# ONQ's proposal for Universal Debt Forgiveness



## onq

I've posted this recent article in this forum because this forum seems directly relevant to the subject matter.
This thread  in the *The bailout, the banking crisis and other economic issues forum* also refers to subjects covered in the below article.
I've posted the article in full because it contains several links to  other articles and talks which are relevant to the discussion and I have  included the relevant hyperlinks to each.

ONQ.
_ 
==============================================

http://businessetc.thejournal.ie/writing-off-mortgage-debt-is-an-emergency-need-206457-Aug2011/

_*Writing off mortgage debt is an “emergency” need*

_THE ECONOMIST CONSTANTIN Gurdgiev has said that the number of  mortgage defaults in Ireland has grown to “an emergency situation”._
_He said that the Government needed to introduce reform to the bankruptcy system immediately. Speaking just a short time ago on [broken link removed], Gurdgiev said:_

_The bankruptcy law must be changed so that people can not be pursued for  the rest of their life… In my view, a large quantity of mortgages were  missold to people by banks and financial institutions. We have to  recognise that this is an emergency situation._

_He said that it was “complete ********” [my edit] that negative equity only affects householders when they decide to move home._

_UCD  economist Morgan Kelly claimed at an address to a meeting of economists  last week that a mortgage debt relief scheme would cost between €5  billion and €6 billion, and that around one-fifth of mortgage holders  were struggling to meet mortgage repayments. He told the Kilkenny Arts Festival  two weekends ago that Ireland is now “insolvent” and that mortgage debt  and unemployment were huge millstones around people’s necks. (Listen to his lecture here)._

_Gurdgiev  said that while he agreed with Kelly’s overall proposal of mortgage  debt relief, he thought such relief should be “staggered” so that it  didn’t become a divisive social issue and foster resentment in those who  don’t receive the relief._
_Willie Penrose, the ‘super’ junior  minister at the Department of the Environment, told Sarah McInerney in  this morning’s Sunday Times that he thought the Government should  discuss the idea of a mortgage debt relief scheme._

_A debt forgiveness plan was mooted by several economists in [broken link removed]  last December, including Gurgiev, Brian Lucey, Stephen Kinsella, Ronan  Lyons, Karl Deeter, David Madden, Valerio Poti, Brendan McElroy and John  D Masson. In the letter, they jointly argued that partial debt  forgiveness would motivate people to spend more money and allow them to  move forward in their own economic life, thereby boosting  entrepreneurship._

_Another proposal for reducing mortgage debt was suggested last February by the housing agency Threshold. They told TheJournal.ie that  they wanted the new government to consider a “mortgage to shared  equity” scheme. The proposal would see the State buy homes at a  “significant discount” from financial institutions when a houseowner is  in danger of facing repossession. The State would then rent the home  back to the former owner, who could later repurchase the home when their  financial circumstances improved._

_==============================================_


----------



## goingforgold

I already know of a married couple with children, with two houses and debts in the region of 500k between both properties. They are in negative equity but not massively so. They are paying their mortgage debt quite comfortably and both are working. They have substantial savings 70K+. 

They are now thinking that they can get something out of this potential debt forgiveness scheme. They feel that there are loads of other couples in the same situation who will claim they can't repay their mortgages so why shouldn't they do the same?

So if a couple owe 300k on a house worth 150K do they get some form of debt forgiveness purely because they are in negative equity? And what about another couple who through living very prudently have a mortgage of 150K on a property worth 150K. What do they get?

This is going to be so hard to manage and administer. People will hide their savings and all that type of carry on to avail of this golden opportunity. I realise there are thousands of genuine hardship cases but how are we going to distinguish these from the tens of thousands that are going to jump on the bandwagon? Taxpayer beware again!

Look at this thread posted today. Looks like people are copping on already that maybe they are better off not to honour their loans. I think in the shorterm these debt forgiveness proposals could encourage bad behaviour from people which will make a bad situation even worse.

http://www.askaboutmoney.com/showthread.php?t=159486

I agree with Matthew Elderfield whe he says “must be careful that any approach doesn’t provide financial incentives for the arrears problem to get worse”.


----------



## jpd

Why not give every household € 150,000 or € 200,000 - then can use it to write down their debt or spend it if they don't have any.

That would avoid the moral hazard


----------



## onq

Giving people €200,000 for "nothing"?
Isn't that what got us where we are - the lure of easy money?

Let them take the money - €6Bn or so its estimated - and use it to set up a commercial lending bank to help stimulate indigenous jobs growth and the local economy.
With a fractional reserve of say 10% that bank could lend out up to €60Bn - a decent shot on the arm for our economy, according to what Professor Lucey of TCD told me after a Front Line programme last year.

ONQ.


----------



## hastalavista

onq said:


> Giving people €200,000 for "nothing"?
> Isn't that what got us where we are - the lure of easy money?
> 
> Let them take the money - €6Bn or so its estimated - and use it to set up a commercial lending bank to help stimulate indigenous jobs growth and the local economy.
> With a fractional reserve of say 10% that bank could lend out up to €60Bn - a decent shot on the arm for our economy, according to what Professor Lucey of TCD told me after a Front Line programme last year.
> 
> ONQ.



who is going to lend 50bn to an entity in a bankrupt country  that has no consumer confidence facing cuts and hikes of 20bn by 2015, coupled with stagnating growth world wide? 
Angela wont do it.
The National pension reserve has already been thrashed by the Labour party and its bearded cohorts in Liberty Hall.

Lucey, God love him, is in his ivory tower funded by the taxpayer, and well away from the real front line as is Kenny on his million plus from the taxpayer via RTE.

Debt forgiveness on a selective basis wont work because the non-recipients will stop paying their debts.


----------



## onq

hastalavista said:


> who is going to lend 50bn to an entity in a bankrupt country  that has no consumer confidence facing cuts and hikes of 20bn by 2015, coupled with stagnating growth world wide?
> Angela wont do it.
> The National pension reserve has already been thrashed by the Labour party and its bearded cohorts in Liberty Hall.
> 
> Lucey, God love him, is in his ivory tower funded by the taxpayer, and well away from the real front line as is Kenny on his million plus from the taxpayer via RTE.
> 
> Debt forgiveness on a selective basis wont work because the non-recipients will stop paying their debts.




Let me clarify a few things.
I didn't mention 60Bn in the context of lending to a singular entity.

Lucey said the economy needed about 60 Billion in lending .
I understood this to be the amount of liquidity our economy needs in order to function according to my understanding.

---------------------------------------------

I agree that selective debt forgiveness won't work.
I had a conversation with someone recently about this and came to the conclusion that it has to be universal debt forgiveness.

This is something most people cannot get their heads around, but its very simple.
Either the debt is forgiven and we re-write the rule book to benefit citizens, or the system will collapse.
And if we do not take a long hard look at the fractional reserve banking system and the way it charges interest we will miss the point.

We also need to seriously look at remuneration for the upper echelons of companies and debunk the myth that money buys quality.
Even these same heads of companies don't believe that, and their HR departments have this ground into their bones.
But its still peddled as justification for the outrageous salaries those in the "jobs for the boys" network pay themselves.

We need to really, really really put the markets under the microscope and put some controls in place because its quite clear vested interests are preventing this from occurring.
Finally we need to tax and regulate over the counter sales and micro-transactions to regulate this, not just with a Tobin Tax, but on an ongoing basis.

So to summarize - 

- Selective debt forgiveness is divisive, universal debt forgiveness is what's required.
- We need to look at the entire money system and undertake a comprehensive reform along ethical banking lines and we could do a lot worse than take a hard look at how the the Islamic Banks do business.
- We need to tax and regulate the banks and shareholders need to take a long hard look at the scandalous levels of money top management are being paid - they're simply not worth it as the current debacle proves.

ONQ.


----------



## onq

Slaphead said:


> Im seriusly wondering why do i bother paying mine, bought in 2009 and havnt missed a payment. No i hear i could have bought a bigger house, paid less, or nothing at all and have a big chunk taken off it! Crazy stuff.



Even in the context of the present thread I don't think that's on offer.

To be fair to your interpretation, its not perfectly clear exactly what's on offer.

ONQ.


----------



## Slaphead

onq said:


> Even in the context of the present thread I don't think that's on offer.
> To be fair to your interpretation, its not perfectly clear exactly what's on offer.
> ONQ.



yeah, i know its all up in the air, but you cant just reward people for their stupidity. Whatever is done it has to be fair to everyone, otherwise it'll just be open to corruption.


----------



## onq

I think some people have had enough of the doom and gloom merchant Morgan Kelly.
Yet here he comes like the pied piper leading all the highly indebted rollers into the promised land!
But this is a minefield in more ways than one because its very clear there are several different kinds of people here.

Will the poor young couples who brought outrageously prices houses by the skin of their teeth be lumped in with the conspicuous consumers with their outrageous mortgages for in-your-face-houses, which included WoW-factor extensions and a BMW X5?

What about those who bought because they received incompetent or deliberately misleading advice from their mortgage advisers, or who were offered mortgages that any seasoned estate agent and lender knew they could not sustain by any rule of thumb?

Will such badly advised relative "innocents" be given priority treatment?
None of these scenarios sits very easily with me at the moment.
That's because favouring any one disenfranchises the rest!

-----------------------------------

I have to say I was never impressed too with the parable of the Prodigal Son.
I was always more sympathetic to the hard working sons who didn't get a bonus.
I could understand they were upset when the wastrel who returned got the fatted calf!

So for me its either "Universal forgiveness" or "no forgiveness".
Its past time we took the yoke from around our necks that the money lenders have fashioned for us.

We have to look in debt at how we pay for goods and services and how those who run the money markets can be made accountable to sovereign countries
Its also past time we legislated to ensure that giving bad advice on borrowing and providing credit beyond prudent limits becomes an offence punishable by law.
That might give the dodgy estate agents an unscrupulous mortgage providers pause they next time they try to steer innocents into taking on mortgages they cannot sustain.

ONQ.


----------



## goingforgold

onq said:


> - Selective debt forgiveness is divisive, universal debt forgiveness is what's required.


 
Can you please explain what your interpretation of universal debt forgiveness is. Does this mean that every citizen in the country with mortgage debt on their PPR has that debt written off?

Or does it mean that those in negative equity get their mortgage reduced. Or does it only mean that those who cannot repay their mortgages get them written off/reduced?

Neither of these scenarios will work for the reasons previously outlined, ie other people jumping on the bandwagon, not paying their mortgages, giving up their jobs, hiding their savings etc in order to avail of this golden ticket.


----------



## onq

I thought "universal" was a big enough word.

All debt is reset to zero.

ONQ.


----------



## goingforgold

onq said:


> I thought "universal" was a big enough word.
> 
> All debt is reset to zero.
> 
> ONQ.


 
Ok, let's try and bring some sense to this thread. What you are suggesting is that we wipe out all debt. Even if we just wipe out all mortgage debt on people's PPR and use Morgan Kelly's rather conservative estimate of 55billion euro where do you suggest we get that from? Why not wipe out all personal debt as well to be fair to everybody! I believe by universal debt forgiveness you actually are suggesting that ALL debt be wiped out. Money cannot just disappear so who pays the hundreds of billions required for this to happen? Do we just print the required money? Inflation?

Also from a moral and social perspective let's take this simple example. Mary and John "wanted" a 600K house in 2007 and bought it. They now can't afford to pay for it. Ann and Brian who had the same income bought a 200K house to live within their means and now have a very small mortgage on a modest house. Do you suggest we wipe out Mary and John's debt and leave them live in their fancy house just because they wanted it? So Ann and Brian as taxpayers end up paying for Mary and John's fancy house and all other prudent people who leave in modest properties will do likewise. NOT going to happen. I could give a thousand other reasons as to why this makes no sense but we'd be here for the day.

So we need to get real here and put a sensible argument together. For what it's worth I feel the only way any debt forgiveness scheme could work would be for it to happen through the courts and where people's incomes and savings would be scrutinised as they would be in a bankruptcy case. Also obviously somebody who can't afford to pay for a big fancy house can't have their mortgages wiped out and be left to live there. There would be two choices, hand back the keys or get a reduced mortgage but not massively so as this would not be fair to those who are living within their means in more modest properties. Another option would be to reduce the mortgage to a sustainable level but the property would have to reflect this new mortgage. ie if a couple can't afford to pay for a huge house, they should have their mortgaged reduced, hand back the keys and purchase a property worth the value of the new mortgage. This would improve the property market and solve the mortgage debt problem. We need some outside the box thinking like this to solve our problems. There is no blanket solution without serious consequences both financially and socially/morally.

We have to remember what has happened with the social welfare system in this country. It was originally setup to help the vulnerable. Now it's a lifestyle choice for people up and down the country in every town and village. Why? Because people have taken advantage of the generosity of the system. This will happen twofold if such a debt forgiveness scheme is introduced. As I already pointed out people are already anticipating such a move and starting to take advantage already! Will we ever learn?!

In other threads you suggest that people need to live up to their responsibilites. See attached. You need to keep a consistent argument here. Why should people live up to their responsibilities when you're suggesting that the most irresponsible move of all could be possible, ie "universal debt forgiveness".

http://www.askaboutmoney.com/showthread.php?t=159486


----------



## Chris

goingforgold said:


> Ok, let's try and bring some sense to this thread.



And that you have achieved, great post. I would be absolutely sickened by such a universal debt forgiveness; so much so that I would immediately pack up and leave the country. Any kind of debt forgiveness will reward making mistakes, and set a detrimental precedence for future generations. At the same time someone like me, who bought a modest house on a low LTV and sold when things started turning down and never accumulated any significant debt, i.e. did everything right, would be punished for having done so. This is like reverse Darwinism!


----------



## onq

Your species of logic escapes me Chris.

Someone else getting assisted equates to you being punished? How?

ONQ.


----------



## orka

Maybe we have misunderstood how you plan to fund the universal write-off/'all debt set to zero' - can you elaborate? I can only see two ways of funding the write-off of our 115B of mortgage debt (I think that was the number in a different thread on Morgan Kelly's $6B plan). Either the taxpayer picks up the tab or the banks somehow manage to use 115B of deposits to write off the debts. Either way, 'we' (tax payers/depositers) will be punished. Where does your plan envisage the money coming from for universal debt forgiveness? 

Punishment is also not only the infliction of something bad - it can be the absence of something good. Why should some people who overstretched themselves with eg 500K of mortgage debt be given a house for free (they now own, free and clear, an asset worth a few 100K courtesy of your 'all debt set to zero' plan) while another person who didn't buy at all gets nothing?


----------



## onq

goingforgold said:


> Ok, let's try and bring some sense to this thread. What you are suggesting is that we wipe out all debt. Even if we just wipe out all mortgage debt on people's PPR and use Morgan Kelly's rather conservative estimate of 55billion euro where do you suggest we get that from? Why not wipe out all personal debt as well to be fair to everybody! I believe by universal debt forgiveness you actually are suggesting that ALL debt be wiped out. Money cannot just disappear so who pays the hundreds of billions required for this to happen? Do we just print the required money? Inflation?



Debt is created when someone lends money to another.
Its the simple expedient of double entry book-keeping.

Debt was originally intended to be paid back.
We are living in a time when its rolled over.

The conventions of today are based on bootstrapping debt.
The bootstrapping is done by convention and can be cut.

People are tying themselves in knots over repaying debt artificially created by a system based on inflated values.
Artificial values fueled by virtual debts have led us to where we are today.

Seeing the rapid responses in the negative was expected.
I had hoped that leaving the ladder, someone might fall upward for a change.

The money system is as much a belief system as any philosophy or legal system.
It only works because we all agree it should work - but what if we challenged that belief?

Apart from some questionable moralizing already noted in this thread, is there no way to break the mental straitjacket that prevents us from seeing beyond the vale of Money?

When everything is relative, putting a price on a thing at a point in time and expecting people to pay that price even when relative values fall results in perceived hardship.
Is there an argument whereby the level of a debt should relate to the current value of the good or service?
Is there an argument that focuses on the rate of interest as an issue which in and of itself causes problems?

We need to think outside of accepted conventions to better understand and address the issues.

We have seen debt forgiveness in the case of odious debt in Third World Countries.
I have posted in relation to Odious Debt before now.

It is quite clear that values hyped by unscrupulous estate agents and mortgage lenders have saddled people with debts based on unsustainable house prices and interest rates.
It is my firm belief and assertion that this amounts to a form of odious debt, based on a racket run by the aforementioned "professionals" to line their pockets at the house purchasers expense, that it is unsustainable and must be forgiven.

Where the cut off point comes from I do not know.

Trying to protect the banking and financial edifices which are not properly monitored, regulated or controlled and which led to this debacle is not a credible way to deal with the current problem.
However issues of fairness arise in how its dealt with and this raises issues in relation to how all debt is dealt with in the current system.

Is the system itself inequitable or intrinsically unfair?
Is it open to systemic and widespread abuse?
Is it mirrored by other systems e.g. trading?

Then something needs to be done before a world of seven billion people declares itself bankrupt because of monies being taken out of the system by corporations and interest rules for the benefit of a small minority of individuals to the detriment of the greater good.

We can start with Universal Debt Forgiveness to wipe the slate clean.
And believe, me, given the forms of theft and graft that have gone on, that's being very generous to the perpetrators.

For the record, I don't have debts in the millions range or a huge mortgage and am not in negative equity - yet!
I make this post as fair comment on a system which has it has been shown has fostered corruption, runs largely unmonitored and unco-ordinated and needs complete revision or abandonment before it destroys human endeavour.

I believe its that serious.

ONQ.


----------



## onq

goingforgold said:


> We have to remember what has happened with the social welfare system in this country. It was originally setup to help the vulnerable. Now it's a lifestyle choice for people up and down the country in every town and village. Why? Because people have taken advantage of the generosity of the system.



I have already posted in relation to social welfare abuse but you remarks go far beyond that.

They appear to amount to a gross defamation of the current generation sponsored first as an unfounded soundbyte by Minster Joan Burton.

Furthermore, they appear to amount to a gross defamation of most of the half million people receiving state benefits, the majority of whom were working profitably three years ago.

Please withdraw your remarks above or post proof instead of invective.

ONQ.


----------



## goingforgold

onq said:


> It is my firm belief and assertion that this amounts to a form of odious debt, based on a racket run by the aforementioned "professionals" to line their pockets at the house purchasers expense, that it is unsustainable and must be forgiven.
> 
> Where the cut off point comes from I do not know.
> 
> 
> ONQ.


 
With universal debt forgiveness there is no cutoff point. 

That's why it can't work. Every debt would have to be forgiven. I believe the only option is as per my thread above. Very selective forgiveness through the courts. We cannot just wipe the slate clean. You are effectively arguing that capitalism has failed, which is true, but we cannot just start all over again. The consequences would be catastrophic.


----------



## goingforgold

onq said:


> Is there an argument whereby the level of a debt should relate to the current value of the good or service?
> Is there an argument that focuses on the rate of interest as an issue which in and of itself causes problems?
> 
> .


 
In general no there isn't. People bought into this capitalism view of things and now they want the rule book changed because things haven't worked out. There was no such call when prices were on the up an up. By your argument why weren't those who didn't buy a property in the boom times given 200K to give themselves a chance of buying and getting on the "ladder"!

As other posters along with myself have pointed out, your suggestion would not only punish prudent people but it would also reward reckless people by giving them a free valuable asset and leave others with nothing. I'm sorry but this just can't work.


----------



## orka

I despise myself for even bothering to continue to read this thread never mind respond but anyway...

ONQ, so the morning after the universal debt write-off, who has taken the hit?  One day there was 115B in assets on corporate and bank balance sheets; the next day, all gone...  So who takes the hit?  Who has lost 115B in assets overnight?


----------



## onq

goingforgold said:


> In other threads you suggest that people need to live up to their responsibilites. See attached. You need to keep a consistent argument here. Why should people live up to their responsibilities when you're suggesting that the most irresponsible move of all could be possible, ie "universal debt forgiveness".
> 
> http://www.askaboutmoney.com/showthread.php?t=159486



I am well aware of what I've posted and indeed the article I quoted at the start of this thread was originally part of a longer post in which I tore the basic premise apart because of its divisive nature.
I decided not to post that at this time because I wanted to investigate the premises of debt forgiveness as a matter of principle, not accountancy figures.
I've been assuming most people can understand the benefits that accrue when someone is adopting an extreme position, but I'll have to elaborate.

The importance of arguing both sides of a point is that it brings huge perspective to any debate.

My current proposition takes the concept of debt forgiveness to the ultimate.
It exposes the criminality of the players to date and it questions the viability of the bootstrapping of debt that currently exists.
These issues are accepted as "givens" in any limited arguments, because limited arguments don't question the basic conditions which resulted in the situation we're arguing about.

So I rolled it back to zero with the concept of Universal Debt forgiveness.

So far I've had one poster complain - without any supporting argument - that he will be "Punihsed" for being prudent.
Not so, its just that not having run up any odious debt, he has none to forgive.

But its not only people who have this species of debt - nations do too.
And part of the deal in any debt forgiveness must be an examination in detail of how the debt has arisen.
This should result in a formulation of a methodology to ensure it doesn't occur again.

Several points converge on this.

Debt forgiveness cannot occur in a vacuum - the causes of the debt must be fully investigated and understood.
This includes the inherent inequalities in the finance systems that supports and encourages indebtedness.

You can only justify a full investigation of the part of the system under review fro debt forgiveness as goingforgold's post implies.
If you want a review of the entire system, then you must invoke Universal Debt Forgiveness.
If you only review part of the system, then you perpetuate the problem.

The problem is a system which has seen real wealth and value removed from circulation during boom-bust cycles and a reduction of the overall wealth in circulation in the world economy.
Its akin to the level of damage illegal drug use does to society - it soaks up the disposable of the user and then steals the income of the victims of his thefts.
There are a lot of thieves in capitalist society, many of them operating in plain sight - I believe this is at the root cause of the current economic crisis.

ONQ.


----------



## dewdrop

It will never happen


----------



## Sunny

orka said:


> I despise myself for even bothering to continue to read this thread never mind respond but anyway...


 
Bet you really hate yourself now! You should have listened to your gut feeling.


----------



## onq

orka said:


> Maybe we have misunderstood how you plan to fund the universal write-off/'all debt set to zero' - can you elaborate? I can only see two ways of funding the write-off of our 115B of mortgage debt (I think that was the number in a different thread on Morgan Kelly's $6B plan). Either the taxpayer picks up the tab or the banks somehow manage to use 115B of deposits to write off the debts. Either way, 'we' (tax payers/depositers) will be punished. Where does your plan envisage the money coming from for universal debt forgiveness?


The great thing about universal debt forgiveness is that only the holders of debt suffer and only for a short time. New debt will arise as soon as someone can fill out an application form. It will reboot the world economy.

As for the incentive, the current scenario shows years of stagnation just around the corner, when the Chinese bubble crashes.



> Punishment is also not only the infliction of something bad - it can be the absence of something good. Why should some people who overstretched themselves with eg 500K of mortgage debt be given a house for free (they now own, free and clear, an asset worth a few 100K courtesy of your 'all debt set to zero' plan) while another person who didn't buy at all gets nothing?



Value judgments have no part to play in getting a machine working again, or in this case replacing the machine.

At some point all machines become obsolete - the machine that is our banking and financial system seems to be nearing that point.

ONQ.


----------



## onq

dewdrop said:


> It will never happen



As the system starts to tear itself apart following the unseating of the USD as a world reserve currency of choice, many things will happen that seem unthinkable now.

Universal Debt Forgiveness may be the least damaging of all.

I'm sure any Chinese readers can see the implications.

ONQ.


----------



## goingforgold

onq said:


> So far I've had one poster complain - without any supporting argument - that he will be "Punihsed" for being prudent.
> Not so, its just that not having run up any odious debt, he has none to forgive.[\QUOTE]
> 
> I'm beginning to feel I may be wasting my time responding too but I too have given you lots of reasons as to why your suggestion of universal debt forgiveness makes no sense. I'll try and make them simpler:
> 
> 1. The very notion of it will encourage and is already encouraging people to be wreckless, thus making a terrible situation worse. I've given lots of examples of this.
> 
> 2. All debt cannot simply disappear without dire consequences. We cannot function as a capitalist society afterwards - does the world become communist overnight for instance? Or do we just start again in a capitalist manner but in a different way?
> 
> 3. Socially and morally it cannot work. People with massive houses cannot simply retain them and prosper at the expense of those who lived prudent lives. This would create huge social issues. Even if ones mortgage was being reduced by 200K in a debt forgiveness scheme they would have to give up their property for something that reflects their current means and reflect the fact they have had debt forgiven.
> 
> 4.The only way any debt forgiveness can work is through the courts where people would have to be financially scrutinised like they would in bankruptcy proceedings. At the end of the process their house would have to reflect the amount of debt they have had written off and their current means. If there is universal debt forgiveness then of course there is no need for bankruptcy proceedings as everyone will be asset rich and debt free. With those who were most wreckless being the most asset rich!


----------



## goingforgold

onq said:


> So far I've had one poster complain - without any supporting argument - that he will be "Punihsed" for being prudent.
> Not so, its just that not having run up any odious debt, he has none to forgive.


 
I'm beginning to feel I may be wasting my time responding too but I too have given you lots of reasons as to why your suggestion of universal debt forgiveness makes no sense. I'll try and make them simpler:

1. The very notion of it will encourage and is already encouraging people to be wreckless, thus making a terrible situation worse. I've given lots of examples of this.

2. All debt cannot simply disappear without dire consequences. We cannot function as a capitalist society afterwards - does the world become communist overnight for instance? Or do we just start again in a capitalist manner but in a different way?

3. Socially and morally it cannot work. People with massive houses cannot simply retain them and prosper at the expense of those who lived prudent lives. This would create huge social issues. Even if ones mortgage was being reduced by 200K in a debt forgiveness scheme they would have to give up their property for something that reflects their current means and reflect the fact they have had debt forgiven.

4.The only way any debt forgiveness can work is through the courts where people would have to be financially scrutinised like they would in bankruptcy proceedings. At the end of the process their house would have to reflect the amount of debt they have had written off and their current means. If there is universal debt forgiveness then of course there is no need for bankruptcy proceedings as everyone will be asset rich and debt free. And those who were most wreckless will be most asset rich!

PS Apologies for duplicated post!


----------



## onq

goingforgold said:


> With universal debt forgiveness there is no cutoff point.
> 
> That's why it can't work. Every debt would have to be forgiven. I believe the only option is as per my thread above. Very selective forgiveness through the courts. We cannot just wipe the slate clean. You are effectively arguing that capitalism has failed, which is true, but we cannot just start all over again. The consequences would be catastrophic.



This is the crux of the matter.

Capitalism - unregulated markets, the fractional reserve banking system, unlimited interest on debts, boom-and-bust market cycles creating and then totally undermining virtual values - has been exposed for the racket it is.

You say we cannot just start over again because _the consequences would be catastrophic._

I say we must start over again, with a clean slate, because _the consequences already ARE catastrophic_.

From what I can see in new reports, these consequence only seem held at bay by gossamer thin webs of words and written agreement and "laws" which can be torn up at any moment or repudiated to stop sovereign nations descending into chaos.

Perhaps I am more of a realist than you. 

-----------------------------------

We need to build better financial instruments than what we have, more equitable rewards for work done, and more accountability in business and government.

In short, we need a system that is sustainable at any level we choose to remain at - we don't need a system that requires exponential growth to satisfy wall street traders or bankers or estate agents chasing bonuses.

That way lies bankruptcy for us all.

-----------------------------------

Once you get over the concept of wiping the slate clean, exposing the criminality and croneyism at the heart of Big Business and Finance, the rest sort of falls into place.

1. The agreement to enter into Universal Debt forgiveness.

2. The analysis of the problem, or non-problem.

3. The resolution.

-----------------------------------

Many posters to this thread have decried this whole approach because they can think only in terms of the ground rules that currently support the existing system.

The most telling sign of lazy thinking is the promotion of an either/or solution as "the only solution", but that need not be the case.

For the sake of it, let's liken it to the history of a proprietary computer operating system under a paid license we all know and love.

This went on for years, with the producer of the operating system forcing changes on the customer who knew they were being pressured into buying things they didn't want but couldn't find an alternative.

Someone, one particular someone considered the problem and conceived of a collaborative method of information exchange and a new software system resulted.

People didn't pay for the system, which was free, but the setting up and the performance of the system, which generated revenues.

It took a sea-change to embrace the open-source model and it didn't replace the existing model - it exists side-by-side to this day.

-----------------------------------

The parallel translates to the subject under discussion in this way - there could be others, but I'm not clued in enough to think of them today.

All it needs is for one person to conceive the new system and offer its benefits to someone suffering under the old system.

In real terms this could entail simply taking over the debt or part of the debt - the older sees a lower write off, and the newer one has a grateful customer.

-----------------------------------

Think of this as a half-way house for people who cannot contemplate Universal Debt forgiveness.

Think of it also as a warning to those who think that public servants don't to ANY good work, and that the majority of people are drawing the dole because of a "lifestyle choice".

We need to value all people in our society, not just the capitalist high-flyers and the social butterflies.

ONQ.


----------



## onq

goingforgold said:


> onq said:
> 
> 
> 
> So far I've had one poster complain - without any supporting argument - that he will be "Punihsed" for being prudent.
> Not so, its just that not having run up any odious debt, he has none to forgive.
> 
> 
> 
> 
> I'm beginning to feel I may be wasting my time responding too but I too have given you lots of reasons as to why your suggestion of universal debt forgiveness makes no sense. I'll try and make them simpler:
> 
> 1. The very notion of it will encourage and is already encouraging people to be wreckless, thus making a terrible situation worse. I've given lots of examples of this.
> 
> 2. All debt cannot simply disappear without dire consequences. We cannot function as a capitalist society afterwards - does the world become communist overnight for instance? Or do we just start again in a capitalist manner but in a different way?
> 
> 3. Socially and morally it cannot work. People with massive houses cannot simply retain them and prosper at the expense of those who lived prudent lives. This would create huge social issues. Even if ones mortgage was being reduced by 200K in a debt forgiveness scheme they would have to give up their property for something that reflects their current means and reflect the fact they have had debt forgiven.
> 
> 4.The only way any debt forgiveness can work is through the courts where people would have to be financially scrutinized like they would in bankruptcy proceedings. At the end of the process their house would have to reflect the amount of debt they have had written off and their current means. If there is universal debt forgiveness then of course there is no need for bankruptcy proceedings as everyone will be asset rich and debt free. With those who were most wreckless being the most asset rich!
Click to expand...


In order of delivery.

1. Universal debt forgiveness requires as part of its delivery examination of all debts - you can write failsafes in here if you wish, because we certainly wouldn't want to forgive criminals their debts. Your argument has some merit.

2. Who would suffer if all debt disappeared? The creditors. But since in Europe the creditors are also borrowers, the dislocation may not be as catastrophic as people fear. Your argument has some merit.

3. People with massive houses are already retaining them. Those who lived prudent lives will be paying through the nose for the debts incurred by our banks and the imprudent borrowers for five generations. Your argument has little or no merit.

4. I confess my own thought is still developing but in my mind, debt forgiveness does not necessarily mean asset rich. 

I posted previously about the need to bring debt into line with current values. I posted about universal debt forgivness. That is a different thing to clearing away all contracts. Even Morgan Kelly didn't suggest that, nor did I.

----------------------------------------------

How the debt is rolled down to zero is the big issue, the devil is in the details and all that jazz, and I have only begun to think about it.

But I started off thinking "this can be done, we can find a way because we have to."

I didn't start off thinking "this cannot be done."

I think that's the main difference between our positions.

Once you consider that it can be done, and that there are ways it may appear fair to people, then you can discover ways to do it.

The initial departure from received wisdom is the hardest thing.

----------------------------------------------

I suggested that debt forgiveness has to be applied universally because everyone has to be a winner or society as we know it will explode. This is the only way Morgan Kelly's hugely divisive suggestion can be made to work.

People who have debts in the tens of thousands see it - because of the nature of the beast - in much the same light as people who live life at a larger scale.

There seems to be some suggestion creeping in here that I intended that ALL debt be totally written off. I am sorry if I gave that impression. I only meant that all debts would come under the remit of debt forgiveness.

Some of this may be written off, some of it may be bought on favourable terms, and it cannot be limited to property debt.

Everyone has some form of debt - apart from property debts - and all debts should be taken account of and some level of debt forgiveness should be applied.

----------------------------------------------

You own suggestion then kicks into play, with formal investigation of the debt and levels of debt forgiveness being reached.

Personally I doubt that the Courts are the place to do this, although it will require input from people trained in law, accounting, contract and investment.

I trust this clarifies what I see now was a significant misunderstanding created unintentionally by me.

For the record, I couldn't bear communism - I visited Russia in 1988 and say Prestroika at work, the fag end of communism - terrible.

People need incentives to work.

Equally I cannot bear unfettered capitalism - coked up traders making decisions that beggar nations and devalue currencies - unconscionable.

We need a better monitored, better regulated, better balanced system than what we have, that works to improve the quality of life of individuals in a sustainable manner, not to generate paper profits for multinationals to justify unsustainable CEO and Trader salaries and bonuses.

ONQ.


----------



## goingforgold

onq said:


> 3. People with massive houses are already retaining them. Those who lived prudent lives will be paying through the nose for the debts incurred by our banks and the imprudent borrowers for five generations. Your argument has little or no merit.


 
Disagree completely. One cannot be rewarded for their careless behaviour and ignore those who were sensible. Yes they are retaining their properties currently but they are also retaining the debt, that's the difference.



onq said:


> But I started off thinking "this can be done, we can find a way because we have to."
> 
> I didn't start off thinking "this cannot be done."
> 
> I think that's the main difference between our positions.


 
I also think this can be done so we don't differ at all. See my other posts on how debt forgiveness can be administered as fairly as possible




onq said:


> There seems to be some suggestion creeping in here that I intended that ALL debt be totally written off. I am sorry if I gave that impression. I only meant that all debts would come under the remit of debt forgiveness.
> 
> ONQ.


 
When I asked you to define universal debt forgiveness you stated and I quote "I thought "universal" was a big enough word.

All debt is reset to zero."

Now you are saying otherwise. I'm really confused now!


----------



## onq

goingforgold said:


> Disagree completely. One cannot be rewarded for their careless behaviour and ignore those who were sensible. Yes they are retaining their properties currently but they are also retaining the debt, that's the difference.


I understand that the developing position of banks is that they are writing down some debts. I understand that the developing position of the courts is that they are taking this into accounts when banks are prosecuting debtors.
But many of the larger home owners are already bailed-out developers.
Ergo.


> I also think this can be done so we don't differ at all. See my other posts on how debt forgiveness can be administered as fairly as possible


Whereas I'm concerned that (i) this doesn't address all kinds of debt and (ii) it still leaves a rancid system in place where this can happen again.

No one learned in Wall St. from the Savings and Loan Scandal of the 1980's-1990's.

Recently I read that the previous reserve limits set by the BIS had been "got around" by clever instruments of finance.

This shouldn't still be happening.
We should have failsafes in place.



> When I asked you to define universal debt forgiveness you stated and I quote "I thought "universal" was a big enough word.
> 
> All debt is reset to zero."
> 
> Now you are saying otherwise. I'm really confused now!



I'm not deliberately trying to be slippery on this - perhaps I'm learning from your posts goingforgold about the realities involved. 

However I posted -

"How the debt is rolled down to zero is the big issue, the devil is in  the details and all that jazz, and I have only begun to think about it."

I' suppose I'm thinking about my own situation, where I owe money to some institutions but clients own me money and were it all netted out, I would be in a much better position.

ONQ.


----------



## goingforgold

onq said:


> I'm not deliberately trying to be slippery on this - perhaps I'm learning from your posts goingforgold about the realities involved.
> 
> However I posted -
> 
> "How the debt is rolled down to zero is the big issue, the devil is in the details and all that jazz, and I have only begun to think about it."
> 
> I' suppose I'm thinking about my own situation, where I owe money to some institutions but clients own me money and were it all netted out, I would be in a much better position.
> 
> ONQ.


 
You did subsequently post as per above but I guess I was just poining out that it didn't creep into this discussion it was more stated by yourself. I think people were thrown by you stating that ALL debt be written off and start with a clean slate. If that were to solve this problem it would be great but I'm afraid it won't.


----------



## goingforgold

onq said:


> However I posted -
> 
> "How the debt is rolled down to zero is the big issue, the devil is in the details and all that jazz, and I have only begun to think about it."
> 
> I' suppose I'm thinking about my own situation, where I owe money to some institutions but clients own me money and were it all netted out, I would be in a much better position.
> 
> ONQ.


 
You see there in lies the problem ONQ. Not everybody owes money. There are loads and loads of people who have 100K+ in savings and are waiting for the right time to purchase property etc. These people have to be taken into account also. They were wise, the rest of us were not. That sums up capitalism. Sometimes you win, sometimes you lose. When you lose you have to face the consequences. You can't just ask for a clean slate.


----------



## onq

goingforgold,


 Perhaps Universal Forgiveness *is* totally unworkable, but then so is the rising sovereign debt of countries.
 Perhaps it is inequitable, but so is a situation where 1% of the population controls 25% of the wealth.
Perhaps we can't foresee an extreme event before it occurs, but the echoes of 1929 are disturbing.
 I read a lot of what you, sunny, Jim2007, chris, Brendan and others post to AAM.
I don't claim to have any great expertise in Finance or "isms" - Capitalism, Communism, Socialism.
I do have an instinct for some things, and its telling me that Capitalism cannot continue the way it is going.
If we don't so pool our resources to devise something creative to address the current situation, then I fear for our future.

ONQ.


----------



## ontour

Selective debt forgiveness can work in the context of a reformed fast tracked bankruptcy.  People would then have the option to clear all their debts by giving up their assets.  They would be able to retain assets up to an amount, such as €20k.  There would be an impact on their credit rating but it would be as close to hitting the reset button as is possible.  

Only a fraction of people in negative equity would take this option which could mean that this option would be feasible/ affordable.


----------



## onq

This was researched by a client of mine to address his problems but was put on the back burner because the Irish process at the time was very lengthy and cumbersome sign significant restrictions for over a decade IIRC. The English process seemed far more useful as a process but he was ineligible. Apparently in America its a given that such things occur, reflecting the risks entrepreneurs take starting a business.


----------



## Chris

onq said:


> Your species of logic escapes me Chris.
> 
> Someone else getting assisted equates to you being punished? How?


When debt is written off someone has to lose out. In a massive debt forgiveness scheme it would be the taxpayer and anyone with no debt and savings.



goingforgold said:


> You are effectively arguing that capitalism has failed, which is true, but we cannot just start all over again.


While I agree that the current economic system has failed, it is not correct to say that capitalism has failed. Our economic system is nothing even remotely like free market capitalism, but rather a form of corporatism or cronyism aided and made possible by governments.



onq said:


> Capitalism - unregulated markets, the fractional reserve banking system, unlimited interest on debts, boom-and-bust market cycles creating and then totally undermining virtual values - has been exposed for the racket it is.


We do not have unregulated markets or anything even remotely like it, so capitalism has not failed. Boom and bust cycles are artificial government and central bank created phenomena, and neither fractional reserve banking nor central banking have any resemblance of free market capitalism; they are creations of government interference and force.


----------



## onq

Neither goinforgold nor I referred to some ideal form of "free market capitalism" if I recall correctly.

Referring to some ideal system may be fine for distracting philosophical debates on monetary or political systems, but human failings brings them all down to earth.

Following the flag of free market capitalism, American and the West ended up with what the corrupt croney banking and monetary system we have today, just as following the flag of communism resulted in a paranoid bureaucracy that absorbed all free energy and stifled enterprise in any country it took root it - just look at North Korea today.

Both communism and capitalism had great ideals and some very strong points but fell afoul of human greed, paranoia and corruption.

Did you know that the USSR despite being "hampered" by communism actually spent more on the arms race than America in the last decade of the cold war by some accounts (haven't got the citation)
That's not evidence of a system that intrinsically was destined to fail, that's what can be achieved with single-minded central management.
Mind you, the disaster Chernobyl is at the other end of that spectrum!

I don't want to derail us here, merely point out that no system is implemented in an ideal form and all systems have pros and cons.

Capitalism, like the democracy, is just the best of worse alternatives.
Taken together with a system of finance fuelled by debt, it now appears to be crushing individuals and sovereign countries alike.
The only winners are the heads of private corporations, who designed the system to benefit them from the start and financiers, without home any system of finance fails in whatever incarnation it may reveal itself.

My original suggestion recognizes that such systems fail, the the few regularly extract energy from the system (through hoardrindg wealth, funding wars, etc.) and over time the system clogs up and runs down.
I suggested resetting the debt to zero because most well run companies and organizations would not be hugely indebted and those who prospered most from the finance world would take a one time hit.

New debt would arise the next day, but crushing historical debt would be forgiven.

As for moralizing about the appropriate nature of this debt - lets take a real world view - banks love people who have huge appetites and ambitions because these fit the profile of many entrepreneurs, people whose endeavours open up new markets and generate new wealth.
This concept of debt forgiveness would cut out their years in the doldrums and get them into new enterprises without an enforced decade of relative idleness.
This is turn would be likely to result in a quicker return of the markets to health and vibrant growth.

Any responses should speak to the arguments raised as I'm deliberately arguing against type to get a better understanding of the issues raised, but equally to escape my own hide-bound morality on these issues.

ONQ.


----------



## Gekko

Chris said:


> I would be absolutely sickened by such a universal debt forgiveness; so much so that I would immediately pack up and leave the country. Any kind of debt forgiveness will reward making mistakes, and set a detrimental precedence for future generations. At the same time someone like me, who bought a modest house on a low LTV and sold when things started turning down and never accumulated any significant debt, i.e. did everything right, would be punished for having done so. This is like reverse Darwinism!


 
Posts like yours make me want to vomit.  The "moral hazard" argument is morally bankrupt.  You were lucky...end of story.  There are people on their knees in this country and they require society's assistance.  If there are opportunistic freeloaders out there who will try and abuse any rescue package then we should devise a plan to weed them out.  But the existence of such people isn't an excuse to not help those in difficulty.  And if people can't be compassionate enough to help others, they should think selfishly about those who are drowning in debt.  If there is large scale debt forgiveness, people will re-enter the economy and start spending which should benefit us all.

As for those questioning where the money will come from to fund this debt forgiveness, the money's generally already been provided.  The debts have been recorded as bad debts in the financial statements of the banks and written off.  The banks' balance sheets have already taken the hit.


----------



## ontour

Gekko said:


> Posts like yours make me want to vomit.  The "moral hazard" argument is morally bankrupt.  You were lucky...end of story.


In 2008 it was reported that Ireland had a higher rate of Mercedes owners than Germany.  There were people who were lucky in the property market and people who were very unlucky.  There were also people who were prudent and others who were reckless.  There was a lot of 'keeping up with the Jones' during the boom years rather than living within means.  If you want to remove all personal responsibility for financial decisions then we will become a nanny state where credit will only be provided to the privileged few.



Gekko said:


> If there is large scale debt forgiveness, people will re-enter the economy and start spending which should benefit us all.



More spending will boost the economy but only if you ignore where the money comes from.  If it comes from income from exports then it is net positive.  If it is money that we must pay back then we are making the same mistake that many individuals made during the boom by living beyond their means in the hope that a big pay day is on the way.



Gekko said:


> As for those questioning where the money will come from to fund this debt forgiveness, the money's generally already been provided.  The debts have been recorded as bad debts in the financial statements of the banks and written off.  The banks' balance sheets have already taken the hit.



I am open to being better informed about the banks bad debt write offs.  My understanding is that they have written off huge amounts but the majority pertains to commercial property, development land and investments.  While there has been write offs of individual mortgages, the majority of the people who are desperately struggling have not had their debt written off.  If it is written off, someone will have to pay for it, as half the banks are now in control of the state, it will be the taxpayers who are hit.  Higher taxes will depress that magical consumer spending that is the holy grail for national recovery.


----------



## Chris

Gekko said:


> Posts like yours make me want to vomit.  The "moral hazard" argument is morally bankrupt.  You were lucky...end of story.


Moral hazard is what has landed the economy in such a mess, how can increasing this be of any benefit whatsoever. 
Luck had absolutely nothing to do with the situation my family is now in. When I was offered a 92% mortgage for 6 times our combined income I took out an 85% mortgage for 3 times our combined earnings. I also made additional payments over 3 years that reduced the LTV to 75% of the original price. We had two modest cars that were over 5 years old. When after 10+ years of house price increases prices started going down I put the house on the market and sold it within 3 months because I had advertised it for 15% less than all other similar houses available in the area. Absolutely none of this was down to luck.
One of my neighbours on the other hand took out 100% mortgage, took out loans and credit card debt to furnish the place, and then after 12 months remortgaged to buy two brand new cars. He is one of the people that is now hopelessly in debt that would benefit from debt forgiveness.



Gekko said:


> There are people on their knees in this country and they require society's assistance.  If there are opportunistic freeloaders out there who will try and abuse any rescue package then we should devise a plan to weed them out.  But the existence of such people isn't an excuse to not help those in difficulty.  And if people can't be compassionate enough to help others, they should think selfishly about those who are drowning in debt.  If there is large scale debt forgiveness, people will re-enter the economy and start spending which should benefit us all.


Those people that are hopelessly in debt should be looking at the personal bankruptcy route, which in my opinion is something the state can actually do something to speed things up. 



Gekko said:


> As for those questioning where the money will come from to fund this debt forgiveness, the money's generally already been provided.  The debts have been recorded as bad debts in the financial statements of the banks and written off.  The banks' balance sheets have already taken the hit.


Spending is what got us into this trouble. What is needed above anything else is savings. And it is totally untrue to suggest that money is already available for any large scale private debt write off.


----------



## Purple

It took 15 years for Ireland to get itself into this mess, this level of debt. There is no quick fix.
It took the Western World 20-30 years to get itself into this mess, this level of debt. There will be no quick fix.

We in Ireland and the West in general has not been as well off as we thought we were for the last 30 years. We have collectively lived beyond our means for decades and funded it by selling debt to private banks and foreign countries (and, unforgivably, each other). It’s all been a giant ponzi scheme fuelled by debt financed by debt. This is fundamentally unsustainable. The up-shot of this is that we don’t have as much as we thought we had. We’re not as rich as we thought we were. No matter what happens next this truth is unavoidable. The party is over, even if a few people kept dancing after the music stopped. 

Given that money markets are interlinked debt forgiveness in Ireland or anywhere else will have know on effects. These will eventually reach the bug creditors, be they banks, pension funds or countries. So we’d end up with bust pension funds, no credit flows and a very peeved China (the country that spent the last 10-15 years buying up American debt to keep the dollar strong and their exports cheap). The Chinese won’t let that happen without a fight and I mean a real fight with guns and tanks and stuff. Historically plenty of wars and invasions have been started over debts and even bond markets (the British and French invaded Egypt over bond defaults).

To summarise; ignoring the immorality and unfairness of debt forgiveness (universal or otherwise) it is still not a silver bullet and it isn’t something that we can do on our own.


----------



## onq

Chris said:


> When I was offered a 92% mortgage for 6 times our combined income I took out an 85% mortgage for 3 times our combined earnings. I also made additional payments over 3 years that reduced the LTV to 75% of the original price. We had two modest cars that were over 5 years old. When after 10+ years of house price increases prices started going down I put the house on the market and sold it within 3 months because I had advertised it for 15% less than all other similar houses available in the area. Absolutely none of this was down to luck.



I am hugely impressed at your canniness and apart from your selling of the house at the right time and the right price, this broadly mirrors my own experience. I sold two houses to buy one and didn't extend, merely renovated bathrooms and the utility. I didn't buy cars on the mortgage. I didn't buy a second home or a buy to let. I generally stayed within my means and my overdraft and loans were well-managed and I didn't miss payments. Any subsequent difficulties have arisen not from a lack of prudence, competence or willingness to work, but simply a lack of work in the building industry.
However let's not confuse fiscal prudence with morals.



> One of my neighbours on the other hand took out 100% mortgage, took out loans and credit card debt to furnish the place, and then after 12 months remortgaged to buy two brand new cars. He is one of the people that is now hopelessly in debt that would benefit from debt forgiveness.


(nods)

We seemed to be surrounded by such people at one point. They are for the moment married, significant property holders and parents. The current review of debt as as part of its aim the continuation of this status quo.
The problem is that if everyone pursues all such people for debt recovery and takes goods in lieu, these people will have no place to live, possibly no means of support, no transport and their kids will suffer hugely.

Sean Gallagher reports that debt forgiveness is an issue repeatedly raised by voters.
Its all too easy for people with huge financial acumen and a moral imperative to dismiss this out of hand.

I have considered total debt forgiveness to see what might be possible, and the view of many is that its not possible.
I believe that if we don't traverse this possibility early, and have intelligent voices making useful comments now, it could mushroom.
Debt forgiveness important concept to the people of Ireland than seems to be accorded to it in the media so far and it needs careful handling.

Finding billions to plug the holes in bank balance sheets while offering no real alternatives to those caught in the wrack appears to be politically unwise.
Locally we may be able to deal with the problem with a streamlining of the bankruptcy laws, but that seems to be a form of specific debt forgiveness by another name

Globally however, if we don't find some sort of reset button, then I fear that the global situation, with interest on the principal growing and large economies like America simply continuing on running up huge deficits and rolling over loans to finance wars and huge military spending, is unsustainable.
This is the reason I considered universal debt forgiveness in the first place.


----------



## goingforgold

onq said:


> Locally we may be able to deal with the problem with a streamlining of the bankruptcy laws, but that seems to be a form of specific debt forgiveness by another name


 
Yes it would be a form of specific debt forgiveness, but a properly structured one. If you have negative equity and savings you'd have to give up your savings as part of any deal and possibly move to a more modest property to reflect the debt forgiveness.

I think most people on this thread agree that something needs to be done but we also agree that it has to be done right. We cannot simply reward those with big debts and big properties and effectively punish those who don't. There's an old saying, no such thing as a free lunch!

Excellent thread ONQ - has opened up some interesting debate.


----------



## onq

Thank you goingforgold - that is the purpose of taking an extreme position and thanks are due to Brendan for extracting this thread from the Morgan Kely thread and retitling it appropriately.

I believe that if we don't recognize, address and traverse issues like this now, we could end up with a relatively uninformed electorate sending petititions to vote-getting TD's looking for outrageous support for their financial position involving debt forgiveness in the millions range.

Many of those affected could be prominent members of their local community and could sway voters to their way of thinking, while the support already given to banks for what many feel was their reckless fuelling of mere speculation on the property market has undermined the ability of any government to credibly refuse aid.

Its important to draw a distinction between necessary aid to keep the financial system going until we get through this and not bring down the Euro if we were to fail, and supporting people who were reckless in their spending patterns - some of whom still are, but the looks of things!


----------



## Purple

ONQ, just adding thumbs-up to a good thread that's started an interesting discussion.


----------



## onq

Thanks Purple,

Many people think that taking an extreme position is trolling, but I have always found it to be the opposite.
Yes trolls superficially make outrageous statements, but their intention is solely to disrupt a thread - mine is not.
My intention is to take an extreme position for the sake of argument, because this can bring a better perspective than a narrower focus.

I try put ideas to people they might otherwise simply reject out of hand because of long practice or experience, to get them to think about things again in the new context.
Its similar to what I've always had to do practicing architecture to "keep fresh" and its not easy and it does take up time.

The scale of the financial situation we're all going through warrants all of the people who can think to use this time to think afresh.
In a forum like this they can explore new concepts and challenge accepted thinking even if we all end up back where we started from.

The benefit is that newcomers to the debate or people without much in the way of numerate or accounting or financial skills can find their way among unfamiliar concepts and better understand the result.
Traversing the issue and arriving at a strategy logically having looked at all the alternatives, however whacky they seem, is much better than a top-down edict simply saying "No, here's what we'll do."


----------



## onq

Purple said:


> So we’d end up with bust pension funds, no credit flows and a very peeved China (the country that spent the last 10-15 years buying up American debt to keep the dollar strong and their exports cheap). The Chinese won’t let that happen without a fight and I mean a real fight with guns and tanks and stuff. Historically plenty of wars and invasions have been started over debts and even bond markets (the British and French invaded Egypt over bond defaults).



I'm glad you raised that point Purple.

Look at the previous major financial crises (I know there may be others) and their follow-ons. These may not be seen as direct follow-ons, but they followed on, if you get my drift.

1907 Bank Crisis --> 1914 WWI

1929 Wall St. Crash --> 1939 WWII

2008 World Financial Crisis --- 2018 WWIII?

My initial impulse for considering Universal Debt forgiveness was to have some other alternative to waging a third world war - this may be the inevitable consequence we face - a win for arms manufacturers, with investment again financed by the banks and the entire world hopelessly in debt to them. Well we all embrace something like Universal Debt Forgiveness then, I wonder?

But even if this possible future doesn't come to pass, unless we overhaul the current system which rests on valuations of goods and services which as you have pointed out are entirely relative, provides liquidity by interest-ridden credit, and supports a small percentage of "winners" who routinely extract wealth from the system, this isn't going to improve any time soon.

That's because leading governments have settled into the idea that as long as they can continue to afford the interest, the financiers will happily roll over and even increase the debt.
Sovereign government are now so indebted that they are effectively dependent on unelected financiers beholden to no one controlling the world economy. That bothers me.


----------



## Purple

onq said:


> Sovereign government are now so indebted that they are effectively dependent on unelected financiers beholden to no one controlling the world economy. That bothers me.



This is mainly a Western issue which is the point I make above. 
Of course the unelected financiers don't operate in a vacuum either so in the end they depend on Joe Blogs buying that TV or iPod to keep the wheels turning. Free democratic countries are the ones with the rich consumers ergo it is in the long term interest of these masters of the universe to keep the world free but in the short term they want to screw them to maximise their profit. Strange how circular the whole thing is.


----------



## onq

+1 Purple,

You make it sound almost - dare I say it - "sustainable".

Sustainable that is for those at the top of the pile.


----------



## Gekko

Why not do the following?

Write people's mortgage debts in relation to their principal private residences back to (say) 80% of the value of the home.  Only write off loans for the purchase, improvement or repair of the property.  This is easy enough to calculate as it was the criteria used for mortgage interest relief (where "top ups" for other items were excluded) and standard rental income calculations.

That way you don't reward those who've taken out equity for ridiculous reasons.  The moral hazard is doing nothing to help people.


----------



## ontour

Gekko,

The LTV is not directly correlated to people being in difficulty.  There are many people in properties that have LTVs higher than 80% who can afford their mortgage payments and whose property suits their needs.

Having an LTV above 80% does not mean that you did not remortgage to buy a fast car, a big extension or nice holidays.


----------



## Chris

onq said:


> I am hugely impressed at your canniness and apart from your selling of the house at the right time and the right price, this broadly mirrors my own experience. I sold two houses to buy one and didn't extend, merely renovated bathrooms and the utility. I didn't buy cars on the mortgage. I didn't buy a second home or a buy to let. I generally stayed within my means and my overdraft and loans were well-managed and I didn't miss payments. Any subsequent difficulties have arisen not from a lack of prudence, competence or willingness to work, but simply a lack of work in the building industry.
> However let's not confuse fiscal prudence with morals.


To be honest I don't think it is canniness. I basically stuck to the mantra of spend what you have and don't borrow for luxuries. While there have been some exceptions where I took out interest free credit to buy a TV or car, I did so while having the cash already saved. Over the years I have had many people criticize and even make fun of me for the way I approached my finances. What annoys me most is that some of the same people now say I was so lucky, when luck had nothing to do with it, just simple financial prudence. And this is something that has gone very astray in this country in general.



onq said:


> The problem is that if everyone pursues all such people for debt recovery and takes goods in lieu, these people will have no place to live, possibly no means of support, no transport and their kids will suffer hugely.


I disagree, if they lose their house and the content they will still be able to rent. But this seems to be a touchy subject with a lot of people in Ireland. Since we sold the house in early 2008 we have been renting and moved three times before we found the right house with a great landlord. The mentality from all my Irish friends and colleagues was that I should wait 6 months for things to settle a bit and then use the proceeds from the house sale to have two house deposits. When I said that I was going to wait years before I even consider buying a PPR I was again criticized and ridiculed. What I am basically saying that there is absolutely nothing wrong with renting whether single, as a couple or as a family, whether it is by choice of force of situation.



onq said:


> Sean Gallagher reports that debt forgiveness is an issue repeatedly raised by voters.
> Its all too easy for people with huge financial acumen and a moral imperative to dismiss this out of hand.


Of course some voters are going to raise this, but everybody tries to get something for free, and people in general are pretty averse to accepting that they made a mistake and they have to live up to it.
I would also not say that it takes any significant level of financial acumen to not have ended up in dire financial problems, especially on the scale we are seeing in Ireland. If we now reward people for having made bad financial decisions, even if everybody seemed to be doing the same, then society will not learn from the mistakes made. The lesson will be that if things get really bad, others will pick up the tab.



onq said:


> Finding billions to plug the holes in bank balance sheets while offering no real alternatives to those caught in the wrack appears to be politically unwise.
> Locally we may be able to deal with the problem with a streamlining of the bankruptcy laws, but that seems to be a form of specific debt forgiveness by another name


I fully agree. But the mistake was to plug the hole in the banks by bailing out bank creditors, and this mistake should not be repeated again. 
I honestly can't see how any other approach, other than through official bankruptcy procedures, can avoid a situation where the financially imprudent end up better off than the financially prudent. This is totally and utterly unfair and immoral. But you are right, it is a form of debt forgiveness or simply default. And there should be a lot of it, but it should only be at the expense of the creditors and not the involuntary taxpayer. 



onq said:


> Globally however, if we don't find some sort of reset button, then I fear that the global situation, with interest on the principal growing and large economies like America simply continuing on running up huge deficits and rolling over loans to finance wars and huge military spending, is unsustainable.
> This is the reason I considered universal debt forgiveness in the first place.


I agree, a lot of debt will have to be written off, but again it should under no circumstances be at the expense of the taxpayer. But what we are seeing now is governments around the world scrambling to patch holes on a sinking ship. Governments created the debt problem and now everyone is expecting that the same institutions are actually able to fix the problem with more interventions that do not force all the burden on the creditors.
I fully agree with Purple, it took a long time to build up this debt and there is not going to be a simple or quick solution. But what governments have been doing for the past 4 years has only made things worse.


----------



## Firefly

Chris said:


> Since we sold the house in early 2008 we have been renting and moved three times before we found the right house with a great landlord.
> ...
> What I am basically saying that there is absolutely nothing wrong with renting whether single, as a couple or as a family, whether it is by choice of force of situation.



Hi Chris, in the absence of proper rental laws here as per the likes of France/Germany I don't think that renting can offer the same form of stability for a family with children (assuming that people can afford what they buy and don't have to sell and put strain on the family). If the children are moving around frequently it would be unsettling as they would be constantly making new and leaving old friends. Also, there is the "time limit" for mortgages....unless someone has significant deposits then they could quite quickly run out of time by being too old for a 20 year mortgage. Again, proper rental laws would help here. If the accomodation was good and rents were cheap then people would have so much more disposable income that they could spend/save/invest etc, never mind the anxiety of hearing about interest rate rises.


----------



## Mpsox

In terms of debt forgiveness, to me, there are 3 kinds of people. Firstly, there are those who have lost their jobs and are struggling to pay things back, and secondly, those who got completely carried away and borrowed left right and centre and even if they are working, can't carry the debt burden they've loaded on themselves. In addition, we're losing flexibility in the workforce due to the inability of people to move for work due to negative equity. Therefore I don't believe a "one size fits all" approach to debt relief works and each strand should be handled seperately.

One thing that is often forgotten is that a mortgage is a long term commitment on both sides. The issue should not be, can a person pay back their mortgage now, but rather can they pay it back over 25/30 years. Hence, we need far greater flexibility from banks then we currently have to allow people to get back on their feet if they loose their jobs. If that means interest only for 5 years, so be it. 

Secondly, people need the flexibilty to move and if that means carrying negative equity on to another property, so be it. Yes it is a more risky loan for the bank (neg equity would be unsecured) but possibly some sort of a state guarantee in specific circumstances could suffice. 

In terms of those who borrowed to the hilt, then they should be made to make all reasonable efforts to pay back their debt, and if that is not feasible, they should file for bankruptcy and deal with the consequences. Remember, lenders accept a risk when they lend money and part of that risk is that they could take a hit. It's an old saying in banking is that the worst lending manager you can have is someone who never had a loss, (since it meant they never leant anything). I'm annoyed enough at bailing out builders, I'd be even more annoyed if I was asked to contribute to the loan someone took out for a 42" inch TV


----------



## onq

Mpsox said:


> In terms of debt forgiveness, to me, there are 3 kinds of people. Firstly, there are those who have lost their jobs and are struggling to pay things back, and secondly, those who got completely carried away and borrowed left right and centre and even if they are working, can't carry the debt burden they've loaded on themselves.



That's two kinds of people Mpsox.What's the third?


----------



## onq

Chris said:


> I disagree, if they lose their house and the content they will still be able to rent. But this seems to be a touchy subject with a lot of people in Ireland. Since we sold the house in early 2008 we have been renting and moved three times before we found the right house with a great landlord. The mentality from all my Irish friends and colleagues was that I should wait 6 months for things to settle a bit and then use the proceeds from the house sale to have two house deposits. When I said that I was going to wait years before I even consider buying a PPR I was again criticized and ridiculed. What I am basically saying that there is absolutely nothing wrong with renting whether single, as a couple or as a family, whether it is by choice of force of situation.



I wasn't decrying their renting Chris, far from it.

My parents rented for years - although like most landlords he did very little with the house, but then there wasn't a lot to do.
I lived in rental accommodation with my wife during our engagement - our only problem was the restriction on keeping pets, which we ignored.

Indeed I was kicking myself for not doing likewise in terms of switching house in this estate - given the market and the cost of renting it makes a lot of sense.
On the other hand being prudent with borrowings and negotiating an interest-only mortgage for a while allows you to maintain a performing loan and keep your property.

Horses for courses.


----------



## Purple

onq said:


> That's two kinds of people Mpsox.What's the third?


There are 3 kinds of people; those who can count and those that can't.


----------



## PaddyBloggit

onq said:


> That's two kinds of people Mpsox.What's the third?




I reckon these are the three that Mpsox refers to:
(Bulletpoints are my own)



Mpsox said:


> ....
> 
> 
> Firstly, there are those who have lost their jobs and  are struggling to pay things back, and ....
> secondly, those who got  completely carried away and borrowed left right and centre and even if  they are working, can't carry the debt burden they've loaded on  themselves.
> In addition, we're losing flexibility in the workforce due  to the inability of people to move for work due to negative equity.


----------



## onq

Purple said:


> There are 3 kinds of people; those who can count and those that can't.


----------



## onq

PaddyBloggit said:


> I reckon these are the three that Mpsox refers to:
> (Bulletpoints are my own)





> Firstly, there are those who have lost their jobs and  are struggling to pay things back, and ....
> secondly, those who got  completely carried away and borrowed left  right and centre and even if  they are working, can't carry the debt  burden they've loaded on  themselves.
> In addition, we're losing flexibility in the workforce due  to the inability of people to move for work due to negative equity.


(nods)

One and two are fine - those points I got.

3 refers to a consequence, as opposed to a category of person.

As far a it goes, it appears to be incorrect, since mobility for work doesn't always require a family to relocate within the jurisdiction.

Its a small island, and the additional cost of travel and temporary lodging would be far less than the loss that would be incurred by negative equity.

If Mpsox means "relocate outside the jusridiction" then that doesn't relate to mobility within OUR workforce.


----------



## Gekko

Gekko said:


> Why not do the following?
> 
> Write people's mortgage debts in relation to their principal private residences back to (say) 80% of the value of the home. Only write off loans for the purchase, improvement or repair of the property. This is easy enough to calculate as it was the criteria used for mortgage interest relief (where "top ups" for other items were excluded) and standard rental income calculations.
> 
> That way you don't reward those who've taken out equity for ridiculous reasons. The moral hazard is doing nothing to help people.


 


ontour said:


> Gekko,
> 
> The LTV is not directly correlated to people being in difficulty. There are many people in properties that have LTVs higher than 80% who can afford their mortgage payments and whose property suits their needs.
> 
> Having an LTV above 80% does not mean that you did not remortgage to buy a fast car, a big extension or nice holidays.


 
1) There are degrees of being in difficulty. Someone in negative equity with a decent job may not be in difficulty in relation to their mortgage repayments but they may be stuck in an unsuitable property. Plus writing down everyone's mortgage to (say) 80% might help silence the "moral hazard merchants".

2) Which is why I suggested that any write down should only be in relation to loans for the purchase, improvement or repair of the person's PPR.


----------



## ontour

Gekko said:


> 1) ...... may not be in difficulty in relation to their mortgage repayments but they may be stuck in an unsuitable property. Plus writing down everyone's mortgage to (say) 80% might help silence the "moral hazard merchants".



Unemployed people who live in properties that they can not sell or rent but could find employment if they could move are in 'unsuitable property'  Apart from that who would qualify for the universal mortgage bailout?

Many 'moral hazard merchants'  or smart investors/ prudent borrowers etc.  do not have a negative equity mortgage because they did not trade up in the boom or waited to buy because prices were to high.  What will you do for those people?  We are back to writing everyone a big check and tell the children that the retirement age is now 90 !


----------



## onq

ontour said:


> Unemployed people who live in properties that they can not sell or rent but could find employment if they could move are in 'unsuitable property'  Apart from that who would qualify for the universal mortgage bailout?


I think you're trying to limit the word "universal", ontour.


> Many 'moral hazard merchants'  or smart investors/ prudent borrowers etc.  do not have a negative equity mortgage because they did not trade up in the boom or waited to buy because prices were to high.  What will you do for those people?  We are back to writing everyone a big check and tell the children that the retirement age is now 90 !


Yes, that could work, plus it'll reduce the pensions bill.


----------



## Chris

Firefly said:


> Hi Chris, in the absence of proper rental laws here as per the likes of France/Germany I don't think that renting can offer the same form of stability for a family with children (assuming that people can afford what they buy and don't have to sell and put strain on the family). If the children are moving around frequently it would be unsettling as they would be constantly making new and leaving old friends. Also, there is the "time limit" for mortgages....unless someone has significant deposits then they could quite quickly run out of time by being too old for a 20 year mortgage. Again, proper rental laws would help here. If the accomodation was good and rents were cheap then people would have so much more disposable income that they could spend/save/invest etc, never mind the anxiety of hearing about interest rate rises.


Some valid points, but I don't think you don't need some government regulations to make long term renting work. Germany is often held up as a model for rental laws, but there are loads of pitfalls there. Because of the added cost to landlords, accommodation is pretty much always empty, no light fittings, no sockets, not even a kitchen. Fully furnished accommodation is is extremely rare. Once you are renting a certain place for more than 5 years (I think this is the right number) then the renter has to give 12 months notice to vacate the property. I know many people in Germany that have ended up paying 6 months rent for two apartments because they had to move. Maintenance like painting walls falls to the renter, regardless of the state of carpets, the landlord is only obliged to replace them every 15 years, which means that renters essentially pay for these.
I think that people are perfectly capable of negotiating contracts or getting advice on doing so. With my current landlord I have a written agreement that the notice period we have to give is not one month but 3 and we have agreed a rental price for a three year period which includes a split of maintenance responsibilities between the two parties. If I had wanted longer term certainty the landlord would have been willing to increase the notice period. He was even willing to fix the rent for a 5 year period. 
These are flexibilities you do not have in Germany. Because landlords are only able to increase rent by I think 2% per year, what happens is that rent only ever goes up, even if it is only a small amount.




onq said:


> I think you're trying to limit the word "universal", ontour.


I think ontour was referring more to the fact that if all mortgage holders have their mortgage reduced this would still leave a moral hazard. Those that did not buy and kept saving will not get any benefit. In addition a universal bailout will put an artificial floor under house prices so potential buyers would be hit negatively.



Purple said:


> There are 3 kinds of people; those who can count and those that can't.


Actually there are 10 types of people in the world, those that understand binary and those that don't.


----------



## Firefly

Chris said:


> Some valid points, but I don't think you don't need some government regulations to make long term renting work. Germany is often held up as a model for rental laws, but there are loads of pitfalls there. Because of the added cost to landlords, accommodation is pretty much always empty, no light fittings, no sockets, not even a kitchen. Fully furnished accommodation is is extremely rare. Once you are renting a certain place for more than 5 years (I think this is the right number) then the renter has to give 12 months notice to vacate the property. I know many people in Germany that have ended up paying 6 months rent for two apartments because they had to move. Maintenance like painting walls falls to the renter, regardless of the state of carpets, the landlord is only obliged to replace them every 15 years, which means that renters essentially pay for these.
> I think that people are perfectly capable of negotiating contracts or getting advice on doing so. With my current landlord I have a written agreement that the notice period we have to give is not one month but 3 and we have agreed a rental price for a three year period which includes a split of maintenance responsibilities between the two parties. If I had wanted longer term certainty the landlord would have been willing to increase the notice period. He was even willing to fix the rent for a 5 year period.
> These are flexibilities you do not have in Germany. Because landlords are only able to increase rent by I think 2% per year, what happens is that rent only ever goes up, even if it is only a small amount.



Hi Chris. I think the current market favours the renter and any landlord looking to keep their investment property for the long run would be delighted with a 3 year term. However, if you were to go back to 2002-2005  with a family and kids you would have had a hard time finding any landlord looking to be locked into such a lease unless the rent was very high...there were queues of people outside the door for viewings (I was there myself) and the landlord had the pick.


----------



## Gekko

ontour said:


> Unemployed people who live in properties that they can not sell or rent but could find employment if they could move are in 'unsuitable property' Apart from that who would qualify for the universal mortgage bailout?
> 
> Many 'moral hazard merchants' or smart investors/ prudent borrowers etc. do not have a negative equity mortgage because they did not trade up in the boom or waited to buy because prices were to high. What will you do for those people? We are back to writing everyone a big check and tell the children that the retirement age is now 90 !


 
People in totally unsuitable apartments who want to start a family for example.

The smugness of your post and those by others astonishes me.

Those who haven't been stung by the property collapse were in the main just lucky.  For either chronological reasons or in fact because of incompetence they didn't invest in the property market.  Sages slowly rubbing their beards during the period 2001 - 2007 were thin on the ground but the way people carry on now you'd swear that they were everywhere.

EVERYONE encouraged and cajoled people to buy property.  The government did so with its policies.  Ergo the government and the State MUST bail people out.

A UNIVERSAL write down of ALL mortgages on people's principal private residences to (say) 80% or 90% of their market value is the way to go.  Build in safeguards to prevent the writing off of non principal private residence purchase/improvement related debt but that's the bones of the way we should go.


----------



## monagt

"Nama have their own debt forgiveness program http://wp.me/pNlCf-1K0 /bet there aren't many nama developers living on cornflakes... "  ref Brian Lucey


----------



## IsleOfMan

Gekko said:


> Those who haven't been stung by the property collapse were in the main just lucky. For either chronological reasons or in fact because of incompetence they didn't invest in the property market. Sages slowly rubbing their beards during the period 2001 - 2007 were thin on the ground but the way people carry on now you'd swear that they were everywhere.
> 
> EVERYONE encouraged and cajoled people to buy property. of the way we should go.


 
I have three sons who fitted the profile of those people who might have been looking for a property a few years back. None of them purchased despite being offered loan approval letters from their banks and the fact that I was also offering them a gift toward the deposit. It had nothing to do with age or incompetance.


----------



## BOXtheFOX

Gekko said:


> 1)
> 
> 2) Which is why I suggested that any write down should only be in relation to loans for the purchase, improvement or repair of the person's PPR.


 
I think that you would have to break this down even further. I didn't take out my existing kitchen and replace it with a newer one. I still have my old kitchen. I didn't re-tyle my bathrooms, the old tyles are still there. I didn't bother with decking, electric gates etc. Some people "improved" their homes just like they updated their wardrobe.  What exactly is home improvement?


----------



## Chris

Gekko said:


> Those who haven't been stung by the property collapse were in the main just lucky.  For either chronological reasons or in fact because of incompetence they didn't invest in the property market.


How on earth was staying out of the property market an act of incompetence? If anything it was an extremely competent action to take. I have posted about my own actions before, and absolutely nothing in it was luck. To say that people who consciously didn't buy or sold were simply lucky is very insulting to their intelligence.



Gekko said:


> EVERYONE encouraged and cajoled people to buy property.  The government did so with its policies.  Ergo the government and the State MUST bail people out.
> 
> A UNIVERSAL write down of ALL mortgages on people's principal private residences to (say) 80% or 90% of their market value is the way to go.  Build in safeguards to prevent the writing off of non principal private residence purchase/improvement related debt but that's the bones of the way we should go.


So the answer to a problem caused by government intervention is more government intervention. You cannot be serious!


----------



## ontour

Gekko,

Look at it from a different perspective,  There are people who decided not to buy and have been renting and have not been able to 'settle down'.  They have not been able to make a house in to a home, I am not saying that everyone needs to own a property but there is an Irish mindset that we need to own the house and personalise it for it to change from a house to a home.

There are people living in small apartments that would like to have children but have deferred it as they are not in a position to provide a home that they deem suitable.  There are people in financial difficulty that have deferred having children because they do not feel that they have the financial security for any / more children.

The case is strongly put for people who were unlucky/ imprudent with little consideration for those people who make sacrifices as they have no expectation of a 'bail out'.   People have made life altering decisions without due planning and consideration, the morale hazard argument is that based on experience we need people to think more carefully about the implications for themselves and others.  The overly simplistic rationale is that a bail out would reduce people's adversity to risk.

You are absolutely correct that now many people will say that they saw it coming and that the majority of people, media & professionals promoted the unsustainable growth.  Given that the state is the people, I am still at a loss as to where the money will come from for the bail out, unless we burn bondholders it is going to be paid for by us the people.

There was a significant shift of wealth/ debt between generations over the last decade.  We only ever hear about the pensioners who can not pay the fuel bills, this stereotype masks the many retired people who greatly benefited from the boom.  Part of the cost of a bail out should be funded by redressing the generational disparity that occurred.

Having a non-principal private residence is excluded in your plan.  There are many couple who married in the last 5 years who had to keep their their pre-marital homes due to negative equity or inability to sell,  these accidental landlords have been 'unlucky'.

First solution for a bail out should be restructuring of debt, second should be a fast-track facility for bankruptcy  and the last resort should be a universal bailout (debt forgiveness).


----------



## Purple

ontour said:


> First solution for a bail out should be restructuring of debt, second should be a fast-track facility for bankruptcy  and the last resort should be a universal bailout.



I agree.


----------



## DerKaiser

goingforgold said:


> So we need to get real here and put a sensible argument together. For what it's worth I feel the only way any debt forgiveness scheme could work would be for it to happen through the courts and where people's incomes and savings would be scrutinised as they would be in a bankruptcy case.
> 
> Also obviously somebody who can't afford to pay for a big fancy house can't have their mortgages wiped out and be left to live there.



We were closer to a real solution 12 posts in.

How about our NAMA for the people?  Except it works as follows (rather than the ill thought through soundbite most people would like it to be):


The state pays discounted amounts to the banks to purchase mortgage debt where it's obvious restructuring alone will not work.


The state then acts as both the state and a debt collection agency on a case by case basis.  They take over all the income and assets of the household concerned leaving them possession of their PPR (provided it's not luxury - say over €400k in value at current prices) but not owning it .


In order to incentivise the household to not just decide to live off social welfare, they get to keep all their income up to €20k and 30% of any excess they take in above that amount.


This situation continues for 5 years, after which point the household can start fresh, keeping all their net of tax income and can continue to rent their home from the state at market rates.


----------



## monagt

40,040 Irish homes are in arrears of greater than 180 days. 10k homes now going through the courts. Running out of cans and roads here folks

The number of homeowners falling behind in their repayments has jumped from 49,609 at the end of March to 55,763 at the end of June.


----------



## BOXtheFOX

Those in the 1980's and 1990's who fell in to arrears on their mortgages weren't given or expected a bailout.


----------



## monagt

Those in the 1980's and 1990's who fell in to arrears on their mortgages weren't given or expected a bailout.

TRUE and I lived thro' it but the circumstances differ radically.

The country is being taken back 5/6 years in terms of incomes, allowances, pensions, standard of living, cost of homes, etc,

For the first time we have sudden mass unemployment, public service employees and pensioners pay and pensions being systematically reduced.

But should mortgages on overpriced house also be taken back??

This would reduce burden on state services and increase consumer spending so it would not all be taxes lost.


----------



## Purple

monagt said:


> But should mortgages on overpriced house also be taken back??


Taken back by whom?


----------



## monagt

> Taken back by whom?



Taken back to an appropriate level in relation to the current value of the house (within + - parameters)

I don't pretend to have an answer to this problem and do see both sides of the argument, but the answer is not throwing young couples on the street or making them lead an impoverished life for the next 20 years.

Does the lender take the house and then sell it at 50% of the original value to someone else while the owners could have stayed in their home if their equity and mortgage had been adjusted to the new circumstances?
Something for nothing is not the answer either but perhaps shared risk with the lender.


----------



## Purple

monagt said:


> Taken back to an appropriate level in relation to the current value of the house (within + - parameters)
> 
> I don't pretend to have an answer to this problem and do see both sides of the argument, but the answer is not throwing young couples on the street or making them lead an impoverished life for the next 20 years.
> 
> Does the lender take the house and then sell it at 50% of the original value to someone else while the owners could have stayed in their home if their equity and mortgage had been adjusted to the new circumstances?
> Something for nothing is not the answer either but perhaps shared risk with the lender.



My question is who takes back the loan; who takes the hit?

If you lend me €20 and I can’t pay you then you lose €20. It doesn't just disappear. Given that the banks are nationalised it means that tax payer owns the debt. If my bank reduces my mortgage by €100’000 then the tax payer is down by that amount.

If there’s to be a debt for equity swap, a “NAMA for the people” then the state (or state owned banks) need to make sure they are covered so the banks should be looking for at least a 50% margin on the debt, i.e. if a mortgage is reduced by €100’000 then they should take €150’000 of equity in the property. After all they have to cover their costs, their risks and the fact that they are reducing their cash-flow.


----------



## monagt

If the person owes 400k on a house that is worth @200k and walks away.

The bank sells house in a distressed sale for €190k - expenses of say 15K so they net €175

Better to reduce mortgage to 200K and let people agree to pay it and taxpayer is up 25k + taxpayer does not have to provide social support such as house, allowances......etc.

The excess equity has already been written off.


----------



## ontour

monagt said:


> If the person owes 400k on a house that is worth @200k and walks away.



There is currently no facility to walk away, mortgages were not non-recourse.  This is why bankruptcy is the solution for some indebted mortgage holders. 



monagt said:


> The excess equity has already been written off.



What equity, there is only negative equity?  Who has already written off the negative equity of all these mortgage holders?


----------



## monagt

> There is currently no facility to walk away, mortgages were not non-recourse. This is why bankruptcy is the solution for some indebted mortgage holders.



Correct Ontour, I am being simplistic in my use of words. UK or NI being options on bankruptcy.



> What equity, there is only negative equity? Who has already written off the negative equity of all these mortgage holders?



VinB Monday, it was said and not contradicted that it has been written off in the banks books and does not have to be replaced if they do deals with mortgagees.


----------



## ontour

monagt said:


> VinB Monday, it was said and not contradicted that it has been written off in the banks books and does not have to be replaced if they do deals with mortgagees.



Ivan and gang said that the debt has *not *been written off by the banks.  The point was made that the recapitalization of the banks could be used to write off this debt.
   The point was made that this course of action would result in an increase in the cost of bond financing.  The banks would basically be spending the ‘rainy day’ fund now, without it they are a higher risk.
  Also this recapitalization applies to about 50% of the mortgage market and none of the panel had an answer on how to deal with struggling mortgage holders in the other banks.

  What was consistent across the whole panel was that the concept of a universal mortgage write down was rejected.

  For anyone who did not see it, Ivan Yates panel was Paul Sommerville, _[FONT=&quot]Brian Hayes[/FONT]_, Karl Whelan and Mike Soden


----------



## monagt

You are basically correct in your recollection.


----------



## shnaek

Also, if I have a house that cost me 400k that is worth @200k and I am servicing the mortgage on it, and I see my neighbour's mortgage reduced to 200k due to debt forgiveness, then there is a great incentive for me to alter my circumstances so I can gain 200k net of taxes and the interest on that amount over the period of the mortgage - probably worth nearly 400k in income. Takes a very long time to earn that money. Better for me to lose my job and gain that money all at once. You have to admit, it is a really huge incentive.


----------



## monagt

> The Finance Minister says the capital is already in Irish banks to allow them to write off loans in a debt forgiveness scheme.
> 
> Michael Noonan says it is a pressing issue for some families and will have to be dealt with.
> 
> But he insists it is manageable.


[broken link removed]


----------



## monagt

> Also, if I have a house that cost me 400k that is worth @200k and I am servicing the mortgage on it, and I see my neighbour's mortgage reduced to 200k, then there is a great incentive for me to alter my circumstances so I can gain 200k net of taxes and the interest on that amount over the period of the mortgage - probably worth nearly 400k in income. Takes a very long time to earn that money. Better for me to lose my job and gain that money all at once.



Yeah, I see your point 2. Unfortunately I don't have an answer thats acceptable to all.


----------



## BOXtheFOX

monagt said:


> Those in the 1980's and 1990's who fell in to arrears on their mortgages weren't given or expected a bailout.
> 
> TRUE and I lived thro' it but the circumstances differ radically.


 

I don't agree.
For those people who were in arrears in the 1980's and 1990's the stresses and problems associated with those arrears were just as real then as they are now.  The only difference now is that there is a bigger group of people experiencing these problems and these people are collectively a bigger voice than those lonely individuals of 10 and 20 years ago.


----------



## monagt

> I don't agree.
> For those people who were in arrears in the 1980's and 1990's the stresses and problems associated with those arrears were just as real then as they are now. The only difference now is that there is a bigger group of people experiencing these problems and these people are collectively a bigger voice than those lonely individuals of 10 and 20 years ago.



I Disagree! 

In general terms:

1. Public Service did not get a reduction in Pay or Pensions. (people were able to depend on their income levels)

2. Unemployed were able to access alternative jobs abroad easier, and many did, now the whole world (except Asia Pacific) is in the same mess.

3. Credit did not dry up, Banks were not bust, Government was not bust.

4. It was different.


----------



## ontour

[broken link removed]


----------



## onq

monagt said:


> I Disagree!
> 
> In general terms:
> 
> 1. Public Service did not get a reduction in Pay or Pensions. (people were able to depend on their income levels)
> 
> 2. Unemployed were able to access alternative jobs abroad easier, and many did, now the whole world (except Asia Pacific) is in the same mess.
> 
> 3. Credit did not dry up, Banks were not bust, Government was not bust.
> 
> 4. It was different.




I agree with all of the above, having lived through it and seen 60,000 of my peers emigrate PER YEAR from the middle of the 'Eighties.

The mid-eighties was the period was the time the first bank bailout occurred.

The economy was in the can with Charles Haughey telling us in 1980 that -

"                              As a community we are living away beyond our means. I do not  mean that everyone in the community is living too well. Clearly many are  not and have barely enough to get by.                      " 

- while he was living it up in various posh nosh houses and being financed by AIB.

You can refresh your memory here -

[broken link removed]

 - and read about all the other issues centering on systemic lack of governance in banking circles here -

http://en.wikipedia.org/wiki/Allied_Irish_Banks#Insurance_Corporation_of_Ireland

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


----------



## Shawady

I tend to agree with Michael Noonan's position. I think it is best sorted between the bank and the homeowner. Some sort of blanket Debt Forgiveness scheme would be too difficult to work.


----------



## onq

ontour said:


> [broken link removed]



This was the widely anticipated outcome at this stage, but enlivening the debate has made it something a bit more than a brief dismissal.
Intelligent people have taken and continue to take a long hard look at the underlying issues to see what and whether appropriate relief may be available.

Now, people affected are considering something else - the role of selling agents and lending agents who gave poor advice to borrowers who undertook loans beyond their foreseeable means.
People who have profited from misdirection and overselling to consumers could be limited to a return based on a level of debt the borrower might have been afforded under prudent lending guidelines.

This is ot to suggest that people who over-borrowed should have the balance of the mortgage written off, on the contrary, but it draws a logical line in the sand as to where the write off might be positioned.
Ths could be operated on a debt for equity swap resulting in a manageable mortgage in the interim with the penalty for the lender that they would have to forego realizing their claim on the asset until the eventual sale.


----------



## Ryandd

The reality is that vasts amount of people are not in debt because of negative equity but because they have no means of paying the mortgage after losing their jobs so there should really be more government focus on jobs , if banks could give people more time in way of interest only or extending the term greatly until such time that persons become more stable with employment, I personally don't want debt forgivness I would rather be back in my job and paying my way, that was my commitment and I don't feel responible for losing my job I became surpless to requirement like so many others because companies with good credit cannot access money and they are in fear of closing.  If people could see this is just a circle of events that will continue to turn people against each other until the cycle is broken and the real life issues are dealt with.   There is no focus on creating jobs in this country or programme for supporting businesses to employ just one person if every company around the country employed just one person off the live register it would greatly reduce numbers and spending will start to kick off.  The biggest time of year is shortly approaching for spending which is christmas time and its also a time of year when shops make decisions to close with closing down sales in January.  Business around Ireland need to be involved in this recovery stage and supported to employ people instead of this internship scheme which is a disaster waiting to happen.


----------



## onq

My understanding is that there is money in banks for venture capital investment, i.e. new business ventures, as opposed to propping up existing businesses. But that's for another thread.


----------



## Ryandd

I understand what your saying about the money in the banks for new business but is it really wise to putting money into new business when existing ones are shutting down.  Banks are just cherry picking ventures but I wonder will they be willing to bail them out when they come looking for more credit.  I understand this may belong to another thread, but finally look at all the loyal customers of the banks now that are not being supported, such a shame.


----------



## onq

As I said, this is the subject for another thread. Feel free to start one and I'm sure many will join in.


----------

