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Comment by ljm | Hacker News Reader

> The US has relatively generous bankruptcy laws. Many people go through bankruptcy and rebuild their credit over several years.

Are you happy to say this with a straight face?

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Yes, of course!

Honestly, what would you prefer? That people are forced to repay loans they can't afford? Or that nobody is allowed to take out a loan unless they have enough capital in the bank to repay the loan anyway (e.g. loans are only for rich people)?

You probably shouldn't be given credit if you can't afford to repay it or it seems like you'd struggle to repay it.

This logic works when people can live decent lives without loans. It breaks down when that ceases to be the case.

Then that's the problem. Unsustainable loans distort the clearing prices for goods and services. College tuition is a great example.

Sure, that's the problem. The question is how do you solve it. Ideally you implement a different solution before removing the existing workaround.

If there is an existing workaround no one will look for a different solution.

I don't think that's true. And I don't think wrecking some people's lives just as an incentive for others to look for solutions is easy to justify.

On this theory, they shut down mental health institutions. Now what happens is mostly that jails serve as ill-suited, ad-hoc mental health institutions. Turns out making things worse without having a plan doesn't always have salutary results.

Pretty much every first-world country other than the USA has at least partially solved it. Social safety nets, regulation of utilities/public goods (education for example), and a guaranteed standard of living.

But then, how predatory bankers will survive? Some country needs to protect them...

“loans distort the clearing prices for …College tuition”

Does it though? I thought the same thing until I started paying tuition for my kids private elementary schools. It’s almost as much as college and no loans around to distort prices.

Bad example. There's a free option in the market, so the paid option is for rich people only.

Daycare might be a more compelling one.

Econ 101 would say that a free option would push the equilibrium price down. I'm not sure I follow your reasoning. There are comments on other stories everyday complaining about how hard it is to price against "free."

Moreover, the owner of the school drives a Toyota. I think my point is that the cost of providing an education is greater than many people think. It's not like colleges are turning a profit off of tuition.

> "and no loans around to distort prices."

As a result, private school remains kind of a luxury product for people who don't like the free public offering and can afford to pay to send their kids somewhere else.

I can only imagine that if we extended some version of our school loan program to primary/secondary education we would have a lot of highly indebted parents or, god forbid, children, and an explosion of private schools.

Ultimately, it would also drive prices up. The high end would need to be more exclusive (expensive) and everyone else would compete on perceived quality more than price.

Yeah I think that is exactly what would happen. Private school is like 3x more expensive than college probably 5x when you adjust for time value of money

There are surely some fundamental problems in a society if an average person can't enjoy a decent life without being in debt.

Just pay off the money and then you're out, right?

I think people are aware of that. The hard part is the question of how to solve it.

Sounds like you’re arguing against the non-wealthy owning homes, which is pretty shitty.

If you can’t live a “decent” life without loans, loans will almost certainly make the situation worse.

People qualify for credit when times are good and they can afford to pay it back. Then something bad happens and they can't. Banks are usually in the business of getting paid back. Often when they're not, it's because of a regulatory failure.

Banks don’t hold the products they securitize. This isn’t the olden days most products at large banks get bundled and sold off

So regulatory failure?

Banks aren't in the business of getting paid back, they're in the business of getting paid back more than they gave you. The ideal customer are irresponsible enough to accumulate interest, but not so irresponsible that they completely default.

That's why the US elites are adamant about not giving any social benefits to its population: they want the largest number of people depending on loans to survive, and working hard to make banks rich! People who depend on loans are forced to work hard, both for the benefit of their employers and the banks. It is like a cassino, where the banks have the house edge: banks will end up making more in interest over the lifetime of the loans (and the people).

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