no third solution » Agora!, Economics Lessons, metablogging, Warfare State » Comments on Comments #10
Comments on Comments #10
In response to my revised comment policy, David at 1955design.com counsels:
WordPress automatically adds a rel=nofollow tag to the link of all commenters.
For the most part there is absolutely no benefit to the commenters link as Google will not backlink to their site.
Does WP automatically add a rel=nofollow tag to the
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In this edition of “Comments” I had planned to offer my rebuttal to Kip Esquire’s podcast, The Libertarian Case against Jury Nullification which is not exactly a response to my post On Jury Nullification, but topical nonetheless. But I just got around to listening to it today. My rebuttal will perhaps be a stand-alone blog post to appear at a later date, since I’m not prepared to publish the series of notes I took while listening to the podcast.
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The “Soviet Onion” comments about the underground network in Canada, led by conscientious objector to the Vietnam war:
Sounds like Agorist praxis to me. Finally, an anti-war strategy that emphasizes counter-economics over symbolic action.
Wishful thinking, and maybe reading too far in to my speculation about living off-the-grid, which doesn’t appear to be what most of the defectors are doing. Instead, they’re just trying to live normal lives in another country, not sure if it will accept them. I agree, though, that this unfortunate circumstance is an opportunity for agorism. By some accounts, there are 16,000 deserters, and the government has only prosecuted about 800 of them. There is probably an agorist way to insure against prosecution, the policy would pay money damages in the amount of legal fees incurred, as well as a predetermined monthly stipend to the victim or his family, if he is incarcerated as a result of desertion. It is also an opportunity (albeit, an unlikely one) to leverage activism.
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Regarding the people who are simply mailing the keys back to their banks (What Should You Do About Your Rising Mortgage Payments?), our friend Logan comments:
Ah yes, these homeowners are using the ol’ shirk-my-financial-obligations strategy I see…
And Francois Tremblay adds sarcastically,
Damn homeowners, how dare they want to own homes? I wish people would just be content with their low station in life.
Logan, “shirk” has such negative connotations! It is perfectly within the realm of accepted behavior to forfeit one’s collateral to the lender when one is unwilling or unable to continue servicing the debt as scheduled. The primary purpose of a mortgage is to secure the lender’s interest in the mortgaged property in the event that the borrower defaults on the underlying note.
The lender effectively says: “We will loan you money to buy this house, and you will pay us back according to the schedule. If you stop making payments, can’t make payments, or simply don’t want to make payments any more, we get the house (since you only owned it subject to our interest) which we can then sell. If the proceeds are sufficient to cover our costs, you get any surplus. If they are not, we eat the difference. In either case, you’ve destroyed your credit for the next few years.”
So, returning the keys to the bank, is not really shirking one’s obligations. It’s fundamentally not that much different than asking your bank to do a deed in lieu of foreclosure. Unfortunately, the current economic environment precludes most people from executing this sort of instrument, because the homes aren’t worth as much as the owners are indebted.
Why not?
The banks were loaning money that didn’t exist yesterday. This is pure, monetary inflation1, and this cycle can continue only so long as the banks continue loaning money tomorrow that doesn’t exist today. Eventually they start demanding to be repaid—principal plus interest. The principal was created yesterday, but the interest, well, it’s a sum of money which won’t exist tomorrow! This “interest” portion of people’s indebtedness has never come into existence, so it should come as no surprise that people are no longer able to service their debts as soon as the new money stops being created!
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1. I’ve previously blogged about core inflation and inflation proper, the latter being: When money is created out of thin air, inflation is the inevitable side-effect. Of this, there is no uncertainty. There is no such thing as “core” inflation; either money is being created (which causes inflation) or it is not
2. There is no 2!
Written by David Z
A lifelong Michigan resident, David holds a Bachelor's Degree from Central Michigan University and a Master of Arts Degree in Economics from Walsh College of Business & Accounting. Among other things, he is a market researcher, an avid snowboarder, beer-snob, former collegiate rugby player, bacon enthusiast and dog lover.
Filed under: Agora!, Economics Lessons, metablogging, Warfare State
David,
Lazily forfeiting the collateral to the lender in favor of buying a second property is NOT “within the realm of accepted behavior.”
When the borrower signs the typical mortgage note he or she is giving his or her word — making a promise — to the lender that he or she will pay back the principal plus interest according to the terms outlined in the note. Such a promise represents an ethical, moral, and legal obligation to the lender. After all, without the lender, the borrower would not have the means to purchase the property in the first place. Having negative equity in the property — however inconvenient it may feel to the borrower — does not excuse the borrower from his or her ethical, moral, and legal obligation to the lender.
To sidestep the lender by buying another property just to avoid being in a negative equity situation in the original property is, yes, to shirk one’s ethical, moral, and legal obligation to the lender. It is ungrateful behavior. It is not the right thing to do unto others, especially to those who trusted you, took you at your word, took your personal signature as evidence of your good faith, took a risk on you, and graciously lent you capital so that you could have the opportunity to pursue the American Dream of building equity in your own personal property instead of continuing to rent from a landlord year after year with no incremental wealth to show for it. And now that you’ve hit a bump in the road, TEMPORARILY have negative equity, and are TOO IMPATIENT to wait several years for the value of the property to increase and get you back to zero equity or even positive equity (hey, PAYING DOWN THE MORTGAGE eventually gets you to positive equity too!), you are reneging on your promise you made to the lender when he loaned you the money?
Such shirking screams “Hey Mr. Lender, I don’t respect you even though you were there for me when I needed you, so I’m going to stick you with a piece of property that I know you never wanted, that I know you hoped to never have to ever deal with, and that I know you only wrote in the note as collateral for contingency purposes should I default on the terms of our mutual agreement. And now, since I am VOLUNTARILY defaulting just because it inconveniences me to be in a state of negative equity (after all, I can readily afford to make payments to a different lender who loaned me capital so I could buy a second property and dodge my original promise to you), I hope you now realize, Mr. Lender, that my word is no good, my signature is meaningless, I’m acting in bad faith, and even though you fulfilled your obligation to me by lending me the money to buy the property I now say unto you: SCREW YOU!”
Such behavior does not follow the Golden Rule, which we all learned from preschool onward as the basic foundation of human decency. Rationalize it any way you want to, but slinking into another property to avoid your obligations to the lender on the first property is not anywhere near the realm of accepted behavior. At least, not in the America I grew up in and would like to believe remains with us today.
Logan.
[...] really must have a pushed one of Logan’s buttons when (in #10)I said: It is perfectly within the realm of accepted behavior to forfeit one’s collateral to the [...]