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Taking something without paying for it is stealing. A person who stopped paying his bills would lose access to credit and be sued by his creditors. And it would go downhill after that.
Ncole1:Yes! Most people need a mortgage to buy living space. Nobody needs a loan to buy stocks. They can pay cash. This single change would just about put an end to market speculation that turns all equity markets into casinos to the detriment of risk averse investors. If the speculators want to gamble they can go to Monaco where the big boys play.
Removing margin doesn't change the ability to purchase options. Removing margin isn't going to be the positive you hope. Banks will also do nonpurpose loans against you portfolio which could circumvent your attempt directly as could any other form of lending
Ncole1:Yes! Most people need a mortgage to buy living space. Nobody needs a loan to buy stocks. They can pay cash. This single change would just about put an end to market speculation that turns all equity markets into casinos to the detriment of risk averse investors. If the speculators want to gamble they can go to Monaco where the big boys play.
If you own a house and stocks and have debt, it's irrelevant. Asking which asset the debt is currently used in order to hold is like asking which paycheck I used to buy groceries last week when I paid for them with a debit card linked to an account where all my paychecks go. Money is fungible, therefore debt is fungible!
If everyone stopped paying their bills, most companies would very quickly go bankrupt. (After all, they've had to incur the expense of the product or service they provided to you; so if you don't "repay" them for it, they are out their money.) It would soon become nearly impossible to obtain goods or services without paying for them upfront, in cash, or as a barter transaction. The resultant economic collapse would throw millions upon millions of people out of work.
There would be demands for the government to step in and "do something," but what could they do? After all, people have stopped paying their tax bills too! Look for martial law to be declared, for two reasons: (1) to try and contain the widespread looting and violence that would soon become epidemic, and (2) to forceably extract money from the citizens in order to fund their own operations.
In short order, our society and way of life would collapse into barbarism. It would make Somalia or Zimbabwe look like Switzerland by comparison. Those with the means would flee to other countries, or organize themselves into self-defensive collectives. For everyone else, life would revert to being brutish, nasty, and short.
How about massive business failure, resulting in massive loss of middle class wealth through 401ks/pensions and rampant unemployment.
Nice try, but terrible idea. Will do 100x the harm of any good.
Quote:
Originally Posted by GregW
What would happen if the banks refused to loan corporations to buy back their own stock?
The banks don't loan the money for this purpose -- the bond market does. And in most cases, this is actually a good thing.
Let go of the idea that debt is bad. It is a tool and can be used responsibly or irresponsibly, neither of which is the fault of the debt itself. Retraction of credit is far more sure to harm the economy than help it just "because there's less debt out there."
The stock market would crash.
All businesses would shut their doors. (Would businesses pay their bills? Probably not.)
Massive lay-offs.
Severe depression.
The government would <EXPLETIVE> in their pants.
Actually an emergency bailout bill would be passed since, as we all know, Sempra, Verizon, Comcast et al. are all too big to fail. The bailout would be via deficit spending and the resultant inflation would offset what we saved. In the end they still get it all.
Actually an emergency bailout bill would be passed since, as we all know, Sempra, Verizon, Comcast et al. are all too big to fail. The bailout would be via deficit spending and the resultant inflation would offset what we saved. In the end they still get it all.
TARP, SCHMARP!
If people by the masses suddenly aren't buying, that spells serious recession and easily deflation. The amount and velocity of money running around would be seriously diminished.
Just like all the TARP and QE trillions over the past 6 years, and still not onerous inflation as a result. For the same reasons on a lesser scale.
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