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Old 12-04-2011, 09:43 PM
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Default Personal Debt and National Financial Collapse



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What will happen to our personal debts (mortgages, car loans, credit card debts, student loans) if there is a total and absolute economic collapse in this country? If it's all in shambles, how will it affect us on a personal level?
It may be a dumb question but I guess I just don't have a clear handle on it.
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Old 12-04-2011, 09:53 PM
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The banks will try to make sure you still owe them in "New dollars" the "Amero" or whatever so long as it is just a collapse of the dollar or our country. They have the money and power to make new laws and will try to ensure you still owe them. It will be interesting if the dollar is basically worthless and lets say 1 oz of gold buys you one million dollars, then you pay off you home or all debts with said dollars. It is speculation of how courts or new law will deal with such situations as the original debt was a contract for dollars and you would have essentially upheld your end of the contract, however the banks would be paid back in a virtually worthless assets. The fact that so many dollars are owed makes it hard for a total collapse to happen because there will still be alot of demand for dollars even if the value sinks for consumers to pay off debts at lower value like the gold example above.

However if the whole economic system of the world collapses there will be no banks.
Old 12-04-2011, 09:55 PM
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The loans you have that are on collateral such as house and car will require payment or they will repossess/foreclose on them. Credit card loans under the new bankruptcy law could require repayment if you are earning a good salary, if you are destitute the credit card companies are SOL. Student loans are inescapable other than through some form of government forgiveness.

Expect none of that to change without a disaster that kills off the majority of mankind. Economical depression will simply suck worse for those with bills and no income.
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Old 12-04-2011, 10:00 PM
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SOL? I'm not sure I know what that means--for credit card companies if we can't pay them if we are destitute.
Old 12-04-2011, 10:02 PM
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There are many variables to consider. If by "absolute economic collapse", you imply that there is deflation of the US dollar (similar to what happened during the Great Depression) and that you can buy more with the dollars that you have (think about a hamburger for a nickle), then you will be paying back today's (inflated) debts with tomorrow's (deflated) dollars. In other words, you will effectively be paying more for the debt. You will work more to get the same dollars of income so that you can pay back the old debt. If you have a job. So, if you are working at 1960's level wages and you are paying back a 2000's level mortgage then you are ****ed.

If, however, you think that "absolute economic collapse" means that the dollar will become devalued because of inflation, then things will become more costly and you will need more money to buy the same items. Think about buying a hamburger with a bucket full of cash. Then, your old debts will be paid off quicker because you will be using devalued dollars to pay of the same dollar amount owed. This is why countries devalue their currency. That lets them pay back their old debts with money that is worth less.

That is a good start. Let me know if you need more info.
Old 12-04-2011, 11:04 PM
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I expect the banks will continue to use the coercive power of state and local governments to collect on any debts. I've heard how they did this in the 1930s and I suggest to you that both the banks and the government are more evil and corrupt today.

I paid off all my debts and plan to keep it that way.
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Old 12-04-2011, 11:22 PM
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It really depends on what happens with the govt.

If the govt remains, the few remaining banks will buy up all the debts and assets of the failed banks for pennies on the dollar. The net effect is that sometime down the road, the banks will come after you to pay. So if your mortgage is with Wells Fargo, and they go bankrupt, another bank will buy their assets (read: your mortgage and a million like it), then demand that you pay them.

Complicating the game is that the govt can change the rules when they want. And in the middle of a financial crisis, no one in power will really oppose them.

Of course, if the govt goes belly up, then all bets are off.
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Old 12-05-2011, 12:29 AM
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Default Very appropriate post

Quote:
Originally Posted by Hick Industries View Post
I expect the banks will continue to use the coercive power of state and local governments to collect on any debts. I've heard how they did this in the 1930s and I suggest to you that both the banks and the government are more evil and corrupt today.

I paid off all my debts and plan to keep it that way.
Addresses the OP gives perfect advice.
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Old 12-05-2011, 01:05 AM
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IMO, you will stay on the hook, and have to make payments when the banks get back into operation-plus interest for when you missed payments.

Expect the worst,

Get out of debt ASAP!!!
Old 12-05-2011, 01:29 AM
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I am in a different camp, i believe the economy/dollar will collapse, and since every country in the world holds dollars in backing of their own money, to the ave tune of around 60% of reserves. Then i would venture to say that it will result in a world wide collapse. Bankers are almost getting hung now, imagine when the golden horde runs out of government cheese.

Ain't no bankers going to be collecting your mortgage each month.
Old 12-05-2011, 01:57 AM
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I own my home bought it in 1980. But i agree if the financial systems of the world fall then there will be millions of home loans lost, There will not be enough collection agency,s to even know wher to start.
Old 12-05-2011, 05:15 AM
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its simple math if you have $30 left and your choice is to buy 2 loaves of bread or pay citibank which do you choose?
Banks as is wont be open,they will be overrun,occupied and they will also be on the hook for their own misguided debts
mortgages about the same with the robosigning lawsuits it is really hard to tell,i have heard of many now who have gone 1.5 yrs so far without paying a mortgage,their lawyers advised them they have no clue who to pay the mortgage to because their original not can't be found
it will all be one big mess but in a utter collapse,credit to a financial institution may be the last thing you need to worry about
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Old 12-05-2011, 06:39 AM
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If all of the brick and mortar buildings that house any record of your notes all burn down, and if the internet and all the servers that hold that same information burn up, you might be in the clear. But I doubt it.
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Old 12-05-2011, 07:15 AM
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modern day credit cards were not fully utilized until the 1950s. In a collapse credit cards would more than likely not even be accepted and therefore useless,possibly,so i see no reason to maintain a credit score when credit will be no good for some years to come..
Cash would be expected by the majority of businesses,prepay cards maybe and of course bartering systems/items. Car notes and mortgages may need to be at least paid on to keep,if there is a way to get a payment to them...although i am not sure what they would foreclose on if the house is burnt down,bombed or otherwise rendered inhabitable...
Old 12-05-2011, 08:50 AM
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Family History facts from the 20's-30's Depression..

Bank closed and my Great Great Aunt lost $10,000 (ya, she was one of the rich ones). Just poof, one day it was there, the next day gone. Bank closed never opened again ever. Thus, she became one of the poor ones.

Our ranch...local property taxes went up too fast. Before we could scratch together enough money we lost 110 acres out of the middle. It was a Sheriff's Sale. Basically the local elected Sheriff comes to your place, after a tiny post in the local paper (legality), they show up and a bunch of guy's bid on your land. We scrambled but were a week short of the payment. That square of 110 acres is still owned by another family, smack dab in the middle of our ranch, surrounded on all sides by us. It's not very good ground, has no real water supply, or water rights, but its still a thorn. They don't keep their fences up, they poach their way into their plot and out...Just sucks. They don't use it for anything, it just sits there and grows weeds that blow onto us. We've been trying to buy it back since we lost it in 1934. Its sad its really useless ground, that's why we used it to "loose" but still. Big bummer...but life has winners and loosers, and we lost. Course we are still a viable cattle operation before and after so we weathered darn good. I've wanted to buy it back since I was 8 years old and was told the story.

I would imagine any debt you have will cause your assets to be "auctioned" off by the local Sheriff to pay off your debt. That's what happened to us.-WW
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Old 12-05-2011, 09:03 AM
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correct... secured debt can always be seized if the willing seize person has the guts to wade through the roving gangs,roadblocks etc

unsecured debt like credit cards etc are not secured by anything and thus nothing is seizable..
Old 12-05-2011, 09:06 AM
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Quote:
Originally Posted by maddie View Post
SOL? I'm not sure I know what that means--for credit card companies if we can't pay them if we are destitute.
It means they have no way to get any payment. They made a Unsecured loan to you when granting credit. Chapter 7 Bankruptcy gives them nothing. (SOL means (bad word) outa luck).
Old 12-05-2011, 10:00 AM
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And for this, you need to understand who runs government and to what ends. So I'd say it all depends on the multi-national corporations. Big oil, the military industrial complex, banksters, agriculture, Big Pharm.

I believe we are seeing changes in the transition of power from governments to corporations, a new sort of private global feudalism. Though most of this has existed for a few centuries, it's just going through some new changes. So governments will openly begin to answer more to the multi-national banksters, etc. in terms of how they run their societies and maximize return of labor to the global elite. So you'll still be paying taxes, interest, etc. but it'll be going to the multi-nationals, who run various governments to make sure it goes that way. For instance, even now a lot of countries probably get more "foreign aid" than many US states (whose citizens actually pay taxes). We're bailing out European banks, propping up people like Mubarek (I'm still holding my breath for the corporate media to tell us that his assets are being returned to the US), etc.

If the government collapses, expect private armies to take over directly, rather than using government as a proxy.

If the multi-nationals collapse, then that's a different matter. But so long as people need to buy things, I wouldn't really expect this.

Quote:
Originally Posted by TRM View Post
It really depends on what happens with the govt.

If the govt remains, the few remaining banks will buy up all the debts and assets of the failed banks for pennies on the dollar. The net effect is that sometime down the road, the banks will come after you to pay. So if your mortgage is with Wells Fargo, and they go bankrupt, another bank will buy their assets (read: your mortgage and a million like it), then demand that you pay them.

Complicating the game is that the govt can change the rules when they want. And in the middle of a financial crisis, no one in power will really oppose them.

Of course, if the govt goes belly up, then all bets are off.
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Old 12-05-2011, 02:11 PM
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Quote:
Originally Posted by aramchek View Post
And for this, you need to understand who runs government and to what ends. So I'd say it all depends on the multi-national corporations. Big oil, the military industrial complex, banksters, agriculture, Big Pharm.

I believe we are seeing changes in the transition of power from governments to corporations, a new sort of private global feudalism. Though most of this has existed for a few centuries, it's just going through some new changes. So governments will openly begin to answer more to the multi-national banksters, etc. in terms of how they run their societies and maximize return of labor to the global elite. So you'll still be paying taxes, interest, etc. but it'll be going to the multi-nationals, who run various governments to make sure it goes that way. For instance, even now a lot of countries probably get more "foreign aid" than many US states (whose citizens actually pay taxes). We're bailing out European banks, propping up people like Mubarek (I'm still holding my breath for the corporate media to tell us that his assets are being returned to the US), etc.

If the government collapses, expect private armies to take over directly, rather than using government as a proxy.

If the multi-nationals collapse, then that's a different matter. But so long as people need to buy things, I wouldn't really expect this.
Good post.

There's two interesting points:

The first is the integration of corporations into the government. You're absolutely spot on when talking about corporations gaining a larger say in governmental circles, and that is having profound policy and fiscal effects in the system. Because most of the systems of government are not well known to the public at large (example: how are regulations crafted and why are they necessary), and the public doesn't understand why certain bureaus or agencies even exist, much less their mission, their actions, and their impacts.

Corporations have figured out that the government helps them in a variety of ways. Erecting barriers to entry of market (stopping competitors), corporate welfare (government contracts, tax breaks, subsidies), mutual support (the iron triangle model), and a convenient scape goat are all ways that corporations can use the government to enhance their profitability.

I don't think that we'll arrive at the point where we'll wake up one day and find out that the US Government is actually run by Weyland-Yutani. I think that corporations will become more involved to the point that certain corporations will be indistinguishable from the US (and other) governments. This will be done in the name of "efficiency".

An example is the current political proposal to cut the federal workforce by 10% - this will not actually reduce the amount of workers on the primary and secondary payrolls. What you will see is a reduction of the primary payroll by 10%, and secondary payrolls (contractors) will increase by 10%+. So, it's not a cost savings measure because numerous studies have shown that the private sector is not necessarily more efficient than the public sector in inherently governmental duties; this is a further privatization of government proposal.

The second point is the collapse of multi-nationals. Personally, I think that such a collapse is inevitable, but a few will survive.

Recall Lehman Brothers - they were the victim of a vicious rumor stating that they were undercapatilized and on the verge of collapse, while simultaneously being subject to an illegal naked shorting scheme to drive down shareholder value. This was done by other banks to 1) Reduce competition; 2) Allow the other banks to buy defunct Lehman assets at pennies on the dollar.

If I was the CEO of a large corporation, I would be working very hard to sever all financial connections and increase currency reserves (recall that banks are not lending money). Once I was comfortable where my company was at, I would start doing everything I could to undermine and collapse the financial system. As everything goes to hell in a handbasket, I could sit back and watch my company emerge from the crisis relatively unscathed. Then, I could buy trillions of dollars of assets for a fraction of what they are worth. The Fed and Government would support me, because I'd be one of the few left standing.

My company would come out as one of the most powerful and richest corporations in the history of man. I may even be hailed as a hero - the man who saved the world's economy (JP Morgan - 1907). And I would be more wealthy and powerful than any politician alive or dead.

If I fail, I cost my company a few quarters of profit. Big deal. Maybe I get fired and get a golden parachute of $300 million. Watch me cry.

Sorry for the long post. Just the way I see it.
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Old 12-05-2011, 04:41 PM
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The intermingling of government + corporation goes back centuries. The fur trade and whaling companies, privateers, etc. So it's hard to say how much we're becoming a global corporate feudalism, vs. how it's always been this way but we're just waking back up and seeing it for what it is. In the past, the private elite were unquestionably synonymous with government (Caesar, Pharaoh, the King, etc.). So a lot of the linguistic distinctions we entertain today may have drifted, even though that which they describe has not. We have a sort of cognitive dissonance as a result. We expect government to represent us, some democracy, though they obviously do not. That understanding is a painful process. When they start talking about a 32 or 24 hour work week and 6 weeks of vacation -- and deliver on it -- then I'll suggest otherwise. But so far they've managed a society in which the average worker has not only been DENIED all the benefits of globalism, automation, robotics, mass communications, etc. but he's actually earning LESS adjusted earnings. It takes powerful mojo to still provide the illusion of "by the people, for the people".

With globalism (not just regionalism), instant micro-trading, and certain other game-changers there are certainly some things that are different... But I would be willing to bet that the distinction between rich/poor, powerful/powerless, owner/debtor, landlord/renter will outlast anything except a TEOTWAWI scenario.
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