4 ms·
God, I'm so tired of hearing this: "debt is currently cheap to get, so for the government not to invest would be rather unrational". Debt is cheap BECAUSE we h
by raducu 6y ago
God, I'm so tired of hearing this: "debt is currently cheap to get, so for the government not to invest would be rather unrational".
Debt is cheap BECAUSE we had a financial crisis, BECAUSE we let people who shouldn't have indebted themselves indebt themselves.
There will be grave consequences an suffering in enabling inept people and corporations take on more debt.
- deleted 6y ago[deleted]
- neilwilson 6y agoYou can only borrow if you have collateral to discount against. The question is whether the bankers know how to do their job properly and can assess collateral.
- raducu 6y agoBut isn't collateral a tried an tested measure of knowing if you are actually able to repay your debt? Who would know better than the bankers, politicians?
- neilwilson 6y agoLending stops when people run out of collateral. It's not the interest rate that determines what people can borrow. It's how much collateral they have. The financial collapse was due to bankers failing to assess collateral with sufficient haircut.
- raducu 6y agoCould you explain your last phrase more concretely? In my country mortgage loans stop when people don't have the downpayment of 5%-15% of the mortgage or when they have already indebted themselves for more than 45% of their income. Other loan types are also capped when you debt level exceeds a certain threshold of your income. This all seems reasonable to me. It also seems reasonable that banks would not issue more debt to people when their collateral value drops in market values, such as housing market bubble bursts.
- raverbashing 6y agoQuite simply this: https://www.investopedia.com/terms/n/nina.asp https://www.investopedia.com/terms/n/nina.asp Banks wanted customers and wanted to fill their goals: "loan X per yr." That's why the mortgage loans went boom.
- raducu 6y agoAren't the NINJA loans an example of why we need more bank regulations and tighter loan cheks instead of making banks hand out even more loans?
- raverbashing 6y agoGovernment bonds/markets are a different story than mortgages. If you own the bank $100k, you have a problem. If you own the bank $100Bi, the bank has a problem.
- jiggunjer 6y agoWhich in turn was because they had no stake in the loan if they sold it on.
- pjc50 6y agoThis doesn't make any sense - a naive reading of the financial crisis should have pushed UP rates. As it did for Greece for a while. Negative rates are quite clearly an advantage. If I could borrow a trillion CHF at the Swiss -0.75% rate I would, and then enjoy the free money.
- yokaze 6y ago> Debt is cheap BECAUSE we had a financial crisis, BECAUSE we let people who shouldn't have indebted themselves indebt themselves. > There will be grave consequences an suffering in enabling inept people and corporations take on more debt. I don't disagree here. But isn't that a separate discussion? I thought, we are talking here governments, which currently (due to whatever reasons) can issue bonds at rates below inflation, or even negative rates (e.g. Germany). To use that (essentially free) money when consumer consumption is down sounds to me fairly rational.