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Spoonerian Bankrupties

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  • Jesse Walker
    ... 1. Could you pass along the relevant Spooner cite? I don t think I ve read the book/essay in question. 2. What does he (or you) have to say about the
    Message 1 of 10 , Dec 1, 2009
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      Kevin Carson wrote:

      > In a free market there'd be Spoonerian bankruptcy laws that held
      > debtors liable only for available assets at the time of default.

      1. Could you pass along the relevant Spooner cite? I don't think I've
      read the book/essay in question.

      2. What does he (or you) have to say about the possibility that people
      will shift assets to other hands -- the spouse, say -- to dodge their debts?

      3. What implications do such bankruptcy laws have for your views on
      incorporation?
    • Kevin Carson
      ... Poverty: It s Illegal Causes and Legal Cure http://lysanderspooner.org/node/32 Here s a brief excerpt: Proposition 6. All credit should be based upon
      Message 2 of 10 , Dec 1, 2009
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        On 12/1/09, Jesse Walker <jwalkernot@...> wrote:

        > Kevin Carson wrote:
        >
        > > In a free market there'd be Spoonerian bankruptcy laws that held
        > > debtors liable only for available assets at the time of default.
        >
        > 1. Could you pass along the relevant Spooner cite? I don't think I've
        > read the book/essay in question.

        Poverty: It's Illegal Causes and Legal Cure
        http://lysanderspooner.org/node/32

        Here's a brief excerpt:
        "Proposition 6. All credit should be based upon what a man has, and
        not upon what he has not. A debt should be a lien only upon the
        property that a man has before and when the debt becomes due; and not
        upon his earnings after the debt is due. If, therefore, a man be able
        to pay a debt when it becomes due, he should pay it in full; if
        mutable to pay it in full, he should pay to the extent of his ability;
        and that payment should be the end of that transaction. The debt
        should be no lien upon his future acquisi­tions."

        > 2. What does he (or you) have to say about the possibility that people
        > will shift assets to other hands -- the spouse, say -- to dodge their debts?

        "The only exceptions to this rule should be, 1, where the debtor,
        previous to the debts becoming due, has dishonestly squandered or
        misapplied the means, which he should have retained for the payment of
        his debt; and, 2, where he has omitted to do something, which he was
        plainly bound to do, towards putting himself in a condition to pay."

        > 3. What implications do such bankruptcy laws have for your views on
        > incorporation?

        Depending on who the real owners/residual claimants of a company are
        presumed to be (I'm inclined to think of management holding this
        position), it might increase liability to include the available assets
        of the natural persons, rather than simply (as at present) the assets
        of the corporate person. As it is (based on my limited knowledge of
        corporate law) Chapter Eleven is pretty Spoonerian: creditors simply
        exchange outstanding debt for stock, up to the total amount of equity
        in existence. If the rights of debtors under Chapter Seven were
        brought up to parity with this, it would be nice.

        --
        Kevin Carson
        Center for a Stateless Society http://c4ss.org
        Mutualist Blog: Free Market Anti-Capitalism
        http://mutualist.blogspot.com
        Studies in Mutualist Political Economy
        http://www.mutualist.org/id47.html
        Organization Theory: A Libertarian Perspective
        http://mutualist.blogspot.com/2005/12/studies-in-anarchist-theory-of.html
      • Jay P Hailey
        ... Ummm. Wait. The whole point of credit is that I lend you 1.00 now for a 1.01 later. the whole premise is that this dollar can serve some project you are
        Message 3 of 10 , Dec 1, 2009
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          > Here's a brief excerpt:
          > "Proposition 6. All credit should be based upon what a man has, and
          > not upon what he has not. A debt should be a lien only upon the
          > property that a man has before and when the debt becomes due; and not
          > upon his earnings after the debt is due. If, therefore, a man be able
          > to pay a debt when it becomes due, he should pay it in full; if
          > mutable to pay it in full, he should pay to the extent of his ability;
          > and that payment should be the end of that transaction. The debt
          > should be no lien upon his future acquisi­tions."

          Ummm. Wait.

          The whole point of credit is that I lend you 1.00 now for a 1.01 later.

          the whole premise is that this dollar can serve some project you are
          eengaged in now, to the point where you will profit more than 1.01 by the
          time the debt comes due.

          But it's a risk - you never know for sure if you're going to make 1.02 (or
          more) back using the lent money and your own time, effort annd talents.

          That's WHY I am charging you 1.01 later for 1.00 now. It's a risk premium.
          I don't get to use that dollar on my own project now, andd I may lose the
          dollar all together.

          So when you take the loan, you are taking a risk, too.

          If there is a spoonerian bankruptcy laaw in effect - then the incentive for
          you is to borrow my 1.00 and make sure that, in a year, when the promise to
          repay came due, that you had nothing oof value on you at all. In this way,
          you have benefited by spending my dollar for your own project, and then
          benefitted again, by not repaying the owed dollar.

          It's like We are setting it up to pay you a profit for being broke at
          specific times.

          Over on the Libertaarian Enterprise list when I posted about credit cards,
          one guy came back immediately "Caveat Emptor" and blamed a cultural
          economic illiteracy for the credit card industry hosing people.

          At one time, I'd hate to see you take a loan baseed on bad premises, andd
          then be stuck having to pay it under painful circumstances.

          I am in similar straights myself. Took a student loan to try and edjumacate
          myself in a technical field - and discovered 18 months and 5,000 dollars
          later that I suck ass as a diesel mechanic.

          Ouch.

          Soooo. right now I am broked. Should the loan folks have to eat it because
          I didn't accurately know or diagnnose my own personal failings.

          If I'd borrowed that money from you, it would hardly seem fair.

          Also - I bought tools and occcupied floor space, time and instructor-hours
          at the school.

          If you didn't get paid back for that - that shifts the effects of my thinkos
          from me to you. That's 5,000 dollars of your wealth and buying power up in
          smoke. That's you poorer and the opportunity costs.

          But the Spoonerian system rewards me for failing at that attempt at my
          education.

          So I think there's something backwards going on there.

          Jay ~Meow!~
        • Charles Johnson
          ... Hash: SHA1 ... incentive for ... I have no particularly strong view on whether or not Spooner was right about bankruptcy law. But I m not convinced by this
          Message 4 of 10 , Dec 2, 2009
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            Kevin Carson, quoting Lysander Spooner on bankruptcy:

            >> Here's a brief excerpt:
            >> "Proposition 6. All credit should be based upon what a man has, and
            >> not upon what he has not. A debt should be a lien only upon the
            >> property that a man has before and when the debt becomes due; and not
            >> upon his earnings after the debt is due. If, therefore, a man be able
            >> to pay a debt when it becomes due, he should pay it in full; if
            >> mutable to pay it in full, he should pay to the extent of his ability;
            >> and that payment should be the end of that transaction. The debt
            >> should be no lien upon his future acquisi­tions."

            On 12/1/2009 11:32 PM, Jay P Hailey wrote:

            > The whole point of credit is that I lend you 1.00 now for a 1.01 later.
            >
            > [...]
            >
            > If there is a spoonerian bankruptcy laaw in effect - then the
            incentive for
            > you is to borrow my 1.00 and make sure that, in a year, when the promise to
            > repay came due, that you had nothing oof value on you at all. In this way,
            > you have benefited by spending my dollar for your own project, and then
            > benefitted again, by not repaying the owed dollar.

            I have no particularly strong view on whether or not Spooner was right
            about bankruptcy law. But I'm not convinced by this objection to it.

            Of course, the availability of Spoonerian bankruptcy law offers an
            incentive, *cateris paribus*, to make sure that you don't have the full
            value of the debt on hand when the debt comes due. But that incentive is
            only going to sway your decision if you have no other compelling reason
            to want to have more than the full value of the debt on hand at that
            time. But of course everybody does have such a reason -- for example,
            you may want to have enough cash on hand to eat that week; perhaps more
            importantly, you may also want to be able to borrow money at some point
            in the future. Spooner's view is simply that a creditor cannot forcibly
            seize a portion of future earnings to pay off the unpaid debt; but in
            retaliation that creditor, and any other creditor who cares about
            getting repaid, are certainly free to refuse to lend money (or to lend
            money on the same terms) to anyone who defaulted on previous debts at
            the time they came due, and refused to square it away voluntarily when
            it became possible for her to do so.

            > If I'd borrowed that money from you, it would hardly seem fair.

            Well, Spooner's view is that there are morally fair and morally unfair
            reasons for defaulting on a debt. (A mistake in calculation or
            forecasting about future circumstances is one thing; deliberately or
            negligently squandering resources without concern for your ability to
            pay down your obligations is another.) I expect he's right about that;
            whatever your view about the respective rights of creditors and debtors,
            I think it obvious that there some reasons for defaulting which aren't
            blameworthy, and some reasons which are.

            > But the Spoonerian system rewards me for failing at that attempt at my
            > education.

            Only if you think that there is no reward in responsibility, good
            reputation or good credit.

            - -C
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          • Kevin Carson
            ... Well, yeah. But that risk premium is intended, precisely, to cover the risk of default. So when you default, you default--so long as there s no
            Message 5 of 10 , Dec 2, 2009
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              On 12/2/09, Jay P Hailey <jayphailey@...> wrote:


              > That's WHY I am charging you 1.01 later for 1.00 now. It's a risk premium.
              > I don't get to use that dollar on my own project now, andd I may lose the
              > dollar all together.

              Well, yeah. But that risk premium is intended, precisely, to cover
              the risk of default. So when you default, you default--so long as
              there's no deliberate fraud involved.

              > If there is a spoonerian bankruptcy laaw in effect - then the incentive for
              > you is to borrow my 1.00 and make sure that, in a year, when the promise to
              > repay came due, that you had nothing oof value on you at all. In this way,
              > you have benefited by spending my dollar for your own project, and then
              > benefitted again, by not repaying the owed dollar.

              Well, yeah, I guess--if the only time I'll ever need the trust of
              people I do business with in the community is that one loan from that
              one person, and I'll subsequently be happy to do business with
              everyone on a cash basis for every single transaction, and never rely
              on credit from anyone else again. In that case, deliberate default to
              get a free loan would be a smart move. Of course, your use of the
              money for that year would have to result in no tangible capital assets
              of future productive use for your business, because such assets
              would be fair game in bankruptcy. So if you're willing to destroy
              your business reputation and the trust of all potential business
              associates and customers/sellers in the community, with no tangible
              benefit from your loan at the end of the year, I guess it's a judgment
              call.

              > At one time, I'd hate to see you take a loan baseed on bad premises, andd
              > then be stuck having to pay it under painful circumstances.
              >
              > I am in similar straights myself. Took a student loan to try and edjumacate
              > myself in a technical field - and discovered 18 months and 5,000 dollars
              > later that I suck ass as a diesel mechanic.
              >
              > Ouch.
              >
              > Soooo. right now I am broked. Should the loan folks have to eat it because
              > I didn't accurately know or diagnnose my own personal failings.
              >
              > If I'd borrowed that money from you, it would hardly seem fair.
              >
              > Also - I bought tools and occcupied floor space, time and instructor-hours
              > at the school.
              >
              > If you didn't get paid back for that - that shifts the effects of my thinkos
              > from me to you. That's 5,000 dollars of your wealth and buying power up in
              > smoke. That's you poorer and the opportunity costs.
              >
              > But the Spoonerian system rewards me for failing at that attempt at my
              > education.
              >
              > So I think there's something backwards going on there.

              Well, in your case I don't know anything about your ability to repay.
              The Spoonerian system simply says the creditor is entitled to his pro
              rata share of assets available at the time of default.

              And I believe the onus should lie on a creditor to make sure the
              debor is worthy, and to require either sufficient collateral or charge
              a sufficient risk premium against default. The alternative is
              attempting to enforce a promise (Rothbard went through some serious
              logical contortions to demonstrate that enforcing a debt against an
              insolvent debtor, by constituting "fraud," was consistent with his
              prohibition against enforcing promises).

              There's also room for more creative loan terms, like payment of some
              percentage of income--whatever it may be--until the loan is repaid.
              I'd expect local microcredit systems to develop loan terms based on
              such collateralization of future productive power, with payments
              tailored to ability to pay at any given time.

              --
              Kevin Carson
              Center for a Stateless Society http://c4ss.org
              Mutualist Blog: Free Market Anti-Capitalism
              http://mutualist.blogspot.com
              Studies in Mutualist Political Economy
              http://www.mutualist.org/id47.html
              Organization Theory: A Libertarian Perspective
              http://mutualist.blogspot.com/2005/12/studies-in-anarchist-theory-of.html
            • Michael Bindner
              Situations like this are why I favor cooperativism.  Instead of getting an outside loan, you get a line of credit from the cooperative for those times when
              Message 6 of 10 , Dec 3, 2009
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                Situations like this are why I favor cooperativism.  Instead of getting an outside loan, you get a line of credit from the cooperative for those times when you need to spend more than your salary.  This would be backed by your accumulated share in the cooperative (your retirement) and your home mortgage from the cooperative (which amortizes at retirement).  If you consistently overspend, you retire later than someone who is frugal.  If you are overspending due to some form of mental illness (compulsive shopping, drug addiction, alcoholism) then your fellow members do an intervention.  If you refuse the intervention, you are fired and your accounts are settled - although if you have insufficient equity you may lose your home, but may also get a payout which you will likely squander. 
                 
                Some interventions, of course, should not be voluntary.  If someone is incapable of volition due to mental defect, they really should not be given the option of refusal.

                Michael Bindner 

                 
                 
                 


                --- On Wed, 12/2/09, Kevin Carson <free.market.anticapitalist@...> wrote:

                From: Kevin Carson <free.market.anticapitalist@...>
                Subject: Re: [LeftLibertarian2] Spoonerian Bankrupties
                To: LeftLibertarian2@yahoogroups.com
                Date: Wednesday, December 2, 2009, 1:21 PM

                 
                On 12/2/09, Jay P Hailey <jayphailey@yahoo. com> wrote:

                > That's WHY I am charging you 1.01 later for 1.00 now. It's a risk premium.
                > I don't get to use that dollar on my own project now, andd I may lose the
                > dollar all together.

                Well, yeah. But that risk premium is intended, precisely, to cover
                the risk of default. So when you default, you default--so long as
                there's no deliberate fraud involved.

                > If there is a spoonerian bankruptcy laaw in effect - then the incentive for
                > you is to borrow my 1.00 and make sure that, in a year, when the promise to
                > repay came due, that you had nothing oof value on you at all. In this way,
                > you have benefited by spending my dollar for your own project, and then
                > benefitted again, by not repaying the owed dollar.

                Well, yeah, I guess--if the only time I'll ever need the trust of
                people I do business with in the community is that one loan from that
                one person, and I'll subsequently be happy to do business with
                everyone on a cash basis for every single transaction, and never rely
                on credit from anyone else again. In that case, deliberate default to
                get a free loan would be a smart move. Of course, your use of the
                money for that year would have to result in no tangible capital assets
                of future productive use for your business, because such assets
                would be fair game in bankruptcy. So if you're willing to destroy
                your business reputation and the trust of all potential business
                associates and customers/sellers in the community, with no tangible
                benefit from your loan at the end of the year, I guess it's a judgment
                call.

                > At one time, I'd hate to see you take a loan baseed on bad premises, andd
                > then be stuck having to pay it under painful circumstances.
                >
                > I am in similar straights myself. Took a student loan to try and edjumacate
                > myself in a technical field - and discovered 18 months and 5,000 dollars
                > later that I suck ass as a diesel mechanic.
                >
                > Ouch.
                >
                > Soooo. right now I am broked. Should the loan folks have to eat it because
                > I didn't accurately know or diagnnose my own personal failings.
                >
                > If I'd borrowed that money from you, it would hardly seem fair.
                >
                > Also - I bought tools and occcupied floor space, time and instructor-hours
                > at the school.
                >
                > If you didn't get paid back for that - that shifts the effects of my thinkos
                > from me to you. That's 5,000 dollars of your wealth and buying power up in
                > smoke. That's you poorer and the opportunity costs.
                >
                > But the Spoonerian system rewards me for failing at that attempt at my
                > education.
                >
                > So I think there's something backwards going on there.

                Well, in your case I don't know anything about your ability to repay.
                The Spoonerian system simply says the creditor is entitled to his pro
                rata share of assets available at the time of default.

                And I believe the onus should lie on a creditor to make sure the
                debor is worthy, and to require either sufficient collateral or charge
                a sufficient risk premium against default. The alternative is
                attempting to enforce a promise (Rothbard went through some serious
                logical contortions to demonstrate that enforcing a debt against an
                insolvent debtor, by constituting "fraud," was consistent with his
                prohibition against enforcing promises).

                There's also room for more creative loan terms, like payment of some
                percentage of income--whatever it may be--until the loan is repaid.
                I'd expect local microcredit systems to develop loan terms based on
                such collateralization of future productive power, with payments
                tailored to ability to pay at any given time.

                --
                Kevin Carson
                Center for a Stateless Society http://c4ss. org
                Mutualist Blog: Free Market Anti-Capitalism
                http://mutualist. blogspot. com
                Studies in Mutualist Political Economy
                http://www.mutualis t.org/id47. html
                Organization Theory: A Libertarian Perspective
                http://mutualist. blogspot. com/2005/ 12/studies- in-anarchist- theory-of. html
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