A school district in Pennsylvania has told parents that if they don’t pay off the debts their kids have run up for school lunches then those kids might be whipped off into foster care. Then a local business type says he’ll pay off those debts but the school district doesn’t seem to want the money.
The point of all of this not being about the money nor the debts at all. It’s most certainly not about wanting to drag all the kids off into foster care either.…
See MoreThis sounds a little extraordinary, that the varied lenders to Jet Airways will need to swallow a 75% haircut on the loans they made to the company. It’s not on a trivial sum either, Rs 14,000 crore is mentioned as a total sum. The problem here being that there aren’t really all that many assets to back that up. This then telling us something about Indian banking, that politically favoured companies can indeed borrow in a manner that might not be all that economically wise.…
See MoreYes, of course, we’re in an election season. Therefore the assertions of politicians a re somewhat less reliable than usual. One of those unreliabilities being the insistence that the current level of household debt in the US is a problem.
The fact is that subprime auto debt is falling and the balance and default level just isn’t anything unusual either. That much vaunted mountain of student debt is just not out of line with historical average.…
See MoreOne of the wilder Modern Monetary Theory contentions is that national debts simply don;t matter. Just keep printing the money to pay the interest, roll over the rest. This isn’t, you’ll be amazed to hear, quite how it works. For people who do lend money tend to get quite concerned about whether they’ll get repaid. Risk, interest rates, these therefore matter:
Public debt and the risk premium: A dangerous doom loop
Cinzia Alcidi, Daniel Gros 23 May 2019
The relationship between high public debt and low interest rates is once again at the forefront of debate.This column shows that countries with high debt levels pay a risk premium.…
See MoreWell, obviously enough, don’t elect Jezza, don’t elect socialists. But there’s more to it than that of course. Excessive borrowing has often led to disaster but some few places, some times, have managed to rein all of that in. How did they do it?
Public debt through the ages
Barry Eichengreen, Asmaa El-Ganainy, Rui Esteves, Kris Mitchener 01 April 2019
The history of sovereign debt evolved over time along with the purposes for which governments borrowed: first state building, then public-good provision, and most recently social welfare and entitlements.…
See MoreHere they’re looking at the way in which bond defaults by corporates has risen in recent decades. That’s a useful proxy for how under stress from new market entrants the old established companies are. That stress has risen. The flip side of that being that we’ve got to be in a pretty innovative economy, things are getting markedly better and quickly. Odd to think of it this way, that more corporate bankruptcies and debt restructurings is a good thing, but that is the way it works:
Disruption and credit markets
Bo Becker, Victoria Ivashina 28 March 2019
In the past 30 years, defaults on corporate bonds in the US have been substantially above the historical average.…
See MoreIt’s always entirely possible that a developing country can have a debt problem. For there are those cautionary tales of places which manage to regress – always, but always, as a result of bad politics or political decisions – and it’s that very regression which makes formerly manageable debt loads into unmanageable.
It’s also true that if external debts loads are high and there’s some endogenous change then that can cause problems. Say, global interest rates rise, or the terms of trade for an export dependent nation do.…
See MoreThe Coastguard had up on one of its websites a little tipsheet for employees who had been furloughed – have a garage sale, try to do some babysitting, try out being a mystery shopper. Not bad advice for people who are now suddenly without an income but this is making some people more than a tad irate. How very dare they and so on.
The thing is, that tip sheet is really just a copy – lightly edited perhaps – of something put out by a debt management company.…
See MoreIt does rather depend upon who you read here over the IMF’s latest warnings about debt, the next downturn and the final crumbling of capitalism. It’s entirely true that debt is now higher than it was in 2008 – maybe not the problem some think – and that there will be another downturn at some point. The question is, well, will the next one be as bad as the last? There it’s not so certain, thus the warnings.…
See MoreDebts that cannot be repaid won’t be repaid – there are no known examples of this not being true. Given that Greece cannot repay the money currently owed it will not be repaid, that’s pretty obvious and simple. However, stout insistences that it will all be repaid must be maintained. For what is owed is due to European taxpayers and the politicians who sprayed the money on Greece, for entirely and only political reasons, cannot afford for fear of their own careers to admit the obvious.…
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