Modern Debt Jubilee

"We're already in a Depression, what we have to decide
is how not to payback all those loans" - SK

The jubilee was a feature of ancient Hebrew law. Every 50 years debts were forgiven, slaves freed, and alienated lands restored to the original owners.

The idea of a debt jubilee then is not new. There is also a modern campaign to have a debt jubilee for Third World countries impoverished by the IMF and the World Bank. See for example the Debt Jubilee Campaign.

"Dishonourable debt should not be honoured."

Steve Keen's suggestion for a Modern Debt Jubilee is that banks deceived us about the benefits of debt, and loaned us more money than we could afford, even in a boom, and we are now in a slump. At the same time the banks were financing their gambling on asset prices which caused prices and interest rates to rise. Because the gamblers had to borrow to sustain their cashflow and pay back creditors, this gambling became a big ponzi scheme. And eventually bankrupted the world.

However just writing off debt would be problematic because of how complex the system is. Steve's answer to this is to give consumers and businesses money, with the proviso that they must pay off any debts before spending.

Give money to people and business, not to banks

At the moment banks can't lend money to the private sector because the private sector is in debt to the tune of 450% of GDP. The Modern Debt Jubilee would substantially reduce this figure. Banks would be able to loan to business to fund innovation and growth. Businesses would generate wealth and employ people. They would not be crippled by debt servicing costs. People would once again have disposable to spend on commodities so retail and other sectors would receive a boost. Demand for goods and services would increase, providing an economic stimulus. Government tax revenues would improve, so any austerity measures could be softened. House prices would come down, which is bad for short term investors but good for the affordable housing crisis we face.

Stop financing ponzi schemes

Capitalism is inherently cyclical. But the cycles are made significantly worse by debt financed gambling on asset prices. Some form of prevention would need to be enacted to prevent this. Steve's idea is that once traded, shares lose their value after 50 years. He calls this Jubilee Shares.

Repeat every 50 years