We’re still at the beginning of the Trump economic catastrophe
Bailing out banks not people is a recipe for economic calamity.
At some point, debts that can’t be paid will not be paid.
Hudson’s oft-repeated golden rule is “Debts that can’t be paid, won’t be paid.” That is to say: making it harder to declare bankruptcy, or binding debtors over to arbitration or wage-garnishing won’t actually get them to pay debts they cannot afford.
This is a very sharp observation in the US context. The 2008 crisis was “solved” by bailing out finance, not people – and so the finance sector was able to lend to consumers to buy things again, while consumer debt mounted to spectacular levels.
Between mounting costs for housing, education, transport and health – a place to sleep, a path to employment, a way to get to work, the physical capacity to do your job – being alive has meant increasing your debt burden.
Bailing out people is useless if they are just going to hand over their relief checks to banks, landlords, or insurance companies. People need relief from their creditors, not more money to pay them off. Rents and mortgages need to be renegotiated, not subsidized.
When I see long lines of people for food handouts, I can’t help thinking if they just had a few hundred bucks they could go to the store and buy better food themselves. But they probably sent their last cash to a bank or landlord.
So we need renegotiation of debts AND relief, not one or the other. They are complementary.
There is a case for bailing out banks (hear me out). If you don’t pay your mortgage, the bank feels the crunch. And when you don’t pay rent, your landlord can’t pay his mortgage, so the burden again falls on the bank. So the answer is to provide support (limited bailouts) but only to banks who agree to renegotiate their loans and keep renters and homeowners in the game.
Of course, wealthy landlords who are NOT dependent on monthly rent checks are all too happy to empty their buildings and use cheap credit to renovate them for higher future rents.