Morgan Kelly - Pump a few billion into the middle class coffers?

iPlop

Mike 1972 wrote: »

Council houes are rarely "free" and If they still have a anyways halfway decent job why would they be entitled to rent allowance ?

Because you still are under certain conditions, rate of pay, children, partner working etc..

littlemac1980

The Waltzing Consumer wrote: »

Yes, but you are forgetting one thing. If someone cant afford a mortgage, they lose the house, so the state has lost one million euro. So if the state then sells it at the current value, it is 500k so the taxpayer STILL owes 500k.

But if the state owns the house and gets the couple to buy another state house which is valued less, you are repaying part of this debt that in other cirumstances may never be paid back. At least you are getting something back, you are filling the empty units, getting people living in these ghost estates and people will not be getting their debts completely wiped out, but rearranged to a debt they can afford.

Quite simply, someone will lose house, pay nothing back, state takes all the pain OR someone will lose house, pay for another house, state does not take all the pain.

And you have forgotten one thing too, something which everyone who thinks sensibly about this proposal realises. The human factor.

For every 1 person genuinely in serious financial trouble, 49 others will jump on the bandwagon and decide that their 2 bedroom apartment in smithfield isn't as desirable as it was when the coffee shop around the corner was full of young professionals.

So instead of taking over only 1 house, without debt forgiveness, if this type of scheme is implemented, the government will end up taking 50 houses.

Its easy to get on the scheme too, you just have to have a mortgage, and not have a job, or have a job that can't cover it, i.e. be in a worse position than you would be if you were on the dole, but you can be on the dole and get the scheme if you want, that's just common sense.

The Waltzing Consumer

littlemac1980 wrote: »

And you have forgotten one thing too, something which makes everyone who thinks sensibly about this proposal realises. The human factor.

For every 1 person genuinely in serious financial trouble, 49 others will jump on the bandwagon and decide that their 2 bedroom apartment in smithfield isn't as desirable as it was when the coffee shop around the corner was full of young professionals.

So instead of taking over only 1 house, without debt forgiveness, if this type of scheme is implemented, the government will end up taking 50 houses.

Its easy to get on the scheme too, you just have to have a mortgage, and not have a job, or have a job that can't cover it, i.e. be in a worse position than you would be if you were on the dole, but you can be on the dole and get the scheme if you want, that's just common sense.

Well a good point. But the main idea is that this is not a normal market, the buyers don't get to pick and choose the house or location. IF you can't afford the current apartment/house, instead of simply having it repossessed, you will be offered the chance to buy a cheaper unit already in state ownership.

Obviously there should be safeguards to make sure people are simply not trying to run away from debts they can afford but are too selfish or lazy to pay. It is just an idea though, not a fully thought out plan.

Mike 1972

The Waltzing Consumer wrote: »

But the main idea is that this is not a normal market,

Market was going up
Market is now going down

Isint that what markets do ?

littlemac1980

The Waltzing Consumer wrote: »

Well a good point. But the main idea is that this is not a normal market, the buyers don't get to pick and choose the house or location. IF you can't afford the current apartment/house, instead of simply having it repossessed, you will be offered the chance to buy a cheaper unit already in state ownership.

Obviously there should be safeguards to make sure people are simply not trying to run away from debts they can afford but are too selfish or lazy to pay. It is just an idea though, not a fully thought out plan.

Well then I don't see any practical difference (In terms of end results, i.e. balance of losses, and applicant's control of location of their new house) in what you propose to the existing system of bankruptcy law, and social housing, except that there would be no safeguards in place to prevent further reckless borrowing, as would exist AFAIK in a bankruptcy situation, and also the system is in inherently open to abuse on a large scale due to the fact that the single qualifying criterion - level of income - is effectively in the control of a potential applicant.

The only practical difference beyond those points is that what you propose would cost an enormous amount of additional money to administer, further contributing to public expenditure and the national deficit, and by its nature would have to run concurrent to the social housing and bankruptcy schemes presently in place.

doomed

In fairness the Kelly argument is consistent and the same one he would make in respect of debt forgiveness for Ireland or Greece. People make mistakes and can't pay. They should pay of course but they can't and writing it off helps clear the decks so the economy can restart. Its essentially an economic argument rather than a moral one.

Its like mountain rescue. The rescuers know the punter who went up there in the fog in a pair of shorts and flip flops is a certified moron but that doesnt mean leaving them up there, tempting as it is.

The problem is you can't do mass write offs. Some people are in dire straits (say they lost their job) and in those cases, it makes sense to face the fact that you will never get the money back. Others will let the mortgage slide because they know the bank will sh1t itself and will do a deal. Sky sports on the other hand won't.

As for negative equity, irrelevant. If you can afford the mortgage then you keep paying it. Eventually the house will be worth something.

oppenheimer1

gosuckonalemon wrote: »

Morgan Kelly is a highly respected Economist. He predicted years ago that our economy was unsustainable and a recession/property collapse was inevitable. I think I'll take his word on this one.

Morgan Kelly also used figures pulled out of the arse of the Sunday Independent to make dangerous and unsubstantiated claims about the financial state of people who bought mansions during the boom. He made those claims at the Magill summer school... Me thinks Morgan is getting a taste for life in the public eye...

He called the top of the boom and fair play to him, but just because he got one call right doesn't make him a sage on all things economic. Many people have predicted the end of the world... some day someone will get the call right.

The Left Hand Of God

I'd pretty much guess most of those advocating debt forgiveness are people with negative equity or non mortgage paying student hippy tree hugging types.

iPlop

The Left Hand Of God wrote: »

I'd pretty much guess most of those advocating debt forgiveness are people with negative equity or non mortgage paying student hippy tree hugging types.

Nope none of the above, mortgage is small and I'm not in negitive equity, Me and my wife are in full time permenant employment.And I don't like hippies.

Sofa King Great

Sofa King Great wrote: »

Where have i said people should be evicted from their homes?

Potentially something has to be done but debt forgiveness is not it.

A few months of Zimbabweian style hyper inflation would soon sort out the problem!

Your hamburger would soon cost more than your outstanding mortgage (& your savings).

Monty Burnz

oppenheimer1 wrote: »

He called the top of the boom and fair play to him, but just because he got one call right doesn't make him a sage on all things economic. Many people have predicted the end of the world... some day someone will get the call right.

Indeed, he and many people accurately predicted the end of the Fianna Failure bubble, and gave accurate reasons why it would end. If Fianna Failure had an ounce of integrity or the slightest pretence of having an agenda other than 'win the next election', 99% of this misery could have been avoided.

Mike 1972

The Left Hand Of God wrote: »

I'd pretty much guess most of those advocating debt forgiveness are people with negative equity or non mortgage paying student hippy tree hugging types.

Why would a non-mortgage payer (whether or not they conform to your ludicrous stereotype :rolleyes: ) want mortgage forgiveness ? Surely its about the last thing theyd want ?

Deleted User wrote: »

Your hamburger would soon cost more than your outstanding mortgage (& your savings).

Think they tried that in the Weimar Republic. By most accounts it didnt work out too well :eek:

7sr2z3fely84g5

http://www.breakingnews.ie/ireland/mortgage-broker-banks-can-handle-debt-forgiveness-518256.html
Mortgage broker: Banks can handle debt-forgiveness

Confusion over the possibility of the introduction of full or partial debt-forgiveness is increasing.

Groups assisting troubled homeowners are intensifying their calls on the Government to agree an approach on how to deal with mortgage arrears.

UCD economist Morgan Kelly has proposed a debt forgiveness scheme to help mortgage holders unable to meet their repayments.

However a number of Ministers, including the Tánaiste Eamon Gilmore and Joan Burton, the Minister for Social Protection, appear to be at odds on how to deal with the growing problem.

Karl Deeter, Operations Manager of Irish Mortgage Brokers, has said the infrastructure is already there.

Mr Deeter said the banks can handle debt-forgiveness, but the issue is"legislative".

So,are there forces at working stopping this,or there would be such an backlash or typical irish approach where all of a sudden there be more people who cant "afford" to pay their mortgage,some the comments in the linked page are interesting.

iPlop

Joslyn Worried Pun wrote: »

http://www.breakingnews.ie/ireland/mortgage-broker-banks-can-handle-debt-forgiveness-518256.html
Mortgage broker: Banks can handle debt-forgiveness



So,are there forces at working stopping this,or there would be such an backlash or typical irish approach where all of a sudden there be more people who cant "afford" to pay their mortgage,some the comments in the linked page are interesting.

It's an Irish begrudgery thing in this country imo, the rich are ****, the people in arrears are ****, everyone is a wanker if person A gets something that person B doesn't.

Take the lotto as an example, when somebody wins it he's a "fcuking wanker"


It's all about begrudgery, they've started debt forgiveness in the states

The last thing that mortgage companies want to do is forgive their customers' debts. Bank of America will make an exception for a few borrowers.

Around 45,000 homeowners will be offered reductions in mortgage debt as part of the bank's foreclosure-avoidance effort. If all of them accept the offer, and if all of those customers faithfully make their reduced monthly payments for the next five years, the amount forgiven could total $3 billion.

Before you get your hopes up, keep this in mind: These 45,000 borrowers are a small subset of the bank's customers. Principal forgiveness will be offered only to people who got certain kinds of loans from Countrywide Home Loans. Bank of America bought Countrywide in 2008.

When Bank of America bought Countrywide, it took possession of $25 billion in pay-option adjustable-rate mortgages. That's how much the customers owed on pay-option ARMs; their total value as an investment was $13.9 billion last September, because Bank of America knew that billions of dollars' worth of these loans would go belly-up eventually.

Countrywide did a lot of subprime loans, too. Bank of America stayed away from subprime. But when BofA bought Countrywide, it ended up with $1.8 billion in Countrywide's subprime ARMs on the books. The borrowers who got those loans may be eligible for principal forgiveness, too, along with a few people who got prime, two-year ARMs from Countrywide.

Bottom line: Principal forgiveness may be offered to 45,000 customers who got pay-option and subprime ARMs from Countrywide. If your loan officer sported a Bank of America ID badge, you won't be offered principal forgiveness, because you didn't get your mortgage from Countrywide.

advertisement
What is a pay-option ARM?
Pay-option ARMs are adjustable-rate mortgages in which the borrower chooses the payment. The borrower usually has four options. One option is to pay less than the interest accumulated that month. In other words, the borrower might rack up $1,200 in interest in a given month, but have the option of paying $1,000. The $200 difference was added to principal. After making the minimum payment, the borrower owed more on the house. When borrowers end up owing more after making a payment, it's called negative amortization. According to an SEC filing, 72 percent of pay-option customers made negative-amortization payments in June 2008. From July through September last year, half did.
"In our experience, we have found that severely underwater homeowners are reluctant to accept a solution that does not offer some reduction in principal," says Barbara Desoer, president of Bank of America Home Loans.



Read more: Bank of America offers mortgage loan forgiveness http://www.bankrate.com/finance/mortgages/bank-of-america-offers-home-loan-forgiveness-1.aspx#ixzz1WKqIzlAX

Blazer

doomed wrote: »

In fairness the Kelly argument is consistent and the same one he would make in respect of debt forgiveness for Ireland or Greece. People make mistakes and can't pay. They should pay of course but they can't and writing it off helps clear the decks so the economy can restart. Its essentially an economic argument rather than a moral one.

Its like mountain rescue. The rescuers know the punter who went up there in the fog in a pair of shorts and flip flops is a certified moron but that doesnt mean leaving them up there, tempting as it is.

The problem is you can't do mass write offs. Some people are in dire straits (say they lost their job) and in those cases, it makes sense to face the fact that you will never get the money back. Others will let the mortgage slide because they know the bank will sh1t itself and will do a deal. Sky sports on the other hand won't.

As for negative equity, irrelevant. If you can afford the mortgage then you keep paying it. Eventually the house will be worth something.

You could also use another mountain climbing analogy.
Someone is in dire need of rescuing but the problem is people are then risking their lives to rescue this person so they have no choice but to leave them behind. Yes one person will die but more will live.
In other words you cannot risk the futures of over 4 million inhabitants for the sake of 30,000 of people who are in trouble.
It sounds cold hearted but all governments apply this analogy every day.

I think people really need to think long and hard about what money actually is!

Creative accountants can make it vanish and reappear at a whim! the same could be done with these debts without hurting savers.

hmmm

Deleted User wrote: »

Creative accountants can make it vanish and reappear at a whim! the same could be done with these debts without hurting savers.

Oh for gods sake.

Spudmonkey

dolanbaker wrote: »

I think people really need to think long and hard about what money actually is!

Creative accountants can make it vanish and reappear at a whim! the same could be done with these debts without hurting savers.

Alchemy you mean? I've a lump of coal here I'd like transformed into a diamond. Would you oblige?

iPlop

Spudmonkey wrote: »

Alchemy you mean? I've a lump of coal here I'd like transformed into a diamond. Would you oblige?

Coal is not paper , money is, think about, it quite stupid holding debt against a country over paper

Spudmonkey

Sink The Banana wrote: »

Coal is not paper , money is, think about, it quite stupid holding debt against a country over paper

You can't just call the whole thing off. If you decide money is useless and we can just write off debts, how do you pay for things? Do we go back to some primitive form of bartering?

skinner2x

c_man wrote: »

If people are getting their mortgages forgiven, the very least I want is a PS3. And some games obviously.

I think thats the first true AH answer..:D

Spudmonkey

Spudmonkey wrote: »

Alchemy you mean? I've a lump of coal here I'd like transformed into a diamond. Would you oblige?

Money is worth nothing unless you believe in it!

After all, history is full of examples of reverse alchemy, where life savings have been rendered worthless at the stroke of a pen.

Spudmonkey

dolanbaker wrote: »

Money is worth nothing unless you believe in it!

After all, history is full of examples of reverse alchemy, where life savings have been rendered worthless at the stroke of a pen.

We do business on the basis that it is. So before we decide to remove the common method of paying for things, please provide me with an alternative so I can go shopping this week.

Spudmonkey

Spudmonkey wrote: »

We do business on the basis that it is. So before we decide to remove the common method of paying for things, please provide me with an alternative so I can go shopping this week.

An Punt Nua!

Spudmonkey

Deleted User wrote: »

An Punt Nua!

Now tell me why I should exchange any goods or services for a currency which can be made worthless at the stroke of a pen. Especially if the goods or services I could offer are in real terms worth more than another new piece of paper.

Spudmonkey

Spudmonkey wrote: »

Now tell me why I should exchange any goods or services for a currency which can be made worthless at the stroke of a pen. Especially if the goods or services I could offer are in real terms worth more than another new piece of paper.

You need to ask the people who got us into this mess in the first place!

Monty Burnz

Sink The Banana wrote: »

Coal is not paper , money is, think about, it quite stupid holding debt against a country over paper

The paper is a promise to pay. If we undermine fiat currency, the whole economy will collapse. Weimar Republic, anyone?

Monty Burnz

Monty Burnz wrote: »

The paper is a promise to pay. If we undermine fiat currency, the whole economy will collapse. Weimar Republic, anyone?

looks like we're approaching that phase right now.

The head of the International Monetary Fund (IMF) has said the global economy is not growing at a fast enough pace and faces a number of risks to recovery.
Christine Lagarde warned a threat of global recession remained and called for coordinated policy action.
She said this should include the mandatory recapitalisation of European banks

http://www.bbc.co.uk/news/business-14699093

magic money.:rolleyes:

Monty Burnz

Deleted User wrote: »

looks like we're approaching that phase right now.


http://www.bbc.co.uk/news/business-14699093

magic money.:rolleyes:

The ECB is in a position to print euros. We aren't. And if we switch to Punt Nua, their value would collapse (which would be good for exports and competitiveness) but our debts would still be owed in euros, so sovereign default would be certain.

I've stated here many times, sovereign default might be best in the long run, but you'd have to be prepared for years of misery, and many people would die. Not a good time to be 'vulnerable'. Just be sure you understand what you are asking for.

Monty Burnz

Monty Burnz wrote: »

The ECB is in a position to print euros. We aren't. And if we switch to Punt Nua, their value would collapse (which would be good for exports and competitiveness) but our debts would still be owed in euros, so sovereign default would be certain.

I've stated here many times, sovereign default might be best in the long run, but you'd have to be prepared for years of misery, and many people would die. Not a good time to be 'vulnerable'. Just be sure you understand what you are asking for.

I'm well aware of the situation, it's worse than that, it's global!

Most of the debt will never be paid, Period!

Spudmonkey

Deleted User wrote: »

You need to ask the people who got us into this mess in the first place!

No I'm asking you because its what you propose. If you can't give me an answer I'll just assume you haven't thought it through.

I'll ask it again. If all debt is to be written off because shur tis only paper, give me a reason why anyone would have faith in a new currency when its value could be wiped out just as easily?

Spudmonkey

Spudmonkey wrote: »

No I'm asking you because its what you propose. If you can't give me an answer I'll just assume you haven't thought it through.

I'll ask it again. If all debt is to be written off because shur tis only paper, give me a reason why anyone would have faith in a new currency when its value could be wiped out just as easily?

For the same reason that they used to have faith with it's predecessor before it was rendered worthless by bad economics.

Any new currency would have to be created by governments and spent into existance rather than loaned into existance.

With a rationed supply of money and fractional reserve banking outlawed, the money will be treated as valuable as the supply will always be limited.

A vital requirement in a post growth economy.