Financial Meltdown- Debtors & Bailouts

Crisis of debt is one of the major reasons of economic downturn. Why the crisis is persistent is not difficult to understand. Quite a few paper works apparently permit their holders with wealth. However, the fact is that, there is a definite shortage of that ‘wealth’ to meet up the claims of the holders. Debt is nothing but an assurance that in future the debtor will pay back the amount of debt that he/she does not possess presently. There are numerous such debts and paying back of all the debts is not possible in this scenario.

To bailout the debtors from this situation and to pull out our society out of this crisis, much of this debt amounts is needed to be exonerated. This means that the creditors will not get the money back that they have provided as debts. Creditors need to accept the loss for the sake of economy and society. Creditors or lenders actually take this risk as a part of their economic theory. This risk provides them profit and entitles the loss. The fact that why crisis continues is that the lenders will not accept that they have lost the money that they have lent to the debtors. If the banks that loaned money accept the loss, the economy will start to stabilize once again.

It is not the fact that the banks have to take the huge loss and better the economy. That is why there is bailout strategies designed for the banks. In case of such bailouts, the government will borrow money. This borrowed amount by the government will be paid back by tax in the future tax. This tax amount will be distributed among the banks to cover up the loss that they have taken. This is a good solution but it alone cannot do away with economic crisis completely. We have to take initiative and do something to help ourselves in this situation.

Forming a debtors union is a good option that we can do. We take loans for various purposes such as real estate mortgages, student loans, car loans, medical expenses, credit cards, etc. We can systematize ourselves and turn down to pay the debt amount. This will result in a mass default and force the lenders or banks to write off the debt to be written off. In addition, we can renegotiate regarding the debt amount and get certain discount on the amount of the debt. Forming a union of debtors means a step forward to bailout or recapitalizes ourselves.

Debtors union can be an effective solution but for that, we need to organize ourselves and take the lead. Let us join hands and get out of this crisis.