[failed_ideas]

In part, I love this idea. However, as someone who struggles with debt, I've worked to the point of causing serious health issues just to keep my head above water, so if Canada were to do this, I'd be more than ticked. The slacker next to me gets a clean slate, and I get an early grave.

[rfrey]

I totally understand your sentiment, but to me this reflects one of the biggest scams that has ever been pulled on the "average guy" - the notion that debt has moral weight.

I was taught by my parents, and by the books I read and TV shows I watched, that "paying your debts" made you a good person. If you don't pay your debts you're slacking. We've all heard the parables of the great person who went broke, but managed to pay his debtors later even though he legally didn't have to.

What hogwash. Lenders get paid interest in compensation for the risk that the loan might go bad. They deny credit to people if the risk is too high. That's their business. If you borrow to start a business and the business goes south, that's not a moral issue - it's built into the bank's models. Turning it into a moral issue, rather than "just bizness", is just a way for the lenders to shift the risk - that you're paying for - back to you. It's like buying insurance and then not collecting for your burnt house, because you didn't work hard enough to put out the fire.

OK, sucky analogy, but you can bet that people like Donald Trump don't worry about the morality of debt when one of their companies go broke. It's in the contract.

[gmunu]

This is a very interesting comment and I used to think similarly, but Matt Levine over at Bloomberg convinced me over several articles (couldn't find exactly which ones on a casual searching) that it's a little more subtle than that. In contracts between big companies, this is absolutely true. Financial institutions expect that companies will act as rational economic actors and discharge their debt when it's beneficial for them to do so. But in contracts with very small business or with individuals (say mortgages), people act economically irrationally, constrained by social norms, and not dumping their debts as quickly as the laws allow. This results in lower delinquency rates than would otherwise be the case, so the actuarial models allow for the pricing of lower interest rates, more lenient credit policies, etc. If individual people starting acting like big corporations, then default rates would go up and correspondingly interest rates on things like mortgages would go up to.

This isn't to say that that state of the world is worse. It might be better! Certainly we shouldn't discount the burden it places on people to feel guilty over their debts. That's real cost to them and to society generally. But if the social norms around debt changed, they wouldn't change in a vacuum. Probably rates would go up and that's a real cost as well.

[sergiosgc]

You make a common economy error. You are assuming the price of a good or service is defined by its cost. This is only true in very liquid (competitive) markets. Banking is no such market.

You make a perfect case of justifying that the cost of providing the lending service would be higher. However, prices are not defined by cost. They are defined, loosely, by what the market can bear. The cost is a lower limit, but nothing more. Namely, it does not define the price.

For the price of a good or service to approach cost of goods, you need very strong and constant competitive pressure. The banking market, in most countries, is not nearly competitive enough.

[gmunu]

It is certainly not the case that cost == price, I agree. Price is determined by supply and demand. But if you change the cost of mortgages, you probably change their supply curve and hence the market clearing price. To argue that raising the cost of mortgages doesn't change the market clearing price is make a pretty strong claim about the shape of supply and demand curves.

[refurb]

The banking market, in most countries, is not nearly competitive enough.

You don't think money lending is competitive enough? You can get loans for houses, cars and school at just a few points over the risk-free rate.

I'd say the banking market is very competitive since they are all offering the same thing, money (a commodity).

[bko]

I agree that paying debts is deeply engrained as a moral issue. Although I think this is more cultural and is persistent across many cultures, not necessarily something conjured up by lenders. There is a distinction between personal debt and debt tied to a business venture.

How would you feel if your parents passed away with unpaid debt? Although not legally obliged to pay it, many people do [0]. I, personally, would feel a little sadness to know that my parents had unpaid bills. Nor would I abuse the system by taking out large debts on my death bed.

[0] http://www.nytimes.com/2009/03/04/business/04dead.html?pagew...

[JetSpiegel]

> How would you feel if your parents passed away with unpaid debt?

It depends. If they owed a real human being, I would probably pay it. If it was a faceless corporate conglomerate, or a bank that reported millions in profits on the last quarter, I wouldn't bother.

[raverbashing]

That's true. Sure, pay the debt if you can, otherwise just trigger the warranties (read: repo)

Of course you want to pick priorities in what to pay and what to not pay when in difficulty.

And negotiation/consolidation is an alternative

Just keep in mind your credit score will go down the drain, and yeah, maybe you can't get another credit card to hang yourself with, which might be a good thing

[cmdrfred]

I think this is true about loans from banks and credit cards. One place I don't believe this is true is for personal loans, often they have no interest and while you can be declined (they can so no), it is often socially awkward to do so.

[blcArmadillo]

Do lender's get paid interest in compensation for risk? If I'm not mistaken, lenders get paid interest because a dollar today is worth more than a dollar tomorrow.

[jacquesm]

Think of the slacker next to you as having an independent relationship with the state and so do you.

I never understood why some people would happily drag down someone else, that's jealousy in disguise. Simply see this as a plus for society because that debt drags everybody down, including you.

I wouldn't sleep any worse if all the debt for people earning minimum wage or nothing at all were forgiven, that's a much better way to spend money than to enrich a small number of already insanely rich people.

Give it another 3 or 4 decades and a few more rounds of automation and who knows, you just might find yourself in the league of the 'slackers', quite a few of them are not slackers by nature but simply grew up in a time when their skills became surplus and their age forced them out of the productive cycle. Very few people consciously choose to be un-employed and this could happen to all of us.

[swombat]

There's a fantastic scene in the Count of Monte Christo where the Count and his guests witness a double-execution. In fact, thanks to the wonders of the Internet, here it is, from http://www.cleavebooks.co.uk/grol/dumas/count035.htm . Franz, Albert an the Count are witnessing the execution:

Behind the executioner came, in the order in which they were to die, first Peppino and then Andrea. Each was accompanied by two priests. Neither had his eyes bandaged. Peppino walked with a firm step, doubtless aware of what awaited him. Andrea was supported by two priests. Each of them, from time to time, kissed the crucifix a confessor held out to them. At this sight alone Franz felt his legs tremble under him. He looked at Albert — he was as white as his shirt, and mechanically cast away his cigar, although he had not half smoked it.

[...]

"I thought," said Franz to the count, "that you told me there would be but one execution."

"I told you true," replied he coldly.

"And yet here are two culprits."

"Yes; but only one of these two is about to die; the other has many years to live."

"If the pardon is to come, there is no time to lose."

"And see, here it is," said the count. At the moment when Peppino reached the foot of the mandaïa, a priest arrived in some haste, forced his way through the soldiers, and, advancing to the chief of the brotherhood, gave him a folded paper. The piercing eye of Peppino had noticed all. The chief took the paper, unfolded it, and, raising his hand, "Heaven be praised, and his holiness also," said he in a loud voice; "here is a pardon for one of the prisoners!"

"A pardon!" cried the people with one voice — "a pardon!" At this cry Andrea raised his head. "Pardon for whom?" cried he.

Peppino remained breathless. "A pardon for Peppino, called Rocca Priori," said the principal friar. And he passed the paper to the officer commanding the carbineers, who read and returned it to him.

"For Peppino!" cried Andrea, who seemed roused from the torpor in which he had been plunged. "Why for him and not for me? We ought to die together. I was promised he should die with me. You have no right to put me to death alone. I will not die alone — I will not!" And he broke from the priests struggling and raving like a wild beast, and striving desperately to break the cords that bound his hands. The executioner made a sign, and his two assistants leaped from the scaffold and seized him.

"What is going on?" asked Franz of the count; for, as all the talk was in the Roman dialect, he had not perfectly understood it. "Do you not see?" returned the count, "that this human creature who is about to die is furious that his fellow-sufferer does not perish with him? and, were he able, he would rather tear him to pieces with his teeth and nails than let him enjoy the life he himself is about to be deprived of. Oh, man, man — race of crocodiles," cried the count, extending his clinched hands towards the crowd, "how well do I recognize you there, and that at all times you are worthy of yourselves!" Meanwhile Andrea and the two executioners were struggling on the ground, and he kept exclaiming, "He ought to die! — he shall die! — I will not die alone!"

"Look, look," cried the count, seizing the young men's hands — "look, for on my soul it is curious. Here is a man who had resigned himself to his fate, who was going to the scaffold to die — like a coward, it is true, but he was about to die without resistance. Do you know what gave him strength? — do you know what consoled him? It was, that another partook of his punishment — that another partook of his anguish — that another was to die before him. Lead two sheep to the butcher's, two oxen to the slaughterhouse, and make one of them understand that his companion will not die; the sheep will bleat for pleasure, the ox will bellow with joy. But man — man, whom God created in his own image — man, upon whom God has laid his first, his sole commandment, to love his neighbor — man, to whom God has given a voice to express his thoughts — what is his first cry when he hears his fellow-man is saved? A blasphemy. Honor to man, this masterpiece of nature, this king of the creation!" And the count burst into a laugh; a terrible laugh, that showed he must have suffered horribly to be able thus to laugh.

However, the struggle still continued, and it was dreadful to witness. The people all took part against Andrea, and twenty thousand voices cried, "Put him to death! put him to death!" Franz sprang back, but the count seized his arm, and held him before the window. "What are you doing?" said he. "Do you pity him? If you heard the cry of 'Mad dog!' you would take your gun — you would unhesitatingly shoot the poor beast, who, after all, was only guilty of having been bitten by another dog. And yet you pity a man who, without being bitten by one of his race, has yet murdered his benefactor; and who, now unable to kill any one, because his hands are bound, wishes to see his companion in captivity perish. No, no — look, look!"

I think the scene speaks for itself and reuires no further comment.

[davidw]

One thing is a rule where you know what happens, and there's a social safety net in place, and everyone knows how it works, and has voted on it, and so on.

One-off actions are kind of another thing, in my book.

Anyway: politics. Article flagged. I'll happy talk politics here in Padova with anyone who wants to stop by and have a drink.

[rayiner]

Anyone's whose been involved in a corporate bankruptcy would quickly disabuse themselves of the idea that there is or should be any moral qualms about filming for bankruptcy when you're legally entitled to do so.

[failed_ideas]

Just to respond to all at once, I'm looking for fairness here, not to punish those that couldn't pay debts. There isn't anything 'bad' about not being able to manage debt in and of itself. However, if you took 3 jobs to make ends meet and the neighbour simply took a third mortgage and smoked pot all day on pogey, it isn't fair. And this action doesn't install any sense of responsibility. All this does is encourage those who don't pay their debt to continue to not pay. And in no way does that improve society except for a very small few.

The money should be spent on debt relief, and work with those who have large unmanageable debt to begin sustainable debt management through education. Yes, lower it, but still ensure that people understand what debt responsibility is. Something that was entirely absent in my upbringing.

Simply paying someones debt clears a slate for more debt. It doesn't fix a problem. Give a man a fish and you feed him for a day, teach a man to fish and you feed him for a lifetime.

[sgift]

You somehow seem to equate debt with guilt. That is not what debt is, although lenders love it when you believe that. You also seem to think that the main reason people cannot pay of their debt is that they "smoked pot all day" - the notion of debt as guilt shines through here again. Debt is debt. Nothing else. It is not some moral failing if you cannot pay it back, it can have many reasons. And the idea that just because you thought it would be the right thing to do to put yourself in for an early grave by working so hard that your body breaks down everyone who didn't do that is a slacker, not "committed" enough or whatever is very sad.

[paulhauggis]

So here is another example. If I start a Kickstarter campaign and raise $100,000 from multiple backers and never deliver on the product but keep the money. Should I feel guilty? After all, it's just debt..right? Or does this only apply to "evil" bankers?

If everyone had this thinking, nobody except the rich would get loans. As a bank, why would I ever loan someone money if they felt like they were entitled to it and never had any intention of paying me back?

Wiping away debt is just a bad idea. My cousin declared bankruptcy around 10 years ago. She had accumulated $100,000 in credit card debt with nothing to really show for it. This wasn't even school loans, just big name electronics and a multitude of other things she really didn't need.

After her debt was wiped clean, she promptly got right back into debt again and had to declare bankruptcy a second time this past August. The over-spending continued (and still continues to this day).

If someone knows they can spend all they want with no consequences, they will treat it like free money. The only people that will hurt are the rest of us that will suffer with an increased difficulty in getting a loan and increased interest rates and fees.

We shouldn't reward irresponsibility.

[cturner]

I share your instincts, but need to defend the policies. It's important to have a bankruptcy mechanism. Otherwise it's a back-door mechanism to create slavery. By having a predictable bankruptcy regime, lenders can price in the probability of bankruptcy.

Limited liability is a similar issue. It would be convenient if we didn't have corporations and everybody conducted business as themselves. But the experience has been that the trade-off of limited-liability is worth it. You get more growth in a country with it than one without it.

[sgift]

I have the feeling that your cousins experience clouds your judgement here. From all that I've read the count of people who file bankruptcy multiple times is very low as is the count of people who file because of irresponsibility. There are usually very valid reasons (loose your job, get sick, good luck!)

For your example: That is exactly the reason that Kickstarter is not a preorder service, but project funding. There is always a risk that you won't get anything for the money you've invested and you are expected to consider these risks. That's also part of the reasons that professional lenders expect a certain rate of interest (another part of the interest rate is obviously for the fact that the lender could do something else with his money if he didn't lend it). If you have a higher risk, you pay more. So, if you fault multiple times you won't find anyone who will give you money anymore in the future or they will want more interest or they will want some securities .. and so on. I don't see how that somehow makes debt guilt. It is debt. Are you expected to pay it back? Yes. What if you cannot pay it back and you would be crushed under the weight of it? Don't pay it, go bankrupt and your lenders will have to pay the price of their risk-taking.

My point stands that there's a reason we've abolished debtors' prisons: Debt is not guilt.

[Frondo]

There are much bigger things that aren't "fair" to be judgmental about than your neighbour on pogey.

If you want to worry about other people ripping off society in some way, it might be a good idea to worry about the people who are pulling the big cons, not the hypothetical lazy neighbour.

[failed_ideas]

I worry about that too, but that isn't the topic being discussed. Life isn't fair, but I believe we should as humans strive to make it as fair as possible.

[Frondo]

"I believe we should as humans strive to make it as fair as possible."

Agreed. That's why, when the big guy's hoarding 98 of the 100 cookies, I'm not going to fight over it if my neighbor didn't work as hard (in my judgment) for his 1/4th cookie as I feel like I did for mine.

[MichaelGG]

And it is making it more fair, by bringing some people out of a crushing situation. Did you know some places give food to the poor, too? How unfair is that to the parent that worked hard to put food on the table? Or all sorts of other relief that aren't available to people whose work paid off.

[Frondo]

It was probably a mistake in judgment to give yourself health problems for anything money-related.

[MichaelGG]

How common a mistake, though. It's not uncommon for people to even suicide over a debt. Even if the debt isn't something legally enforceable.

[Frondo]

It would be good to keep talking about it, I think, and work to reduce some of the social/moral pressure around debt-paying--no one should injure (e.g. through overwork) or kill themselves over money.

[CJefferson]

I agree. We should do away with the idea of a limited companies entirely.

On a slightly more serious note, I do think that too many people forget how much society invests by allowing limited companies, and (in my opinion) how much those companies "owe" society as a whole.

[sp332]

This isn't about slackers, it's about people getting screwed over by the banking system.