The Solution?

[Emmanuel Goldstein]

Worldwide Debt Jubilee?

https://www.nakedcapitalism.com/2020/03/michael-hudson-a-debt-jubilee-is-the-only-way-to-avoid-a-depression.html

[Carborendum]

9 minutes ago, Emmanuel Goldstein said:

Worldwide Debt Jubilee?

https://www.nakedcapitalism.com/2020/03/michael-hudson-a-debt-jubilee-is-the-only-way-to-avoid-a-depression.html

As a free market capitalist, I have to believe that if the government would only provide a framework, then get out of the way, the market would bring us out much more quickly than any government mandate to hand out money or forgive debt or controls of individuals of any kind.

[JohnsonJones]

Hmm, unless done on a worldwide scale, I don't think this would stop a depression or help the U.S.  The result probably would be the devaluation of the US dollar to the point that it couldn't even be used to trade for other currency, much less be held as a standard.  It would plummet the U.S. into a hole where it would be unable to borrow money (as no one would lend it after it tried to cancel all it's debts) and those in debt to foreign interests (a majority) would have the U.S. Jurisdiction over ridden if possible and U.S. interests ignored.

In an even greater problem, Banks would go under.  Many of their loans are centered around the idea of investing and spending money with the returns being greater than the loans.  The idea of people not being able to pay off these loans is enough to send Banks into deep trouble, the idea that none of the loans would be paid back at all would probably destroy the entire banking industry.  Some may celebrate that, but with that many banks going under that would put the guaranteed savings from the US (up to 100K I believe) in dire jeopardy.   They would not only have to print money, but with the addition of the other aforementioned problems above, it would make dirt on the ground worth more than a US dollar.  We'd be in a situation where a penny today would be worth 1 million US dollars of that future.

The problem is that if you spend One Million dollars (low amount, just an example) with the expectation that in 10 years that will be 1.5 Million dollars when paid back with interest, you are making 500 thousand dollars.  You've already spent that Million.  Now, if that debt is forgiven and you have only recouped 300,000 of your Million, you are suddenly 700 thousand dollars in the hole.  Multiply that by millions of accounts and no Bank can withstand those types of losses.

It's a GREAT idea if an economy could handle it.  Unfortunately (now, I am a historian, NOT an economist) our current economy today is actually built a LOT upon debt.  IT is built on the idea of paying money now to get a larger return later.  A LOT of the economy is based on that (from those that buy places to rent out, using the rental payments as mortgage payments, to those who run produce and sell in contracts, to those who run the banks...etc).  Even Hospitals work on the debt payment idea these days.

It might sound great at first, but I think it would destroy the US economy in relation to the world on a scale never before seen.  It could work if we had 50 years of warning (and everyone knew the date the debts would be cancelled so they could plan for that), but on the turn of a dime...today with how the economy is built around debt...I think it would turn out to be a disaster.

 

Edit - Now I think that if we lived a more Christian society it may work.  Christians traditionally outlawed usury or anything like it (which allowed other cultures to come in and build banks and other practices during earlier centuries).  In it, they also tried to avoid debt as much.  If we had not built our culture around the idea of debts and debt continuation we probably could do the above suggestion much more easily and it would work!  Get rid of the debts type society that our culture is currently based upon and we could probably have no problem doing as suggested.  If anything though, our national debt (in the trillions) relates very well to how the rest of our society operates (on the corporate and the higher tiers of commercial running) in general in the support of it's economic concerns.

Edited April 24, 2020 by JohnsonJones