What If No-One Pays Their Loans Back
My dad used to say that if you owe the bank $1million then you’re in trouble, but if the bank owes $10billion then the bank is in trouble.
We are all in financial poop right now – well most of us like me – even more broke than I was before everything happened. My kids were so stressed about their rent and being thrown out and I tried to explain this to them.
The government cannot have us all out in the street. If only 37% (approximately) are home owners, that would suggest that the rest of us are renting or sharing accommodation of some sort, or are already homeless. That’s 63% of the population. So if the government allowed the normal course of business wherein if you don’t pay your rent you’re out, we’d all be on the streets, so they had to intervene and give us all a stay of execution.
Similarly, home owners who are currently paying off their houses, cannot be thrown out of their homes if they fall behind on their mortgage.
But if EVERYONE stopped paying what would happen? By the rule of the law, the banks would take possession of the property, and try to sell it to someone else. But who would that be?
As a citizen we agree to behave in return for the right and opportunity to make a living. If this is not made available, then anarchy would follow.
So the banks would be left with hundreds of thousands of empty homes while we all stand on the road. The banks are only as profitable as the payments they receive, so if we don’t pay, they don’t make money. If they don’t make money, their balance sheet suffers and their shares go down, taking with them many institutional investors like superannuation and retirement funds, and the whole system starts to collapse.
The stimulus packages that are coming are enough to eat, and possibly house ourselves, but many of us will access our retirement funds which has been made possible by government intervention. This is going to have an enormous impact on the sharemarket as funds will have to cash out their investments. So all the money these funds thought they had locked up safely in the ‘no you can’t have access to your super until you’re 55’ rule has gone and it’s going to be a free for all. I’m accessing mine in both financial years so that’s $20,000 out of my super fund and into the economy. Except it’s going to sit in the bank – I think. Some will go to rent, some willl go to health, so some of it will make its way into the economy but definitely not all of it.
So if we have 25 million in Australia and a third access their superannuation funds, that’s 8.5 million (I rounded up) at $20,000 each over 2 financial years, but within 3 months for a grand total of $170,000,000,000 which I think is $170 billion but honestly I don’t know how to read a number that big.
But you get what I’m saying – that’s a LOT of money about to come out of the market.
If none of us use that to pay the banks back because we have a 6 month moretoreum on loans – and then we never recover by getting a job back after that time – we could all crash the system just by being defiant if nothing else.
I don’t know if people have the courage to be that defiant and just refuse to pay back the loans, because it has long term ramifications to credit scores etc., but that all assumes that things will go back to normal eventually, but it was an interesting thought I had while having my coffee this morning. What would really happen if we all refused to pay back our loans? It’s terrifying and exhilarating at the same time. We could force economic change, but I’m not sure what that would look like in the end, but I also know it’s not going to go on forever the way it is.
If I was a bank and someone owed my $170,000,000,000, I would be really worried right now. Except a bank isn’t one person is it? It’s just an entity. So you have to ask – how much do the people working there really care about the bank?
Just random thoughts going through my head while in isolation.
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