Walk away from your mortgage (New York Times)

Is this more anecdotal evidence of media awakening?

http://www.nytimes.com/2010/01/10/magazine/10FOB-wwln-t.html?source=patrick.net

As stated here, there is absolutely no moral obligation not to. A mortgage is a financial transaction.

Where this essay in the New York Times fails, is in correctly identifying the reasons government attempts to persuade you that walking away is immoral. The NYTimes article says: “There are two reasons why so-called strategic defaults have been considered antisocial and perhaps amoral. One is that foreclosures depress the neighborhood and drive down prices. […] The other reason is that default (supposedly) debases the character of the borrower.

Actually, the NYT only partially got it wrong. The reason government does not want you to walk away is because doing so would immediately cause a revaluation of the property to the downside. This would require a re-marking of the outstanding debt thus triggering a reduction in total outstanding debt.

Of course, if you follow this blog, you know that in an unchecked fiat monetary system inflation is the conditio sine qua non of the existence of government. Thus, the survival of government is predicated on the continued expansion of inflation thus on the continual expansion of debt.

A reduction of outstanding debt is contrary and lethal to the logic of government.

Deflation brings about a reduction of outstanding debt. Deflation is the enemy of debtors and nobody is deeper in debt than government issuer of the reserve currency.

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2 Responses to “Walk away from your mortgage (New York Times)”

  1. ducati998 Says:

    “Thus, the survival of government is predicated on the continued expansion of inflation thus on the continual expansion of debt.”

    guido,

    Not necessarily, government can also create inflation via printing or debasement of coinage [when said coin is gold/silver]

    Debasement doesn’t create debt.

    jog on
    duc

    • guidoamm Says:

      …but… but… but…

      in a fiat monetary system, money is debt. Thus, more printing = more debt – i.e. the Fed cannot print the money and give it to treasury without in return getting some treasuries… ergo… debt

      In the current aberration, the Fed isn’t even giving the money to Treasury anymore. The Fed is the outright buyer of debt (most notably a whole boatload of MBSs)… still debt though…

      Did you read the latest from PIMCO yet? http://www.pimco.com/LeftNav/Featured+Market+Commentary/IO/2010/Let%E2%80%99s+Get+Fisical+January+2010.htm

      Excerpt:
      Our fiscal 2009 deficit totaled nearly 12% of GDP and required over $1.5 trillion of new debt to finance it. The Chinese bought a little ($100 billion) of that, other sovereign wealth funds bought some more, but as shown in Chart 2, foreign investors as a group bought only 20% of the total – perhaps $300 billion or so. The balance over the past 12 months was substantially purchased by the Federal Reserve. Of course they purchased more 30-year Agency mortgages than Treasuries, but PIMCO and others sold them those mortgages and bought – you guessed it – Treasuries with the proceeds. The conclusion of this fairytale is that the government got to run up a 1.5 trillion dollar deficit, didn’t have to sell much of it to private investors, and lived happily ever – ever – well, not ever after, but certainly in 2009.

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