IMF urges debt forgiveness for indebted mortgagees

Graham_Devon

High levels of household debt restrain consumer spending and delay recoveries, the Bretton Woods institution concluded in an analysis of crises over the past century.

While cutting interest rates and unemployment benefits help, the IMF said the authorities should consider going further with “targeted household debt reduction policies”.

Among its proposals, the fund suggested state-sponsored debt forgiveness plans for the most hard-hit families. Although the policies might initially be expensive, they would be beneficial by reinvigorating consumer spending and helping the economy, the IMF said.

In Iceland, banks were made to accept reductions in mortgage interest payments of up to 40pc and the most distressed households had a portion of their outstanding debt written off.

The economy there has now recovered remarkably since its bank-led collapse in 2008.

The IMF said the lessons showed that “policies can help avert self-reinforcing cycles of household defaults, further house price declines, and additional contractions in output” and made a case “for government involvement to lower the cost of restructuring debt, facilitate the writing down of household debt, and help prevent foreclosures”.

So seems debt forgiveness would be targetted at those with mortgages only.

Lost for words really. Would certainly light the touchpaper with many.

http://www.telegraph.co.uk/finance/financialcrisis/9195844/IMF-urges-authorities-to-consider-debt-forgiveness-to-restore-growth.html

PaulF81

What they going to do? Riot? you would get 10 years like that idiot did today.

Graham_Devon

PaulF81 wrote: »

What they going to do? Riot? you would get 10 years like that idiot did today.

True. On the other hand, you'd likely get your mortgage written off and the house given to you due to not being able to pay

moneyinmypocket

Sounds a good plan too me - if banks can write off some people's mortgages it should free up there money to buy things in shops etc

Graham_Devon

moneyinmypocket wrote: »

Sounds a good plan too me - if banks can write off some people's mortgages it should free up there money to buy things in shops etc

Banks wouldn't be.

The taxpayer would pay.

ILW

If the government have all this spare cash slopping around, they could pay off the deficit or give tax refunds to those that deserve it.

PaulF81

Why not just qe an equity baseline in that can be repaid at a later date?

smamst

I tell you what, I'm maxing out all of my credit cards. Might aswell, let somebody else in the future deal with my debts.

Going4TheDream

It is attitude to debt and spending that needs changing for many people, and not to encourage the mantra of 'someone else will pay'

What ever happened to personal responsibility?

ChiefGrasscutter

moneyinmypocket wrote: »

Sounds a good plan too me - if banks can write off some people's mortgages it should free up there money to buy things in shops etc

Given that people's mortgages are underwritten/supplied by people's savings in banks building Societies etc, once some of these mortgages have been written off.....presumbly you are going to tell use where you think the money is going to come from when people want to take out their savings?

'cos I'd like to know as well.

Generali

ChiefGrasscutter wrote: »

Given that people's mortgages are underwritten/supplied by people's savings in banks building Societies etc, once some of these mortgages have been written off.....presumbly you are going to tell use where you think the money is going to come from when people want to take out their savings?

It's the flip side of the coin and ultimately it will happen. Either through 'financial repression' (e.g. forcing interest rates down to uneconomic levels by market intervention such as QE) or by straight forward confiscation.