4 ms·

How would you cancel the underlying debts and maintain any semblance of order?

eli_gottlieb 5y ago
Honestly? I'd just void them, nationalize any banks that go under, and give everyone who's actually using the underlying assets free-and-clear ownership. If you bought a house in the middle of a bubble in 2020, good job, you get a house and your mortgage is cancelled. The Sunk Cost Fallacy is a fallacy for a reason: there is always ultimately someone who pays for a speculative bubble out of their own use-values, and that's the someone who should be made whole, not the speculators. And again, I don't mean to be inflammatory (well ok, I do), but I really feel that constantly reflating asset bubbles for the rest of time, rather than accepting a one-time severe penalty whose moral hazard applies only to people who need things for their use-value, really is a Sunk Cost Fallacy that amounts to throwing good money after bad.
- frockington1 5y ago
  I'm down, I have a few properties. No mortgage and inflationary rent means I wouldn't have to work anymore
  - eli_gottlieb 5y ago
    I mean, I'd be fine with screwing homeowners too, and I am a homeowner. The Zillow estimate of how much I could charge in rent is several times over my mortgage and HOA payments. The estimate for how much I could sell for is $25k over what I paid, two years ago. You can't tell me my house is making $12.5k/year for literally nothing, while I live in it and repairs accumulate, and tell me that's a sensible way to run an economy.
    - frockington1 5y ago
      Low interest rates and high inflation will pump those numbers up even more. I don't see a way to stop the increase without the debt imploding on itself which the government would never let happen (I'm personally in favor)
    - kazen44 5y ago
      also, the rising real estate prices have detrimental second and third order effects. For instance, birth rates are dropping because young adults cannot afford a house, which in term means they have to rent against higher prices which means they have less income to actually put into the economy. What will we do once we have a generation which doesn't have any wealth and doesn't own a place to live? People who have little to show for it after a lifetime of working while subsidizing those who own the properties they live in is not a situation you want society to be in.
      - EVa5I7bHFq9mnYK 5y ago
        Don't forget that those young people have parents and will eventually inherit their real estate, so they will have something to show for it after a lifetime of working.
        pydry 5y ago
        Only some of them. And many of those houses will be sold to pay for healthcare.
        Rodeoclash 5y ago
        Maybe. Remember that the house can be: 1. Split multiple ways due to multiple children. 2. Sold to finance retirement living.
- betterunix2 5y ago
  The result would be an almost immediate spike in interest rates charged to whoever benefited most from the debt cancellation, as lenders would be forced to compensate for the risk of additional cancellations in the future. Worse still, it would create a massive moral hazard as (some) people start to take on loans they know they cannot afford long-term in anticipation of more debt forgiveness (this often happens after bail-out programs and is one of the major arguments for the "too big to fail is too big to exist" philosophy). Since retirees often live on income from loan interest (through pension funds or personal retirement accounts), much of the burden would be borne by retirees and many of them would be forced back into the labor force (crowding out the younger generations who are trying to find their first job; see e.g. Japan for a manifestation of this problem). Debt forgiveness is not nearly as simple and positive as people believe. It often winds up hurting the people it was meant to help and having long-term negative consequences.

Honestly? I'd just void them, nationalize any banks that go under, and give everyone who's actually using the underlying assets free-and-clear ownership. If you bought a house in the middle of a bubble in 2020, good job, you get a house and your mortgage is cancelled. The Sunk Cost Fallacy is a fallacy for a reason: there is always ultimately someone who pays for a speculative bubble out of their own use-values, and that's the someone who should be made whole, not the speculators. And again, I don't mean to be inflammatory (well ok, I do), but I really feel that constantly reflating asset bubbles for the rest of time, rather than accepting a one-time severe penalty whose moral hazard applies only to people who need things for their use-value, really is a Sunk Cost Fallacy that amounts to throwing good money after bad.

frockington1 5y ago
I'm down, I have a few properties. No mortgage and inflationary rent means I wouldn't have to work anymore
- eli_gottlieb 5y ago
  I mean, I'd be fine with screwing homeowners too, and I am a homeowner. The Zillow estimate of how much I could charge in rent is several times over my mortgage and HOA payments. The estimate for how much I could sell for is $25k over what I paid, two years ago. You can't tell me my house is making $12.5k/year for literally nothing, while I live in it and repairs accumulate, and tell me that's a sensible way to run an economy.
  - frockington1 5y ago
    Low interest rates and high inflation will pump those numbers up even more. I don't see a way to stop the increase without the debt imploding on itself which the government would never let happen (I'm personally in favor)
  - kazen44 5y ago
    also, the rising real estate prices have detrimental second and third order effects. For instance, birth rates are dropping because young adults cannot afford a house, which in term means they have to rent against higher prices which means they have less income to actually put into the economy. What will we do once we have a generation which doesn't have any wealth and doesn't own a place to live? People who have little to show for it after a lifetime of working while subsidizing those who own the properties they live in is not a situation you want society to be in.
    - EVa5I7bHFq9mnYK 5y ago
      Don't forget that those young people have parents and will eventually inherit their real estate, so they will have something to show for it after a lifetime of working.
      - pydry 5y ago
        Only some of them. And many of those houses will be sold to pay for healthcare.
      - Rodeoclash 5y ago
        Maybe. Remember that the house can be: 1. Split multiple ways due to multiple children. 2. Sold to finance retirement living.
betterunix2 5y ago
The result would be an almost immediate spike in interest rates charged to whoever benefited most from the debt cancellation, as lenders would be forced to compensate for the risk of additional cancellations in the future. Worse still, it would create a massive moral hazard as (some) people start to take on loans they know they cannot afford long-term in anticipation of more debt forgiveness (this often happens after bail-out programs and is one of the major arguments for the "too big to fail is too big to exist" philosophy). Since retirees often live on income from loan interest (through pension funds or personal retirement accounts), much of the burden would be borne by retirees and many of them would be forced back into the labor force (crowding out the younger generations who are trying to find their first job; see e.g. Japan for a manifestation of this problem). Debt forgiveness is not nearly as simple and positive as people believe. It often winds up hurting the people it was meant to help and having long-term negative consequences.