I was just wondering what would happen if all the Governments of the world decided to clear all business and personal debts straight away.That meaning,everyone had every car,mortgage,visa bills are wiped clean and the world starts with a clean slate.Every bank had the bad debt wiped out without repaying anyone.What you currently own is what you start afresh with without the bills.That way going forward everyone would have money to go out and buy new things.What are the flaws in my analogy if it was decided to be done.
Someone have any ideas?

Every single business in the world would go bankrupt instantly.

Other than that, I'm all for it!

if that's the case, I'm glad I've got weapons and 100's of rounds of ammunition in my home!!

JerseyKRS said:

LMFAO, I remember once someone said that to a dude that was in the Navy, and his reply was, "Your rifle is no match for my F-14".

How does not requiring that people pay what they owe solve economic problems?

They'll just go out and run up more debt...figuring someone'll wipe the slate clean again in a few years.

Here's an idea: Don't buy things you can't afford.

Genesia said:

We are not in this worldwide economic turmoil because people bought things they couldn't afford

logger said:

We most certainly are!

logger said:

You're partly right. Most people bought homes they could afford at the time of purchase, under the original terms of the note.

The problem came when the rates on the mortgages increased, but the income of the borrowers did not.

Maybe we need to take a long, hard look at whether or not adjustable rate mortgages are good things.

RodeoSchro said:

Adjustable rate mortgages are not the problem. The real problem is lenders granting adjustable mortgages to people without sizable downpayments, who are buying homes in markets where the housing values are inflated out of proportion (on the assumption that values are just going to keep going up and up and up). When the values went down, these people were upside down in their mortgages (ie, the property was worth less than they owed). When you're upside down, you're going to have a really hard time refinancing - with any type of loan.

Adjustable-rate mortgages are necessary for some kinds of housing. For example, I bought a condo using a 5/1 adjustable rate mortgage. It was the only kind of mortgage available to me - because lenders typically will not extend a fixed-rate mortgage on a condo in a new development. (They want to make sure a certain number of units have sold and that the association is putting aside ample money for maintenance - so their investment is protected.)

I heeded my lender's warning to make sure I refinanced my mortgage before I got to the five-year mark and the thing adjusted. By then, all the condos were built and sold...and I had enough in it (through payments and an increase in value) to get a 30-year fixed with no PMI.

Had I not been paying attention, I would have missed the peak of housing prices - and I'd probably be paying PMI right now. But I still will would have been able to get financing, because I had more in my place than I owed (thanks to an initial down payment and not having sucked any equity out in the meantime).

I suppose it depends what country you come from.Most of the people in Ireland have gone into negative equity due to over inflated house prices over the last few years.On most new housing estates people would queue in line outside estate agents for 48 hours before the houses went on sale.Peoples houses went up in value by 25% in 2 months.
Now with worldwide financial trouble unemployment has gone through the roof here and people are not buying houses.There are 70,000 unoccupied houses here(population of 4Million).People are losing jobs every day and defaulting on their mortgages.
Can you get a track er mortgage in US.This is a mortgage that follows the central bank rate by a determined rate at start of mortgage.Currently my mortgage rate is 2.7%.I never pay more than .7% above the ECB(European Central Bank) rate which currently stands at 2%.It is a great option if you can get it.

Genesia said:

That doesn't make a lick of sense. Your ability to make your payments has NOTHING to do with how many condos are sold. And saying lenders won't make a fixed rate mortgage in a new development is just plain wrong.

logger said:

How did this thread escape P&R?

The current world recession/depression's roots are seen as being from exactly that - subprime lending in the US. And Ireland's property bubble and inevitable bust was certainly aided by people buying houses they couldn't afford and our banks lending far too much cheap money to them. Prices kept going up and many people believed that they couldn't afford not to get on the property ladder. Simple supply and demand - more people with more money drive up prices. More houses were built, more people bought homes and investment properties on the assumption that the prices would never fall and our economic boom would continue indefinitely. Wrong!

There are obviously many more factors but if our useless government had brought in much stricter controls on lending, we could have avoided a lot of our present economic troubles. But they got used to all the tax revenue from the property sector and didn't want to deflate the bubble.

And try getting a mortgage now - the horse has bolted and now the banks are ultra-strict with lending, thereby deflating property prices further. And I don't think any lenders currently offer tracker mortgages here.

RodeoSchro said:

No...it isn't wrong. It is absolutely the case where I live. What the fuck do you know about condo financing in Wisconsin, anyway? You live in Texas.

Genesia said:

Our mortgage company was licensed to lend in 37 states. I think Wisconsin was one of them, but we sold it in 1997 so maybe my memory is bad.

Again, YOUR ability to pay YOUR loan has diddly-squat to do with whether or not a certain number of condos are sold.

You seem to know as much about finance as you know about what it takes to run up a score in a basketball game.
[Edited 2/5/09 19:37pm]

Damn.

RodeoSchro said:

In other words, you don't know shit about condo loans in Wisconsin.

Obviously, a person's ability to repay a loan isn't the only consideration in mortgage lending. If it were, we wouldn't have had a mortgage industry meltdown, now would we?

Genesia said:

I forgot more about lending than you will ever know.

Just print more money!!!

ZombieKitten said:

That's pretty much what we're doing.

SCNDLS said:

geez