What if US declared bankruptcy?
If millions of Americans filed for Chapter 11 protection, people would suddenly have more spending money and companies would start hiring again, one columnist writes.
The idea isn't as half-baked as you might think. Tens of millions of homeowners could default on their mortgages and millions more could file for bankruptcy, Arends writes.
Why? Because the real problem with our economy is debt. American households owe $13.3 trillion -- an amount that has doubled in the past 11 years. "We're hocked up to the eyeballs, and then some. We're at the bottom of a lake of debt, lashed to an anchor," Arends writes.
Say your household were a company deeply in debt, without any realistic way of paying it off. Companies file for Chapter 11 bankruptcy all the time. It isn't pretty, but it works. Why can't regular Americans do the same thing, Arends wonders.
Many mortgage contracts allow for default, he writes, and the banks can't go after retirement accounts and basic assets. Yes, your credit is shot, but that has already happened to millions of Americans who haven't been able to make their mortgage payments.
Going into bankruptcy would actually free up some spending money for people who have been trapped in debt, Arends writes. They'd be able to buy appliances, go out to dinner and go on vacation. They'd spend money, which would help the economy. That increased demand would cause companies to start hiring again.
"You want to break this logjam?" he asks. "Try Chapter 11 for the nation. Massive defaults. Clear the decks, clean the books."
But is it moral to do this? Is it fair for people to sneak out of their debt while others slog away to pay the bills? "We don't live in an economy based on morals and fairness," Arends writes. This is about doing what it takes to get the country back on track.
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The ancient Hebrews had a "year of Jubilee" every seventh year. It is the historical precedent of modern day bankruptcy. It is also the historical precedent for the concept of a statute of limitations. On this year of Jubilee, all debts were voided. Of course, there was indentured servitude to collect debts during the other years. Remember the story of Jacob and Rebecca.
The reason we can't have a year of Jubilee now is that banking relies on economic servitude to exist and our politicians use the banking system to control the citizens/subjects of the empire. Of course, the largest banks have enough influence over politicians to protect themselves by distributing friends of Angelo favors to the likes of Chris Dodds, Barney Franks, Mr. Obama, etc. The Republicans are not innocent as they also have participated, but Wall Street recently has purchased far more Dems than Reps. ((77% of Wall St.'s contributions last election went to Dems. Countrywide and Freddie Mac were the darlings of Barney and Frank and Obama received more Freddie Mac contirbutions/yr. than any other politician in history)
It is rare to find a politician who does not have a price. That is why we need to get rid of the Fiscal Committee of 12, institute term limits, end political parties and repeal the 16th amendment. and institute the Fair Tax.
The headline of this article, 'What if the United States should go bankrupt.' Then the text proceeds to talk of those people under insurmountable debt going bankrupt. No mention is made of the US government, which is what the title states. This obvious inability to follow ideas logically connected, step by resulting step, is common in the world and rampant in Washington.
The president is a lawyer. The members of congress are mostly lawyers. Yet, they are unable to analyze and solve problems one logical step by the next logical step.
Is the fault with our schools from public to today's universities?
I can't believe the author is a financial adviser.
This idea makes no sense at all. What happens to all of the companies that are owed all of this money? Do they have to file bankruptcy or lay off 1/2 of their work force and create more unemployment because THEY have no operating capital?
BTW - slimjim 1814
Get your facts straight before spouting off. Ford was the ONLY US auto maker that DID NOT take any money from the government. Chrysler and GM took all of the hand-out money they could get. Congratulations to the Ford Motor Company for making it on their own!!
MH438, I agree that bankers' greed is also a factor in this big mess, but nobody is forcing anyone to buy what they can't afford. Ultimately, it is the consumer's responsibility to measure what he/she is able to afford. The banks and credit cards are just a tools to facilitate the transaction if you do not have the cash up front. Misusing these tools can hurt.
We need to start making people responsible again for their actions, and all starts within the family educating the next generations to be responsible. Families make the society, and the society makes the country. If we do not have a solid foundation, the country will collapse financially.
I agree that this is a bad article. The reason individuals and governments are in debt is because of lack of responsibility. In other words lack of morals. And you are saying it is ok not to have morals? Money makes the world go around, if you don't get paid what you are owed how are you going to pay the people that you yourself owe? Vicious little cycle we are in!
As for companies hiring. Yeah they are hiring.... robots/machines!
100 years from now they'll still be pissed at the current generations without us stirring the pot any further.
We need responsible solutions to our fiscal woes. Not, ding dong ditch solutions to passing the buck.
I already cry for my great grandkids who have yet to be born. That future makes me ill.
The BS Pravda spin continues !!!!
Unemployed are good for the economy.
More debt will keep stimulating the economy.
BRIC countries making $1/hr will buy our goods.
Destroying houses so we can build more will spur growth....
More government union employees will grow the US economy.
Now bankruptcy will spur growth ?
Please stop the ignorant spins and pay for real reporters with a real journalism degrees and a competency about economics !
This is a very dumb and very dangerous idea. I was in Argentina during their default in 2001 - 2002, and it was catastrophic. Bank accounts were frozen; no one had access to their savings. Companies went bankrupt, and unemployment soared. A huge number of private homes went on the real estate market, but virtually none were sold, since no one could get a mortgage. By May 2002, thousands of Argentines had fallen out of the middle class and were sleeping on the streets. Crowds would gather in back of restaurants waiting for the garbage to be put out, so they could scavenge food. Crime soared, kidnapping gangs became a growth industry. Provincial governments had no cash to pay state employees, so they just began printing their own money. I could go on and on.
Market Watch is connected to the Wall Street Journal. I'm stunned that they're putting stuff like this out.
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