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What If We Just Wiped Out All Debt?

QUESTION: Hello Marty

I am hoping you will print this in your blog.

Everyone knows that Govt’s/Banks print money out of thin air and then “owe interest” to this invented money. To avoid an interest payment death spiral why can’t all the Govt’s in the world just tell the banks to pound sand? Why can’t we tell them “Sorry….we are no longer going to make interest payments on money you invented out of nothing”.

Regards,

Julie

ANSWER: I actually get this question often. I understand that the sophistry out there makes it sound so easy. Unfortunately, this is nowhere near the mark. The bulk of the lending that leverages the money supply is involved in consumer loans. So this really would create a very unfair arrangement that reminds me of the incident with Mark Antony. Everyone talked about the bankers and assumed that Julius Caesar would rule that all debt was to be forgiven. Mark Anthony believed Caesar would do that so he ran out and bought Pompey estate assuming he would never have to pay for it (see Anatomy of a Debt Crisis it appears, only Julius Caesar ever understood).

To do what you suggest may sound simple but it would produce riots and blood in the streets. Your pension would be gone because most funds invest in debt. What if you were retiring and bought muni bonds to live on because you were told they were tax-free? Perhaps you could not sell your house to retire because the buyer could not get a mortgage so you took the mortgage. That would mean he now gets the house for free.

Trust me – it would be a bloodbath in the streets.

Bronze Age Redux: On Debt, Clean Slates and What the Ancients Have to Teach U

Bronze Age Redux: On Debt, Clean Slates and What the Ancients Have to Teach U

Photo by Zak Greant | CC BY 2.0

One of the most compelling sequences in the Oscar-winning Inside Job, Charles Ferguson’s indictment of Wall Street’s role in the 2008 global financial meltdown, involved not the banker culprits but their supporting cast. These were the Ivy League accomplices. Ferguson mightily skewered these economists for the cover they gave the sub-prime Hamptons dwelling wise guys whose rescue turned out to be a pretext for one of the largest reverse-Robin Hood wealth transfers in history. Though for the foreseeable future they enjoy their tenured posts, control prestigious academic journals and continue to prey on the unformed minds of students, the speculative financial implosion has shaken confidence in the economics academy. And through those cracks (to borrow from Leonard Cohen) shards of light are getting in. Economists once on the academic fringes – in university outposts like the University of Missouri Kansas City and Bard’s Levy Institute – are being looked to not only for understanding how to prevent bankers from setting the economy on fire again, but on how to build a social system that works for the majority.

Among the most brilliant of these heterodox economists is Michael Hudson. Coming to New York City in the 60s to study under a renowned classical music conductor, Michael switched to economics when he became beguiled by an accidental acquaintance with what he saw as the aesthetical flows inter-connecting natural and financial cycles and public debt. His biography contains elements of an epic novel: growing up the son of a jailed Trotskyist labor leader in whose Chicago home he met Rosa Luxembourg’s and Karl Liebknecht’s colleagues; serving as a young balance of payments analyst for David Rockefeller whose Chase Manhattan Bank was calculating how much interest the bank could extract on loans to South American countries…

…click on the above link to read the rest of the article…

Could/Should Jubilee Debt Cancellations be Reintroduced Today?

Could/Should Jubilee Debt Cancellations be Reintroduced Today?

Introduction

The idea of annulling debts nowadays seems so unthinkable that most economists and many theologians doubt whether the Jubilee Year could have been applied in practice, and indeed on a regular basis. A widespread impression is that the Mosaic debt jubilee was a utopian ideal. However, Assyriologists have traced it to a long tradition of Near Eastern proclamations. That tradition is documented as soon as written inscriptions have been found – in Sumer, starting in the mid-third millennium BC.

Instead of causing economic crises, these debt jubilees preserved stability in nearly all Near Eastern societies. Economic polarization, bondage and collapse occurred when such clean slates stopped being proclaimed.

(2) What were Debt Jubilees?

Debt jubilees occurred on a regular basis in the ancient Near East from 2500 BC in Sumer to 1600 BC in Babylonia and its neighbors, and then in Assyria in the first millennium BC. It was normal for new rulers to proclaim these edicts upon taking the throne, in the aftermath of war, or upon the building or renovating a temple. Judaism took the practice out of the hands of kings and placed it at the center of Mosaic Law.[1]

By Babylonian times these debt amnesties contained the three elements that Judaism later adopted in its Jubilee Year of Leviticus 25. The first element was to cancel agrarian debts owed by the citizenry at large. (Mercantile debts among businessmen were left in place.)

A second element of these debt amnesties was to liberate bondservants – the debtor’s wife, daughters or sons who had been pledged to creditors. They were allowed to return freely to the debtor’s home. (Slave girls that had been pledged for debt also were returned to the debtors’ households.) Royal debt jubilees thus freed society from debt bondage, but did not liberate slaves.

…click on the above link to read the rest of the article…

Debt Has No Consequences? Color Me Skeptical

Debt Has No Consequences? Color Me Skeptical

The entire status quo is based on the delusion that rapidly rising debt will never generate any negative consequences.

Here’s a chart of America’s national debt, extended a mere dozen years into the future: the current $20 trillion in debt will double to $40 trillion, and that assumes 1) trillions of dollars in private and local government pensions don’t implode and have to be bailed out by the federal government, a bail-out that will have to be paid by borrowing more money, 2) a recession doesn’t slash federal tax revenues, 3) Universal Basic Income (UBI) doesn’t become policy, adding $1+ trillion in additional borrowing annually–and so on.

Color me skeptical that doubling the debt in 12 years won’t have any negative consequences. Let’s start by noting that federal debt is only the tip of America’s total debt load, which is rising fast in all sectors: federal, state/county/city, corporate and household.

Total government, corporate and household debt soared from $15.5 trillion in 2000 to $41.1 trillion in 2016. (see chart below, courtesy of 720Global). If we extend this expansion another 12 years, we will have a total debt load in the neighborhood of $100 trillion by 2030. And that’s if the “recovery” news is all good.

The consensus is that all this debt will have no negative consequences because 1) interest rates will remain near-zero forever and 2) it’s all “investment”, right? Actually, no; the vast majority of this debt is consumption, not investment, or even worse, it simply services existing debt or funds speculative gambling (stock buybacks, etc.)

Recall that every debt is somebody’s asset. Debt jubilees sound great to debtors, but not so appealing to insurance companies, pension funds, mutual funds, etc. that own the debt and rely on the income from that debt to pay pensioners their pensions, settle insurance claims, etc.

…click on the above link to read the rest of the article…

The Morality and Legality of Debt Jubilee, Part I – Bullion Bulls Canada – Sprott Money News

The Morality and Legality of Debt Jubilee, Part I – Bullion Bulls Canada – Sprott Money News.

Our nations (Western nations) are rapidly going bankrupt. This is not a suggestion or an assertion. It is a simple fact of arithmetic, for anyone capable of operating a calculator, and who can understand the concept of “compound interest”. Indeed, the bankruptcy of these already-insolvent regimes has only been delayed via permanently (fraudulently) keeping interest rates frozen at near-zero – to minimize their already gigantic interest payments.

The economic outcome here is as obvious as it is inevitable. After the mass-bankruptcy which will occur either tomorrow, next month, next year, or (improbably) next decade; there will be a gigantic “economic reset” of Western economies, and very possibly the entire global economy.

debt-jubilee

This simple, inevitable conclusion should not surprise any reader. It has happened many times in our civilized history. Indeed, it has happened with such regularity/frequency that we even have a name for this economic phenomenon: Debt Jubilee. The origins of Debt Jubilee go back to (literally) Biblical times, as our societies have been bankrupting themselves, and then “resetting” for well over 2,000 years.

Having established that there must be an economic reset ahead of us, and having observed that this is a regular occurrence in our societies/civilizations; all that remains to be dealt with is how the next Debt Jubilee should be administered. As Debt Jubilee translates literally to erasing our debts; the question boils down to this: should all debt (government/corporate/individual) be wiped away, or only partially erased?

…click on the above link to read the rest of the article…

Olduvai IV: Courage
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Olduvai II: Exodus
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