The GFC Can be Solved.....

Generali

wotsthat wrote: »

Government is talking about us all being in it together but the middle-classes are taking a disproportional hit. This proposal would simply accelerate that situation which is inherently unfair.

It's alright punishing the banks by cancelling the irresponsible loans but on the other hand this also punishes the prudent who didn't overborrow. The reckless borrowers are rewarded by having loans paid off by the prudent.

The middle classes hold the most cash so they have to be the ones to take the hit.

Poor people have no or very little cash and rich people have real assets. The middle classes have savings or in other words have lent money to the bank.

Time will tell what will happen. I don't claim to be a soothsayer. I do like to make a prediction and see whether or not I'm right.

HAMISH_MCTAVISH

Generali wrote: »

I do like to make a prediction and see whether or not I'm right.

Me too.

So here's mine.....

Steve Keen will be proved wrong. Again.

And rather than "Debunking Economics" as his book title claims, I rather suspect that Classical Economic Theory will end up "Debunking Steve Keen".

He has an interesting take on the world though, I'll give you that. Wrong, but interesting.

Joe_Bloggs

If you take out a career development/student loan and deposit it in a savings account does this make you a target for the hit squad ?
J_B.

StevieJ

HAMISH_MCTAVISH wrote: »

Heh heh..... Sure you don't.;)

And he was handed his new tablets of wisdom at Mt [STRIKE]Sinai [/STRIKE] Kosciuszko.

StevieJ

Generali wrote: »

Time will tell what will happen. I don't claim to be a soothsayer. I do like to make a prediction and see whether or not I'm right.

If you could get that message out to the masses it would certainly get the economy going again as all the hoarders start lashing out and even borrowing - It might just work

Generali

It's easy to mock.

What's another solution to the current travails though?

PS I told you that you wouldn't like it!

RenovationMan

Thrugelmir wrote: »

That merely passes the debt to someone else. Pass the parcel is over. The music has stopped.

Well, that depends on the size of the reduction when the house is sold. Using my house as an example, I bought it for £450k and have a £253k mortgage. If I had to sell quickly and took a 50% hit, I would pay back £253k to the bank and end that debt.

The new owner would have boughtit for £225k and so would require a much smaller mortgage than my £253k one, even if they arranged a 100% mortgage.

If I don't get into financial difficulties I will continue to repay my mortgage over the next 23 years and the debt will be cleared, just like other mortgage debts.

michaels

Whilst not normally a follwer of the fractional Reserve Banking system nutters I think as mentioned above this 'solution' would fall foul of resulting in a huge reduction in the money supply.

Don't forget many of the 'savings' being written off are probably counter balanced by debts (how many with a mortgage, credit card balance or overdraft also have an isa) so the write off of the insolvent debts would also push a lot of others towards insolvency rather than being a one shot solution.

I also think there is a money illusion issue going on - for individuals and indeed countries expenditure can outstrip income but for the world as a whole this is clearly impossible so actually the world as a whole could be consuming more than it can produce by definition. Western countries may be consuming more than they produce but in a way that makes sense - with ageing populations they should be running down assets saved for in the past and similarly developing countries should probably be net savers at this time of demographic advantage.

My point being that take money, solvency etc out and just look at the real variables of income, output and expenditure and there is by definition no global imbalance.

kabayiri

This does sound like the debt cancellation policies in place during Biblical times.

Now, I might be wrong on this, but their policies seemed to guide them through several millenia.

Our society can't even see beyond 2012.

Such is progress I guess....

HAMISH_MCTAVISH

Generali wrote: »

It's easy to mock.

Hey!!!

I'll have you know I put a lot of effort into my mocking.

What's another solution to the current travails though?

Devaluation.

The good old "inflate your way out" routine.

The more things change, the more they stay the same.....

PS I told you that you wouldn't like it!

Not half as much as the Asian economies are going to dislike several decades worth of currency manipulation being unwound as part of a global rebalancing of wealth.