Two Large Chinese Borrowers Miss Bond Payments, Sources Say

Choice quote:

"Because of Chapter 11 and the expertise of US restructuring professionals who advise troubled companies, Gilson says America's economic recovery has been far speedier than Europe's, where bankruptcy laws tend to favor immediate payback of creditors.

"Many countries around the world have bankruptcy laws that primarily seek to liquidate distressed companies," he says. "The emphasis is on reimbursing creditors, or protecting particular stakeholders such as employees, rather than doing what's necessary to rehabilitate the business."

I'm not sure I can do it full justice either but here it goes - US bankruptcy laws are the oldest in the world. During a time when it's not uncommon for people to go to jail and be indentured to their debtors for their inability to repay the debts, US made a bold law that allowed for debt forgiveness and gradual repayment. US bankruptcy laws also made it possible to separate the property and responsibility of the company and that of the individual managing the company. This allowed for greater experimentation - because it's OK to fail without fear of persecution or losing all of the entrepreneur's property when a company fails. One more important factor is the ability of a company to declare bankruptcy and continue to operate - instead of getting divvied up to pay for the creditors. This resulted in companies that would otherwise be shutdown a second chance with restructuring and delayed debt payment. This is a long term view and is good for both the company and the creditors. It prevents short-term creditors from carving up the assets and closing down the company.

https://www.npr.org/sections/money/2017/10/04/555646290/epis...

I don’t think airlines losing a ton of money is unique to the US and so I don’t think the US airline industry’s state tells us much about the effect of US bankruptcy laws at all.

For better or for worse, that makes the incentives different from alternative systems.

Sometimes unproductive companies are kept in business for far too long because there is political pressure.

In the long run, it's not good for anyone if workers remain in unproductive jobs instead of moving on. It depresses salaries, erodes skills and saddles the financial system with debt of questionable quality.

But Chapter 11 is certainly not a prerequisite for that. I think most zombie companies that are being kept alive never enter anything like Chapter 11.

So I think Chapter 11 is good and necessary to avoid the sudden death of companies worth restructuring.

Except those who hold the groceries and staples? I'm no investment expert, but my understanding of the value of real estate is due to the scarcity (when taking into account the cost of improvement and demand.)

<pedantic> More like 36 years. </pedantic>

There's a quick trick to a good approximation for this. The rule of 72 says that you can estimate the time it takes a compounded investment to double by dividing the interest rate by 72. 2% for 36 years will double the investment (or, since your actual statement was going the other way, strip it to nothing)

See, for example, https://www.investopedia.com/ask/answers/what-is-the-rule-72...

Because nobody buys groceries with massive leverage over 30 years.

People buy houses because they count on inflation to raise the nominal value of the leveraged asset far more than the interest they pay, and usually in the long term that works out and they pay less than they would renting (not always, and renting has upsides too of course).

Sorry for being naive, that is the first time I heard of property tax in % of value every year! No wonder why so many comments were referring to what happens to China when they introduce property tax.

Coming from places where we have tax, but none of them are as high or based on its property value. Isn't that basically "renting" the property? For a million dollar value flat I have to pay $20K Every year? Or $1.6K every month? That is pretty insane if you ask me.

And why are people continue investing in US housing? So these tax, assuming being paid by its owner, are basally passed on to the lease? So a rise in property value will add an extra 2% effect on its rental pricing?

I would have thought property tax should lower the interest of investment in property, but that doesn't seems to be the case in US.

1) local governments have already been to tempted to squeeze revenue out of lease renewals, who knows what they’ll do in the future

2) a property tax is inevitable and unknown...

One my coworker ran into a situation with his landlord:

1. He gets a call from his family "Police knocking on the door, they have an eviction notice"

2. Guy angrily calls the landlord

3. Landlord say WTF and rushes to the scene

4. It was later realised that his flat, that was bought and sold god knows how many times, had its lease expired, and the landlord was not even aware of him having to extend it.

5. He had to relocate his family overnight to friends and coworkers

That's not a rule, and technicalities vary greatly from one municipality to another.

This depends tremendously on the city. For Shanghai this may be true-ish, but there's much greater variation between Chinese cities and e.g. US cities.

Now take the lifestyle difference between NYC and Mobile, AL, but double it. Then multiply NYC lifestyle (e.g. income) by like ~0.6 (incomes are like ~0.3, but COL is a fraction of NYC excluding housing so the living standard gap is smaller than implied by incomes) to get Shanghai -- so use that as a baseline, but with the variation from the previous sentence. That's imo roughly what Chinese living standards are like (having been to Chinese cities of varying prosperity).

US: $62,152 Japan : $40,849