the downside of those risks, simply get bailed out at public expense...
I won't debate that, but the extra money those managers could cash on those bailouts feels a teeny bit excessive for meruss_watters said:Those loans/bailouts didn't bail out the investment managers, they bailed out us.
russ_watters said:Do you still literally mean forgiving this debt or are you thinking more in terms of just handing out money to pay it back, per the OP's suggestion?
Everyone has their own views on this, but I have the suspicion at least that those in positions of power in financial services take more out of the system than is justified. Certainty it appears easier in banking and finance to overestimate the value of investments (either fraudulently or by over-confidence) than in other industries. It's much harder for a supermarket, say, to pretend it's making vast profits for five years and then crash owing trillions.russ_watters said:It isn't the investment managers' money, it's the money of everyday people like you and me. Those loans/bailouts didn't bail out the investment managers, they bailed out us.
I view it as a gambling operation such that when a favored bettor loses, people who didn't play can be forced to pay in his stead. The early players made out like bandits, the big guys got bailed out at the crash, and there was rampant fraud, and gross inequities ##-## e.g.russ_watters said:It isn't the investment managers' money, it's the money of everyday people like you and me. Those loans/bailouts didn't bail out the investment managers, they bailed out us.
Yep. Ayn Rand's Atlas ShruggedVanadium 50 said:If the answer is "hey this is a democracy, and there are more of us grasshoppers than you ants" pretty soon there won't be any ants.
Rive said:I won't debate that, but the extra money those managers could cash on those bailouts feels a teeny bit excessive for me
PeroK said:Everyone has their own views on this, but I have the suspicion at least that those in positions of power in financial services take more out of the system than is justified...
In any case, I'm not convinced I'm any wealthier because over a thousand people in the City of London get a million pound bonus every year.
Oh, I don't disagree, guys. I'm fundamentally opposed to the idea of other people managing my money on general principle. I don't have an investment manager, and don't have a pension (another idea I think makes no sense), so I'm in nearly complete control over my money. I don't think a bank failure could cost me anything, though I guess I can't be certain of that.sysprog said:I view it as a gambling operation such that when a favored bettor loses, people who didn't play can be forced to pay in his stead.
I'm not so sure. The issue of the OP is that it's unclear where the money would come from, and a lot of this is discussion of that issue. I did try to steer us away from too much in depth discussion of the 2008 financial crisis though. (this post notwithstanding)Rive said:Ps.: by the way, the topic feels a bit derailed now, maybe a split would be in order?
russ_watters said:There are certain types of loans that I would agree are predatory, such as payday loans, and I would support outlawing them and in some cases shutting down the loan companies
Assuming nothing illegal happened, it is funny that you don't mention how stupid it is for people to blindly lend their own money to irresponsible bankers that gives it to irresponsible loaners, basically having no clue what they do with it.russ_watters said:People like to believe that the core issue is that greed causes bankers to act illegally when the reality is primarily that greed causes them to act stupidly. And not just their greed/stupidity, it was also greed/stupidity for millions of ordinary Americans to take out loans they couldn't pay back.
A stimulus check is a form of financial assistance provided by the government to individuals to stimulate the economy. It is typically a one-time payment sent to eligible individuals based on their income and other factors. The amount of the check varies depending on the individual's income and family size.
If everyone on the planet received stimulus checks, it could potentially have a significant impact on the global economy. It would inject a large amount of money into the economy, which could stimulate consumer spending and boost economic growth. However, it could also lead to inflation and increase the national debt.
The eligibility criteria for stimulus checks vary depending on the country and government policies. In general, individuals with lower incomes and those who have lost their jobs or experienced financial hardship are more likely to receive a stimulus check. Some countries also have age restrictions and limit the number of dependents included in the payment.
Giving stimulus checks to everyone on the planet would have a significant impact on the government's budget. It would require a large amount of money to be allocated towards these payments, which could lead to an increase in taxes or a larger national debt. The government would also need to carefully consider the long-term effects and potential consequences of such a decision.
The potential benefits of giving stimulus checks to everyone include stimulating economic growth, reducing financial stress for individuals, and potentially reducing income inequality. However, there are also potential drawbacks, such as inflation, increased government spending, and potential misuse of funds. It is important for governments to carefully consider all factors before implementing such a policy.