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Politics : Foreign Affairs Discussion Group

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To: Hawkmoon who wrote (160852)	4/22/2005 5:23:31 PM
From: Maurice Winn	Read Replies (1) of 281500

<Destruction of debt equates to destruction of money> Not really Hawk. It's merely the transfer of wealth from one person to another. The reason it's bad to have debts written off is that it's destructive of the essential trust required to make financial systems operate. Writing off debts is punishing the savers. Punishing savers is not the way to get savings, which is capital formation. Without capital, we get to live like chimps, hunter-gathering. The money can be replaced by the simple expedient of pixelating some more and putting it in the lender's account to replace the deadbeat's debt. Since community rule is the only way a creditor can demand and enforce payment of debt [other than criminal violence], it would be reasonable that debt be a community obligation, except that that would mean the critical ingredient of the lender using good judgment would be lost and we'd enter the USSR type system of central planning and lending and very bad economic performance. The community doesn't lose money by bad debts. They lose confidence. Enforcing debt is a vital function of a community. Avoiding that process is also crucial as it's expensive. Creditors holding security over a debt is a good solution to bad debts. Mortgages for example. Unbacked loans are hazardous to the financial health of the lender. Bankruptcy is a way of punishing careless lenders who lend to those unfit for credit. Just ranting, I know you know all that. I just wanted to point out that debt destruction isn't really money destruction [in the sense of wealth being destroyed]. The actual money that the borrower received was passed on to somebody else, which is why they can't repay the loan. The money still exists, but neither the lender nor borrower have it. Mqurice

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