5 ms·

Time to call an old fashioned debt jubilee like they did in the early Roman Empire days. It worked really well for situations like this.

by jdlyga 5y ago

oh_sigh 5y ago
Why would anyone ever pay their debts, and why would anyone ever lend money out, if they knew debt jubilees were possible?
- _jal 5y ago
  You know they're possible, because we're discussing them. Do you pay your debts?
  - oh_sigh 5y ago
    Flying pigs are possible. You know because we're discussing them. When was the last debt jubilee in America(which is where all of my debts are)?
    - ohyeshedid 5y ago
      Might help to clarify if you mean for people or corporations.
    - medvezhenok 5y ago
      1970s) High inflation = *fixed-interest rate debt jubilee over time (as long as wages are inflation-indexed). Also that's the last time the US defaulted on its debt in real terms (i.e. 1971 and the Nixon gold shock)
- lambda_dn 5y ago
  You don't have to pay your debts now, but the downside is your credit rating takes a dive yet loans are still made everyday.
  - nradov 5y ago
    You can't just stop paying and take the credit score hit. If you're solvent then creditors can get a court order to seize your assets, and if you have a job then they can levy a portion of your pay. For small debts creditors might just write it off but if you owe a lot then they'll absolutely come after you.
    - psyc 5y ago
      None of that is legal in the state I live in. Based on my personal experience in other states, I think you're exaggerating the likelihood that collectors will do anything except leave voicemail. But I don't know your definition of "a lot." Is $15k a lot?
      - nradov 5y ago
        Debt lawsuits for amounts under $15k are common in most states. https://www.pewtrusts.org/research-and-analysis/reports/2020/05/how-debt-collectors-are-transforming-the-business-of-state-courts https://www.pewtrusts.org/research-and-analysis/reports/2020...
    - arsome 5y ago
      Unless we're talking about collateralized debt, most of the time my understanding is they'll send debt collectors after you and little else - those debt collectors are often willing to negotiate on the amount because they bought it for less than face value, especially if you put it off for a while. I considered doing this because I got scammed by a water heater rental company that was asking for a ridiculous sum when I bought a new home, but eventually decided to avoid the credit hit. If I were closer to retirement it would have been a no-brainer.
- anoonmoose 5y ago
  "the market can stay irrational longer than you can stay solvent" you would pay your debts because even if debt jubilees were possible you don't know when it will happen and can't predict it with any degree of accuracy and it's not worth the trouble that would be caused by being wrong
  - arsome 5y ago
    Sure, but you'd be encouraged to make sure you had long-standing, slow-paying debts at all times or you'd be missing out on free money. I'd be taking out a few 30 year mortgages if this were a thing and probably borrowing against equity in my home to dump back into the market on some lower risk items. If you can service reasonably cheap debt and still live decently you may as well take it because a "debt jubilee" is like a lottery win if you happen to hit one in your lifetime, and I'm assuming you'd have them more frequently than that? My best guess: debt would be dramatically more expensive as lenders would have to factor it into the price, and home affordability for young people would drop even lower than it is today if this were a thing. Debt jubilees would seem to actually entrench the current upper and middle classes.
    - anoonmoose 5y ago
      and you'd be absolutely screwed if the jubilee only came around every 50-75 years
      - deleted 5y ago
        [deleted]
      - arsome 5y ago
        Depends how leveraged you are - personally with that level I'd be able to pass that on to my kids if needed. One of us is printing free money at least.
- mathgorges 5y ago
  I reckon they would for the same reason people do those things even though bankruptcy exists. Not paying your debts has consequences, even if the _may_ be forgiven. Likewise lending for interest is still profitable, even if it carries risk.
- mikepurvis 5y ago
  I mean, arguably this is the issue with corporate bailouts— executives can take giant risks knowing that they'll reap the upside but be rescued on the public dime if it goes south and they can convince us all that they're too big to fail and "no one saw it coming." (Even the one bank that was allowed to fail—Bear Stearns—seem to have had the execs do pretty all right by themselves: https://www.businessinsider.com/bear-stearns-where-are-they-now-2012-7 https://www.businessinsider.com/bear-stearns-where-are-they-...) I think in general I'm +0 on debt forgiveness for individuals. But it's not fair to speculate about the behaviours it would induce when we can observe already what related behaviours very much already induce. IMO the real losers in a debt-forgiveness scenario are the "responsible" ones who avoided doing something beneficial in order to not be overstretched— or maybe were even prevented from taking on debt by structural/classist barriers around credit-worthiness, job status, etc. For example, someone who now makes less money because they went to the cheaper state college, and has lived a simpler life afterward because they diligently paid it off every month. This person could be understood for feeling a bit crummy if they look over and a former peer who traveled far away for school, lived extravagantly, and rolled the debt forward for years now enjoys having it disappear in a poof.
lambda_dn 5y ago
Everyone would take huge loans and bet on the stock market knowing they never needed to pay them off. It would need to be announced and executed at the same time.
- arsome 5y ago
  Even if they were announced and executed at the same time, as soon as you knew it was a possibility you'd start behaving dramatically differently assuming this was plausible again within your lifetime or your child's lifetime.
- medvezhenok 5y ago
  The U.S. defaulted twice on their obligations in real terms in the 20th century: once in 1934, and another in 1971. That was basically a "debt jubilee" - for the country. Not sure the average person could have profited off of either one though (at least not legally). In 1970s you could have taken out fixed-interest rate debt (if you had the foresight), which would have been devalued as part of the 1970s inflation due to the 1971 Nixon Shock, so perhaps if you knew that you could come out ahead at the time. Usually debt jubilees work by transferring private debts onto public sector and then having the public sector default in real terms (by devaluing the currency).
hn_throwaway_99 5y ago
We're getting there - we just call it inflation, so that instead of cancelling debt all at once we basically just cancel it slowly over an extended period of time.
AnimalMuppet 5y ago
Here's a bunch of mortgages, which are turned into a CDO and sold to a pension fund. Now you declare a debt jubilee. Great! Those mortgages are gone. Unfortunately, so are the pensions. It could still be a net win. But it's going to come down rather badly on some people, and they aren't all rich rentiers...

Time to call an old fashioned debt jubilee like they did in the early Roman Empire days. It worked really well for situations like this.

by jdlyga 5y ago

Time to call an old fashioned debt jubilee like they did in the early Roman Empire days. It worked really well for situations like this.

oh_sigh 5y ago

Why would anyone ever pay their debts, and why would anyone ever lend money out, if they knew debt jubilees were possible?

_jal 5y ago
You know they're possible, because we're discussing them. Do you pay your debts?
- oh_sigh 5y ago
  Flying pigs are possible. You know because we're discussing them. When was the last debt jubilee in America(which is where all of my debts are)?
  - ohyeshedid 5y ago
    Might help to clarify if you mean for people or corporations.
  - medvezhenok 5y ago
    1970s) High inflation = *fixed-interest rate debt jubilee over time (as long as wages are inflation-indexed). Also that's the last time the US defaulted on its debt in real terms (i.e. 1971 and the Nixon gold shock)
lambda_dn 5y ago
You don't have to pay your debts now, but the downside is your credit rating takes a dive yet loans are still made everyday.
- nradov 5y ago
  You can't just stop paying and take the credit score hit. If you're solvent then creditors can get a court order to seize your assets, and if you have a job then they can levy a portion of your pay. For small debts creditors might just write it off but if you owe a lot then they'll absolutely come after you.
  - psyc 5y ago
    None of that is legal in the state I live in. Based on my personal experience in other states, I think you're exaggerating the likelihood that collectors will do anything except leave voicemail. But I don't know your definition of "a lot." Is $15k a lot?
    - nradov 5y ago
      Debt lawsuits for amounts under $15k are common in most states. https://www.pewtrusts.org/research-and-analysis/reports/2020/05/how-debt-collectors-are-transforming-the-business-of-state-courts https://www.pewtrusts.org/research-and-analysis/reports/2020...
  - arsome 5y ago
    Unless we're talking about collateralized debt, most of the time my understanding is they'll send debt collectors after you and little else - those debt collectors are often willing to negotiate on the amount because they bought it for less than face value, especially if you put it off for a while. I considered doing this because I got scammed by a water heater rental company that was asking for a ridiculous sum when I bought a new home, but eventually decided to avoid the credit hit. If I were closer to retirement it would have been a no-brainer.
anoonmoose 5y ago
"the market can stay irrational longer than you can stay solvent" you would pay your debts because even if debt jubilees were possible you don't know when it will happen and can't predict it with any degree of accuracy and it's not worth the trouble that would be caused by being wrong
- arsome 5y ago
  Sure, but you'd be encouraged to make sure you had long-standing, slow-paying debts at all times or you'd be missing out on free money. I'd be taking out a few 30 year mortgages if this were a thing and probably borrowing against equity in my home to dump back into the market on some lower risk items. If you can service reasonably cheap debt and still live decently you may as well take it because a "debt jubilee" is like a lottery win if you happen to hit one in your lifetime, and I'm assuming you'd have them more frequently than that? My best guess: debt would be dramatically more expensive as lenders would have to factor it into the price, and home affordability for young people would drop even lower than it is today if this were a thing. Debt jubilees would seem to actually entrench the current upper and middle classes.
  - anoonmoose 5y ago
    and you'd be absolutely screwed if the jubilee only came around every 50-75 years
    - deleted 5y ago
      [deleted]
    - arsome 5y ago
      Depends how leveraged you are - personally with that level I'd be able to pass that on to my kids if needed. One of us is printing free money at least.
mathgorges 5y ago
I reckon they would for the same reason people do those things even though bankruptcy exists. Not paying your debts has consequences, even if the _may_ be forgiven. Likewise lending for interest is still profitable, even if it carries risk.
mikepurvis 5y ago
I mean, arguably this is the issue with corporate bailouts— executives can take giant risks knowing that they'll reap the upside but be rescued on the public dime if it goes south and they can convince us all that they're too big to fail and "no one saw it coming." (Even the one bank that was allowed to fail—Bear Stearns—seem to have had the execs do pretty all right by themselves: https://www.businessinsider.com/bear-stearns-where-are-they-now-2012-7 https://www.businessinsider.com/bear-stearns-where-are-they-...) I think in general I'm +0 on debt forgiveness for individuals. But it's not fair to speculate about the behaviours it would induce when we can observe already what related behaviours very much already induce. IMO the real losers in a debt-forgiveness scenario are the "responsible" ones who avoided doing something beneficial in order to not be overstretched— or maybe were even prevented from taking on debt by structural/classist barriers around credit-worthiness, job status, etc. For example, someone who now makes less money because they went to the cheaper state college, and has lived a simpler life afterward because they diligently paid it off every month. This person could be understood for feeling a bit crummy if they look over and a former peer who traveled far away for school, lived extravagantly, and rolled the debt forward for years now enjoys having it disappear in a poof.

lambda_dn 5y ago

Everyone would take huge loans and bet on the stock market knowing they never needed to pay them off. It would need to be announced and executed at the same time.

arsome 5y ago
Even if they were announced and executed at the same time, as soon as you knew it was a possibility you'd start behaving dramatically differently assuming this was plausible again within your lifetime or your child's lifetime.
medvezhenok 5y ago
The U.S. defaulted twice on their obligations in real terms in the 20th century: once in 1934, and another in 1971. That was basically a "debt jubilee" - for the country. Not sure the average person could have profited off of either one though (at least not legally). In 1970s you could have taken out fixed-interest rate debt (if you had the foresight), which would have been devalued as part of the 1970s inflation due to the 1971 Nixon Shock, so perhaps if you knew that you could come out ahead at the time. Usually debt jubilees work by transferring private debts onto public sector and then having the public sector default in real terms (by devaluing the currency).

hn_throwaway_99 5y ago

We're getting there - we just call it inflation, so that instead of cancelling debt all at once we basically just cancel it slowly over an extended period of time.

AnimalMuppet 5y ago

Here's a bunch of mortgages, which are turned into a CDO and sold to a pension fund. Now you declare a debt jubilee. Great! Those mortgages are gone. Unfortunately, so are the pensions. It could still be a net win. But it's going to come down rather badly on some people, and they aren't all rich rentiers...