Growth without debt

Aside

In my post Steve Keen in Solvent Land (2), I mentioned that I thought Steve Keen’s analysis may be incomplete in that it ignores

increasing our capital goods (such as housing)

Let me be clear that I am not criticising his analysis, since he has created a model aimed at understanding the importance of debt in our economy whereas I am looking at eliminating debt.

And because I am looking at an economy with no debt, I need to look at whether this means an economy with no growth. Continue reading

Advertisements

Bank accounts for bankrupts

Aside

I have tried to find the help promised by the insolvency service on what accounts are available for bankrupts, but cannot.  There is a document on bank accounts which has a link through to the money advice service, but I could not find the promised list of bankers prepared to open accounts for those who are insolvent.

The insolvency service suggests that “basic bank accounts” which do not have overdraft facilities may be suitable for bankrupts.  The banks may see it differently.  Here are some references to bankruptcy which I could find:

Halifax – easycash

Even if you’ve been bankrupt in the past, you may still be able to open an Easycash account. Just show us the original bankruptcy discharge letter with its original seal

What this means is that bankrupts cannot have this account – they need to be discharged first

TSB – cash account

When you apply for an account with us, we’ll carry out some standard credit checks. We can still open an account for you if you have a poor credit history. But, if your credit reference agency file shows that you have a history of fraud or are an undischarged bankrupt, we won’t be able to accept your application.

 

I did look at various other bank accounts, but could not find any reference to bankruptcy except to say that if you become bankrupt the account may well be frozen.

Debt 101

Aside

I am worried.

One of the blogs I watch is published by Steve Keen and he has recently (at the beginning of the month) published a three blogs looking at whether governments should run surpluses or not.  This was in response to a proposition from the Australian National Commission of Audit that the government should “live within its means.”

His three blogs are:

Should governments run budget surpluses?

Should Governments run Deficits? a Minsky Model?

Should governments run permanent surpluses? (2)

His conclusion (based on some numbers using his modelling software) is that running budget surpluses takes money out of an economy and effectively reduces growth.

On the other hand running a balanced economy (no surplus or deficit) will see public debt reducing.  But running a deficit has higher growth.

So is a deficit economy a good idea?

It matters because if we remove the possibility of debt (commercial lending) from an economy, then it must follow that a government cannot run a deficit – because it cannot borrow.

Or is lower growth a price worth paying for the advantages of taking debt out of the system?

 

Why is a house important to my economy?

Aside

Another way of looking at how the 2008 banking crash happened

honestaphronesis

How did the crash in 2008 happen?

The complexity of the system makes dialogue on the subject difficult but we will try to describe what happened that resulted in the housing and financial crisis by focusing on the key players.

( When you see a link it’s there to offer more information and sometimes links to an explanation of other important parts of the system.)

Player 1: A teacher named Paul gets married to Phillipa in the summer. They decide after the honeymoon a house is needed as the family is growing so they apply and are granted after much paper work a mortgage for a house in a leafy suburb an hour outside the city. The house is worth just 1 million but Paul and Phillipa are both working teachers and have a joint yearly income of 75000. Phillipa works out that with yearly repayments of 20000 it will take them 50+ years…

View original post 628 more words

The problem with mortgages

Aside

As I understand it the problem with mortgages which lead to the global financial crisis was not that people were borrowing money on mortgage.

The mortgages themselves were “high risk” – the amount lent was very high compared to the value of the property and the people who were borrowing had poorly paid jobs, which meant they were less likely to be repaid in full – but that was not the problem either.

The problem was that the mortgages were wrapped up as a package to be sold on to other banks – but that was not the problem.

The problem was that the package was rated as “lower risk” by the clever people who work out risk for financial institutions.