Financial Crises: Borrowers Pain, Creditors Gain

Posted on October 23, 2012 by

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A very interesting paper on the effects of the financial crises on imbalance of power (and thus the imbalance of the incidence of costs) between the borrowers and the lenders. The paper is a serious reality check for Irish policymakers in the context of the ‘reforms’ of the Personal Insolvency laws currently being proposed. In fact, the Irish proposed ‘reforms’ actually tragically replicate the very worst implications of the study summarized below.

“Resolving Debt Overhang: Political Constraints in the Aftermath of Financial Crises” by Atif R. Mian, Amir Sufi, and Francesco Trebbi (NBER Working Paper No. 17831, February 2012 http://www.nber.org/papers/w17831) shows that “debtors bear the brunt of a decline in asset prices associated with financial crises and policies aimed at partial debt relief may be warranted to boost growth in the midst of crises. Drawing on the US experience during the Great Recession of 2008-09 and historical evidence in a large panel of countries, [the study explores] why the political system may fail to deliver such policies. [The authors] find that during the Great Recession creditors were able to use the political system more…………………………………………….

full article at source:http://trueeconomics.blogspot.de/

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About machholz

I started this Blog to get out of my system the absolute rage that I have for the corrupt politicians and their Banker Buddies. I’m an ordinary guy, married with kids, and have firm opinions of what is right and what is wrong. I’m not afraid to say it even when it makes me unpopular. I reproduce news all manner of articles, but will always confirm the source of the articles; this is a compliment to the source of such news pieces. But if you do not agree with this and you are the original author, I will take down any article when requested to do so. I do not assume that the author of the news articles share with my views, I include news articles to give readers another slant to my views or to illustrate what the mainstream news media say on the relevant topic. The opinions expressed are my own but I do not accept liability for them, If I have offended you or made a factual error please put on record the truth by leaving a comment. In addition, my thoughts and opinions change from time to time...I consider this a necessary consequence of having an open mind. This weblog is intended to provide a semi-permanent point in time snapshot and manifestation of the various memes running around my brain, and as such any thoughts and opinions expressed within out-of-date posts may not the same, nor even similar, to those I may hold today. For the record I am currently an Independent political activist and am not affiliated to any political party
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