When Debtors Decide to Default

[ipatent]

Our system recognizes legal incompetence or spendthrift status for people with severe mental disability or psychological conditions, but people with partial mental disability (low intelligence) are thrown into society and told to sink or swim. We can debate what percentage of the populace fits this definition, but the current consumer credit situation should give us a clue.

These people should be assigned permanent mentors or guidance counselors and shouldn't be permitted to borrow money unless the counselor signs off on it. In effect, they need to be treated like children as they have a childlike mentality.

 

[hippietrader]

Quote from ralph00:

She can change her number, but can't the CC sue her and put a lien against any real estate she owes as well as garnish her wages?

I don't know if the bank can take her wages if she has lost here job. The bank can't take her home if she is a renter. They can get calling her so long as they have here phone number.

The IRS can do anything - even if you don't owe them any money! You are guilty of owing until proven otherwise. If you sell any stock, they decide it has no cost basis until proving otherwise.

 

[Zentrickster]

Quote from ipatent:

Our system recognizes legal incompetence or spendthrift status for people with severe mental disability or psychological conditions, but people with partial mental disability (low intelligence) are thrown into society and told to sink or swim. We can debate what percentage of the populace fits this definition, but the current consumer credit situation should give us a clue.

These people should be assigned permanent mentors or guidance counselors and shouldn't be permitted to borrow money unless the counselor signs off on it. In effect, they need to be treated like children as they have a childlike mentality.

you are the child controlled by your own ignorance of contract law and seduction. They are clearly contracts of adhesian that very few can grasp in their evil intent


You are the ignorant one my friend. I defy you to gully understand the arcane and deliberate psychological trickery of the contracts consumers are duped into signing. You have bought their lie hook line and sinker. Your the fool for these thoughts. Mark my words.

 

[ipatent]

Quote from Zentrickster:

you are the child controlled by your own ignorance of contract law and seduction. They are clearly contracts of adhesian that very few can grasp in their evil intent

I'm a lawyer and I handle contracts.

Yes, they are close to being contracts of adhesion. Responsible adults see them as that and don't run a CC balance. It is the children in grown-up that get in trouble.

Quote from Zentrickster:

You are the ignorant one my friend. I defy you to gully understand the arcane and deliberate psychological trickery of the contracts consumers are duped into signing. You have bought their lie hook line and sinker. Your the fool for these thoughts. Mark my words.

Yes there is trickery and propaganda. Responsible adults can see through the trickery and abstain.

 

[krazykarl]

Quote from Zentrickster:

you are the child controlled by your own ignorance of contract law and seduction. They are clearly contracts of adhesian that very few can grasp in their evil intent


You are the ignorant one my friend. I defy you to gully understand the arcane and deliberate psychological trickery of the contracts consumers are duped into signing. You have bought their lie hook line and sinker. Your the fool for these thoughts. Mark my words.

First, it's "you're".


Second, contract law make provisions that the contract must be reasonable, and is thus inherently subjective. If I sign a 300 page contract for a mortgage, literally 300 pages, I can take it to court later, tell the judge that some buried clause is what the lender got me on, and the judge would bust the contract, and depending on the venom my lawyer brought, would have something punitive in store for the lender.

The system isn't slanted in any particular way - just approach it as such.

 

[Zentrickster]

I apprieciate the cogent reply to my post designed to inflame. I am impressed Thank you. However I respectfully disagree that responsible adults can see through the trickery. Some can. Most can't but they are hardly mental deficients as you claim. Sorry for the spelling. English not first tongue

 

[Sandybestdog]

Quote from Misthos:

Here's another way to look at this:

The Bankruptcy reform act of 2005 was notoriously pro lender. It made filing for Chpt 7 (clean sweep) that much more difficult for the avergae American. Chpt 7 for business, to my knowledge, has not been impacted.

So... the CC companies figure, hey, we can now lend to EVERYONE because they can't get away fom it, and we can also charge ridiculous late fees with this legislation... So what did the CC companies do? They relaxed their standards thinking CC reform will cover them. They lent like crazy and focused on the weakest debtors because that's where they make most of their money.

Then the tsunami hit. You can shear the sheep, but you can't skin them alive... Defaults skyrocketed... much more carnage to come... And what happened? The banks got bailed out. And the average American? Job outsourced, higher inflation on commodities (gas, food) due to bailouts... etc.

So, the banks got bailed out after trying to rig the game in their favor - it backfires on them, but no worries. The Treasury and the Fed have their back.

Am I angry at people with 6 flat screen TVs and high credit card debt? Yes. Am I angry at people that got swamped with medical bills or were unemployed and lived off credit cards? Not really.

Am I angry at the Banks and Congress? Big time

This is too much of a true story and too many facts for the average ET poster. You should focus on calling people deadbeat losers if you want to keep a thread going around here.

 

[Sandybestdog]

Quote from stinkyfelix:

We need to bring back debtors' prison...

If there is $100 in the money supply, then banks can lend $1000 in loans. If they charge 20% interest, then a year later $1200 is owed. My question is, how are the borrowers supposed to pay back $1200 in loans, when there is only $1000 in the money supply?

 

[ipatent]

Quote from Zentrickster:

However I respectfully disagree that responsible adults can see through the trickery. Some can. Most can't but they are hardly mental deficients as you claim.

It all depends on the definition of "responsible" and "mentally deficient." The fact that they got into trouble means that they did not anticipate the consequences of their actions. This could be the result of impulsivity (a hallmark of juveniles), which is a form of irresponsibility, or a lack of understanding of the time value of money and how interest compounds, which indicates either a lack of intelligence or a lack of sophistication.

People like this shouldn't be permitted to borrow large amounts of money, especially in an overleveraged economy where even small losses can lead to deleveraging. Reaching the age of 18 should not be enough. Many of these people never lose the mindset of children. Ask any businessperson who has to deal with hourly employees. You end up becoming their guidance counselor.

The reason we end up with lousy elected leaders and election "issues" that resemble those of the typical 5th grade student council is that these idiots are allowed to vote.

Quote from Zentrickster:

Sorry for the spelling. English not first tongue

No problem. You are doing much better than I would in any other language.

 

[PragmaticIdeals]

Quote from Sandybestdog:

If there is $100 in the money supply, then banks can lend $1000 in loans. If they charge 20% interest, then a year later $1200 is owed. My question is, how are the borrowers supposed to pay back $1200 in loans, when there is only $1000 in the money supply?

Let's use a more realistic example:

START OF YEAR

$100 initial money supply (net worth).

Banks lend $400 combined at t = 0

END OF YEAR

Interest at 5% for the year = $20

Principal repayment = $400

--

$80 consumer net worth

--

Ergo, with 0% increase in the base money supply (not accurate, but base money supply actually increases VERY little), just a 5% interest rate and a standard money-multiplier resulting in $400 of loans from a $100 base has caused a dramatic reduction in consumer wealth. From $80 to $100.

Technically, in this example, there would be high deflation as less consumer value is around to reprice goods in the market. However, since it is unlikely that the $400 is to be paid off (or defaulted on) in a single year, a lot of that money will continue to exist in the system and be used to price goods.

That is, until all the credit is wiped from the system and the destructive power of the fractional reserve system in concert with low-to-0 increase in the base monetary supply is exposed.

It has been said that 97% of all dollars in circulation today are debt-created. Just because a lot of that money is sitting in company X's balance sheet as an 'asset' does not imply that the same money is not on company Y's balance sheet as debt.

How long can the Ponzi Leverage Scheme exist? Well, that is anybody's guess, since a prolonged monetization period as well as debt-restructuring/modification initiatives can both serve to 'push the can further down the road.'