Archive for November, 2010

Why dying seniors should pile on the debt

November 17, 2010

This reporter is relying a little too much on financial-industry sources. Dying with debt isn’t a dirty little secret, it’s a financial strategy that’s been well known for 20 years or more.

Dying With Debt: A Dirty Little Retirement Secret – CNBC

And while many retirees who are being quietly buried under a mound of debt may think they’re protecting their kids by not burdening them with their financial problems, if they don’t pay off their debts before they die, it will eventually become their children’s burden.

Whatever that parent owes will be deducted from his or her estate before that estate is divided among the children and other beneficiaries.

This statement makes the enormous assumption that there’s an estate to divide, and that the parent hasn’t had the good sense to distribute their assets among their kids well before their death. Because the real dirty little secret is that unsecured debts of a dead person may be the responsibility of the estate, but they’re not the responsibility of anyone else. (Even though you will read stories of finance companies and debt collectors harassing children and cousins, telling them they have a moral responsibility to pay off what their dead familiy members used to owe.)

So if a parent dies with their house mortgaged and underwater, having given away the family bric-a-brac, tapped out the checking account and put their last 50 grand of expenses on their credit card, there isn’t a damn thing creditors can legally do to their kids. No burden at all. And that’s the outcome the people who pitched this article to the reporter are desperately trying to avoid.

Of course you have to get the timing right.

Perversely, once you recognize the probability that you’re going to leave a negligible or negative estate to your kids, there’s a strong incentive to make that negative number as large as possible, because the outcome will be the same for your heirs regardless.

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Self-limiting Spam

November 9, 2010

From a message I got this morning:

How happy are you with your product documention?

Kids who want to learn will learn if you give them half a chance

November 4, 2010

Old but good

BBC News – Using computers to teach children with no teachers

“I told them: ‘there is some very difficult stuff on this computer, I won’t be surprised if you don’t understand anything’.”

Two months later, he returned.

Initially the children said they had not learnt anything, despite the fact that they used the computers everyday.

“Then a 12-year-old girl raised her hand and said ‘apart from the fact that improper replication of the DNA contributes to genetic disease – we’ve understood nothing else’.”

So the real question is more about getting more of them to want to learn the stuff that would be good for them to learn and getting anyone who might interfere with the process out of the way..

Corporate bustouts have been around a long time

November 3, 2010

Looting – Akerlof, Romer

tags: banking akerlof looting bankruptcy economic underworld

Sure, some of the details have changed, and managers with an ownership stake have gotten in on the deal as well, but they really do lay it all out. If you can get the government to guarantee your debts (or a government-sanctioned rating agency to give them a AAA rating) sometimes/often running a business into the ground is way more profitable than doing things honestly — even more profitable than just running crazy risks in hope of making them pay off. The math is simple and fairly irrefutable, and the cases are nicely done.

I also hadn’t known (shows how uninformed I am) how fraudulent S&Ls and junk bonds tied together. Without which there wouldn’t have been much of the merger madness that destroyed corporate governance.

Felix Salmon belabors the obvious

November 3, 2010

Summers’s incentives | Analysis & Opinion |

Being captured is not some kind of intellectually dishonest overt bribe, where you truly believe A but profess to believe B because doing so makes you rich. It’s much more subtle than that, based partly in the wealth and success and sterling reputations of those (like your mentor Bob Rubin, perhaps) who believe B. And it’s a survivorship-bias thing, too: if you don’t believe B, you’ll never rise to the kind of position where your opinions matter as much as Larry’s do and did.

I’d go a little further and say that capture works best on people with both a general desire to do good and the right modicum of self-reflection. If the intellectual results you achieve appeal just a little to your sense of transgression and go (maybe more than) a little against your professed beliefs in equity and the general welfare, you can be sure that they’re really intellectually rigorous. Not like those people who let their desires for how the world should be distort their analysis of how the world actually is. Yeah, right.

I think that one of Krugman’s great successes, in part because he embraces the notion of being a liberal (even though he only barely is by last-century standards), is in calling out the cult of virtuous suffering (especially suffering by other people). That cult is composed not only of the closet and not-so-closet sadists who like the idea that others must suffer to expiate economic sins, but also of those who have been abused into internalizing the notion that a world in which (other) people don’t suffer is somehow wrong — unnatural, immoral, weak and headed for disaster or whatever. That second group can only believe that its ideas are correct and rigorous (ahem) when they involve suffering. Any solution that involves good things happening to good people is per se suspect.