[HN Gopher] It Pays to Not Pay Your Debts
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       It Pays to Not Pay Your Debts
        
       Author : feross
       Score  : 42 points
       Date   : 2021-10-14 17:47 UTC (5 hours ago)
        
 (HTM) web link (www.bloomberg.com)
 (TXT) w3m dump (www.bloomberg.com)
        
       | wkjej32ioj32 wrote:
       | Official inflation will be 5% in Germany at the end of year and
       | grocery prices already increased by 13%. So, just take a long-
       | term debt and it will be automatically "paid" by inflation. All
       | countries in the EU have huge debt and inflation is the only way
       | the European central bank can do anything about it.
        
       | dkobia wrote:
       | You should watch this after you read the article:
       | https://youtu.be/6c-WCg2Y7sE (How Dying Gas Wells Are Making One
       | Company Rich) -- I imagine it's all Bloombergs effort to expand
       | on this story. Fantastic journalism.
        
       | legitster wrote:
       | Another amazingly good writeup from Matt Levine.
       | 
       | It should be said that natural gas is far, far from the only
       | resource extraction industry that gets away with this. This is
       | also the standard operating procedure for mining operations as
       | well. A large multinational mining company closes down a mine,
       | and sells maintenance of the tailings pond to some cut-rate local
       | company stood up on the spot for the purpose (and can
       | subsequently eat up a bankruptcy no problem).
       | 
       | The difference I guess in mining is that (now) local regulators
       | generally require the tailings pond and maintenance plan to be
       | locked down before permits are even given.
        
         | willcipriano wrote:
         | Can't the laws be modified to require whomever mined the mine
         | is responsible for the cleanup? That way if they hire a fly by
         | night company they are still on the hook. Seems like a loophole
         | that was created on purpose.
        
           | Tanjreeve wrote:
           | This is called a negative externality and it's what political
           | economists spend a lot of their time fighting about. The bit
           | of "how to determine who pays" is very complex/impossible
           | when you're talking about something like air pollution.
        
           | allturtles wrote:
           | I think it would still be hard to write the regulation in a
           | way that couldn't be gamed (e.g. the big, well-capitalized
           | companies lending money to fly-by-night operators to dig
           | wells for them).
           | 
           | It would probably be easier for the government to just levy a
           | tax on all well-owners for every year the well remains
           | uncapped and then use that revenue to pay for capping the
           | well themselves. This would make it impossible to wiggle out
           | of paying and discourage dragging out the use of a well
           | that's leaking methane but producing a tiny amount of gas for
           | many years.
        
             | jnwatson wrote:
             | The government could force the driller to escrow the money
             | to cap the well.
        
               | toomuchtodo wrote:
               | These are called surety bonds.
        
       | [deleted]
        
       | alexfromapex wrote:
       | The title is misleading. In general, you want to pay off debt.
       | However, sometimes leveraging debt to gain assets which make even
       | more money is good. Convincing a lender to reduce liabilities is
       | strange and probably won't work in many scenarios.
        
         | xnyan wrote:
         | There's a very common and overused saying along the lines of
         | "If you owe the bank $100,000, you have a problem. If you owe
         | the bank 1,000,000,000, the bank has a problem."
         | 
         | The point is that in a debt relationship, the lender has given
         | you something today and while you have a legal obligation to
         | pay that back tomorrow, the fact remains that the borrower has
         | The Thing and the lender does not, which often creates leverage
         | to the advantage of the borrower.
         | 
         | The lender knows/accepts that not everyone will pay them back
         | (this risk is controlled by interest), leaving the borrower
         | wiggle room to pay back less than what they owe by threatening
         | to not pay back anything at all. This is why it pays not to pay
         | back your debts - some entities can and have borrowed and used
         | that borrowing as leverage to extract better-than-agreed-upon
         | terms to pay it back.
        
         | villasv wrote:
         | The title is fine. It's not a general purpose aphorism, it's
         | the theme of the article (using bankruptcy/defaults to profit
         | from liabilities).
        
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       (page generated 2021-10-14 23:02 UTC)