Croatia just canceled the debts of its poorest citizens
Let's just look at the predictable consequences of this move:<p>1) Banks and other corporations will never lend money to poor people again. Full stop. If there is a chance that the government will write off that debt (effectively stealing future earnings from banks) for these loans, banks just won't issue them. Say goodbye to educational loans, healthcare loans, car loans. Say goodbye to home loans and mortgages. If you're poor, you just became a ward of the state. And you thought being in debt was bad...<p>2) If a legitimate institution <i>do</i> want to lend money to poor people, interest rates will skyrocket to compensate for this additional government-cancellation risk. If they skyrocket above usury laws, then legitimate institutions will no longer be in the market and the job of lending at-risk capital will turn to the black market. Look out for loan sharks and indentured servitude, including sex slavery, on the rise in Croatia in the future.<p>3) The money has to come from somewhere--it isn't free. By canceling $31M in debt, the government is causing $31M in losses to corporations and institutions that were owed that money. That means $31M less in spending, economic growth, job creation, not to mention taxes, which will have to go up to compensate for the loss. These taxes (or inflation) will hit the poorest people while the rich horde more money or offshore it to prevent it being taken away.<p>4) Lending is the foundation of economic growth, especially for the poor, by allowing borrowers to leverage their limited assets in exchange for future earnings. All things being equal, people will borrow money smartly or stupidly, but the consequences, good or bad, are faced by the people who borrow. If the government cancels debt, it is incentivizing bad borrowing and making it harder for good borrowers to get the capital they need.<p>It's the worst kind of pandering to the voters with long-term destructive consequences to the people of Croatia.<p>In other words, exactly what you'd expect from politicians. Keep up the good work!