Michael Hudson: A Debt Jubilee is the Only Way to Avoid a Depression

By Michael Hudson, a research professor of Economics at University of Missouri, Kansas City, and a research associate at the Levy Economics Institute of Bard College. His latest book is “and forgive them their debts”: Lending, Foreclosure and Redemption from Bronze Age Finance to the Jubilee Year Originally published by the Washington Post, reproduced with permission of the author.

Even before the novel coronavirus appeared, many American families were falling behind on student loans, auto loans, credit cards and other payments. America’s debt overhead was pricing its labor and industry out of world markets. A debt crisis was inevitable eventually, but covid-19 has made it immediate.

Massive social distancing, with its accompanying job losses, stock dives and huge bailouts to corporations, raises the threat of a depression. But it doesn’t have to be this way. History offers us another alternative in such situations: a debt jubilee. This slate-cleaning, balance-restoring step recognizes the fundamental truth that when debts grow too large to be paid without reducing debtors to poverty, the way to hold society together and restore balance is simply to cancel the bad debts.

The word “Jubilee” comes from the Hebrew word for “trumpet” — yobel. In Mosaic Law, it was blown every 50 years to signal the Year of the Lord, in which personal debts were to be canceled. The alternative, the prophet Isaiah warned, was for smallholders to forfeit their lands to creditors: “Woe to you who add house to house and join field to field till no space is left and you live alone in the land.” When Jesus delivered his first sermon, the Gospel of Luke describes him as unrolling the scroll of Isaiah and announcing that he had come to proclaim the Year of the Lord, the Jubilee Year.

Until recently, historians doubted that a debt jubilee would have been possible in practice, or that such proclamations could have been enforced. But Assyriologists have found that from the beginning of recorded history in the Near East, it was normal for new rulers to proclaim a debt amnesty upon taking the throne. Instead of blowing a trumpet, the ruler “raised the sacred torch” to signal the amnesty.

It is now understood that these rulers were not being utopian or idealistic in forgiving debts. The alternative would have been for debtors to fall into bondage. Kingdoms would have lost their labor force, since so many would be working off debts to their creditors. Many debtors would have run away (much as Greeks emigrated en masse after their recent debt crisis), and communities would have been prone to attack from without.

The parallels to the current moment are notable. The U.S. economy has polarized sharply since the 2008 crash. For far too many, their debts leave little income available for consumer spending or spending in the national interest. In a crashing economy, any demand that newly massive debts be paid to a financial class that has already absorbed most of the wealth gained since 2008 will only split our society further.

This has happened before in recent history — after World War I, the burden of war debts and reparations bankrupted Germany, contributing to the global financial collapse of 1929-1931. Most of Germany was insolvent, and its politics polarized between the Nazis and communists. We all know how that ended.

America’s 2008 bank crash offered a great opportunity to write down the often fraudulent junk mortgages that burdened many lower-income families, especially minorities. But this was not done, and millions of American families were evicted. The way to restore normalcy today is a debt write-down. The debts in deepest arrears and most likely to default are student debts, medical debts, general consumer debts and purely speculative debts. They block spending on goods and services, shrinking the “real” economy. A write-down would be pragmatic, not merely moral sympathy with the less affluent.

In fact, it could create what the Germans called an “Economic Miracle” — their own modern debt jubilee in 1948, the currency reform administered by the Allied Powers. When the Deutsche Mark was introduced, replacing the Reichsmark, 90 percent of government and private debt was wiped out. Germany emerged as an almost debt-free country, with low costs of production that jump-started its modern economy.

Critics warn of a creditor collapse and ruinous costs to government. But if the U.S. government can finance $4.5 trillion in quantitative easing, it can absorb the cost of forgoing student and other debt. And for private lenders, only bad loans need be wiped out. Much of what would be written off are accruals, late charges and penalties on loans gone bad. It actually subsidizes bad lending to leave them in place.

In the past, the politically powerful financial sector has blocked a write-down. Until now, the basic ethic of most of us has been that debts must be repaid. But it is time to recognize that most debts now cannotbe paid — through no real fault of the debtors in the face of today’s economic disaster.

The coronavirus outbreak is serving as a mind-expansion exercise, making hitherto unthinkable solutions thinkable. Debts that can’t be paid won’t be. A debt jubilee may be the best way out.

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  1. Stadist

    Where’s the justice in that? I have been living frugally and avoiding debt. So essentially I would (and should?) lose out because I was not willing to join the debt-fuelled spending and bubble creation?

    1. dcrane

      The argument would be that you wouldn’t have to spend many years living in a society suffering from a Great Depression. So it depends on how you measure winning and losing.

        1. Robert

          that comment nearly sent sent me to the emergency room with a ruptured spleen. genius. thank you

      1. a different chris

        The other argument, and I live just like Stadist but without the holier-than-thou attitude, is that I got money to “scrimp and save” because other people were spending it.

        I would like to see what exactly Stadist thinks he would “lose out” on that would be worse to his means of living than a civilizational crash?

      2. pete

        Stadist makes a good point. I like the idea of direct payments to everyone. For example instead of that terrible 50k student loan forgiveness just send everyone who 50k for their college. I for one have experienced an inferior life outcome because I have tried to be frugal. I think that direct payments really would be better.

      3. Anthony G Stegman

        In my view a debt jubilee would go a long way towards preserving capitalism. We need to move beyond capitalism. The price to pay likely includes an economic depression. So be it.

    2. Steven Jennings

      Steve Kenn has some thoughts on this subject. If everyone is given cash to pay down debt, then those with no debt get cash.
      in any case, we need to stop much economic activity in order to slow down climate change, so we are not lookiing at a return to the old days, they are gone forever. Probably your frugal lifestlye is the way forward, so give yourself a pat on the back.

      1. PlutoniumKun

        Its an important issue I think. There is no question that in any jubilee, people who did the ‘sensible’ thing and worked hard to minimise debt and pay it off are going to feel very resentful when they see those who they see as ‘reckless’ getting off easy. Its just human nature, and in some respects justified.

        I don’t honestly know the answer, but as you suggest, giving people the money (or some kind of voucher) directly would address some of these problems.

        1. Norb

          One important point that is missing in your argument, and which is never discussed, is what responsibility creditors must take for making bad loans in the first place. Where is their loss for being irresponsible?

          Giving debtors money directly to pay down debt only reinforces the dynamic of debt slavery. The corrupt financiers are still in power and are made whole. If you have power and influence, making loans the can’t be paid back is the reason you are in power in the first place.

          A debt jubilee is more about exercising political power than simple financial balancing.

          A debt jubilee must also be accompanied with a political reorientation. Without sound public financing and a reinstatement of Glass-Steagall legislation, debt slavery will prevail.

          The only thing I can say to people who gripe about the “unfairness” of a debt jubilee is that you are part of the problem. Such people are not thinking clearly enough about collective social responsibility, and are too individualistic.

          Defining responsibility is what is in question here. How does individual responsibly balance with ones larger social responsibility to communities and societies in which we live.

          Being a frugal, responsible citizen is a worthy goal, but in order to realize that vision, war profiteering, insider-trading, corrupt dealing politicians must be put out of business one way or another.

          The virtue in your society must be defined in some other form beyond money.

          1. a different chris

            *this* Maybe just drive all interest to zero and payment terms to about when the sun cools.

            So you still owe 100k on your mortgage, but you can pay it off interest-free over 50 years.

            On that note, I didn’t look this morning but what are gas prices? I ask because when the price of oil goes up, woah they track it immediately but when it goes down not so much. It’s a good illustration of the way people with means treat people without.

          2. Carla

            “The virtue in your society must be defined in some other form beyond money” sayeth Norb. YES! A thousand times YES!

          3. don

            tell that to someone who has put their head down, worked hard and saved for their family for the last 40 yrs

          4. Patrick

            I don’t think I agree with this assessment. Creditors are creditors by virtue of their assets. Giving everyone $50k would create a dramatic inflation which would devalue those assets. It would tip the balance of power without being quite so socially disruptive.

        2. thoughtful person

          I agree, an important issue. I’ve heard it said Roosevelt insisted that programs like social security and Medicare for 65+ be for all to avoid stigma and unfairness complaining.

          I’ve seen studies on benefits programs (i think one in Ontario) that showed the programs not universal were faurly quickly disbanded. To remain politically popular over theclong term, havecto be universally applied in some way.

          1. PlutoniumKun

            This is something I’ve been banging on about for years – where possible all social programmes need to be as universal as possible – everyone (or at least the clear majority) should see a personal benefit. If they don’t, eventually the right will find away to use peoples resentment to chip away at it. This is why means testing should always be seen as the trojan horse it is for almost any program.

            This is the core secret of the long term success of the Nordic system (plus the social programmes that exist in countries like Japan and Singapore). Its not about helping the poor. It’s about creating a safety net and high quality services for everyone.

            1. Carla

              The common good.

              Re: universal programs: the genius of Social Security is that even the rich love collecting it. Sometimes they enjoy bragging about how much they don’t need it, but they just love getting it every month. (And unfortunately, they generally get higher benefits than those who have no other source of income.)

              1. Anthony G Stegman

                Social Security as currently designed is a ponzi scheme. It will fail eventually as all ponzi schemes do.

                1. d

                  So what your saying is that insurance, 401k, capitalism, are ponzi schemes. And that no one, or entity should ever get help, from any one or any thing at all. So you will have to pay for any roads you drive, in full. No help from others. You also must pay for all the transportation for any thing you buy. And its the whole amount, not just a portion of it.

                  Is that really what you want?

            2. Copeland

              >where possible all social programmes need to be as universal as possible – everyone (or at least the clear majority) should see a personal benefit.

              Agree, but perhaps combine this with another program where being a billionaire or near-billionaire is not possible, because the 95% tax rate eliminates them. After this, everyone benefits, and those who would not, no longer exist.

              How many billionaires are there in Nordic countries, Singapore, etc. compared to USA?

              1. mikeg

                On a percapita basis Norway has more billionairs than USA. They have 15 on a population of 5 million. USA has 600 on a population of 350 million. In truth, Sweden, Iceland, Norway and Singapore all have more billionairs per capita than the USA.

        3. Steve Ruis

          Oh for Pete’s sake! People can be petty, but dwelling on the happiness of others who benefit at no expense to you is an exercise bound to be painful and stupid. So many students were trapped into bad student loans by unscrupulous colleges and cultural memes gone wild (A college education is the way to prosperity!) that a few stories of how the oppressed have been freed from lifetime burdens will wash away all of the negativity. It is unfortunate that some people will continue to dwell on the “unfairness of it all.” e.g. Fox (sic) News, but we cannot allow our future to be determined by the pettiness of people in the present.

          1. montanamaven

            I agree with almost everything you say except for the “Fox News” part. I agree that resentment is something that lives inside you rent free! It takes and gives nothing back. But seeing a young person freed of a burden that smarmy salespeople in the media and both sides of the political spectrum sold, will make me smile. There are far more “liberal” colleges than “conservative” ones that are, as we speak, not giving students their dorm money back even though the students are at home studying online.

            I have lived my whole life with little debt which was drummed into me by my Calvinist father. But if a debt jubilee helps my neighbors who are right now crying on their porches with fear of eviction, I say “bring help now”.

            As a lifelong so called Democrat who is now an Independent, there are neo-liberal rich jerks on CNN, MSNBC, NPR and on Fox. But I am finding more community spirit on some of the Fox programs than anything on the other outlets. Some of the Fox hosts can get a little Jesusee and their Business people are pretty awful but so are the ones on CNBC.
            I’m looking for things we can work on together. There is a lot of common sense amongst the people outside of the cities. I grew up in the country but close to the city. Always loved the city. But the country is where I learned to drive a tractor and go to Ice Cream Socials. My husband is a rancher. He lives by “Shit happens”, “Git ‘er done”, and “It could be worse.”
            Give some of the Fox folks a try. Yes, most of them are still neo-liberals like the MSDNC crowd, but the Fox folks are a little less dour. Bret Baier is a good news guy. Martha McCallum is trying. Tucker is the “sworn enemy of lying, pomposity, smugness and group think”.
            (And if you told me 20 years ago I would be saying this I would have called you crazy.). See people can change.

          2. kevin

            I’m not saying its not a reason to do it, but saying “at no expense to you” is just not correct. Either we tax everyone directly, or inderectly pay for it via inflation/low returns in the upcoming years.

            Would you really say Trump’s recent tax cut to corporations/the rich came at no expense to everyone else?

          3. Altandmain

            It’s a legitimate issue and he/she is not the only person who is going to be thinking in this way.

            Here in Canada, we’ve had partial student relief and those who saved up and paid early felt resentful of their colleagues. My mom’s colleague at work once joked, it’s one of the few things that makes him lean conservative. He’s not the only one. That was just a relatively modest relief (ex: his colleagues got a reduction of 70k CAD to 50k CAD). A full on student debt would have even higher levels of resentment, even more so in the US, which has a far weaker egalitarian culture than Canada (which isn’t strong to begin with).

            As PlutoniumKun notes, maybe offering cash payments to those who saved early might help mitigate this.

            One other serious problem is that the program is too friendly to the rich.


            It might worsen inequality.

            1. The upper middle class tends to go to the most expensive private universities. They get the biggest loan relief in many cases, but they also have really high incomes, so it might worsen inequality between those who studied in less lucrative career fields.

            2. Inequality between those who went to university and those who didn’t will grow.

            It’s not as simple as you make it sound. Most people don’t agree with Fox News at all, but there are very serious issues to consider. I think that a universal cash payment is a better solution to minimize resentment, but that’s just me.

            As montanamaven also notes, the sense of community is often stronger in the Fox communities too – most notably Tucker Carlson. Like it or not those are swing votes. Any serious second New Deal is going to need to earn their votes.

        4. CanCyn

          But so many people who are in debt are not ‘reckless’. Maybe even most?Unfortunate due to medical bills, working for employers who do not offer retirement savings plans, and so many other circumstances that have nothing to do with recklessness.

      2. Mikel

        There are other possible options too. Jubilee doesn’t mean no more debt, credit, banks. Thus, options for those who only got to watch their savings evaporate to save debtors could include 0% interest credit cards and loans for 3 – 5 years.
        You don’t have an environment where savers will be rewarded for a long time.

    3. teacup

      The justice is in exposing the rentier aspect of neoliberalism, the extractive financial nature of a government captured by vested interests seeking to make markets out of what are essential public services. The point of public infrastructure is to provide it either free or at cost so as to reduce the public’s potential debt overhead, meanwhile equalizing opportunity and stabilizing community. The system we have creates deadweight loss, it unnecessarily burdens people and leads to the social, cultural and distributive polarization we see today.

    4. Noel Nospamington

      Like you, I have also lived frugally with no debt my entire life. This means that after leaving my parents home, I have had to live exclusively in rental apartments. Only in my 50s can I now afford to buy property for my first time, which has been difficult in the greatly over valued Canadian real estate market.

      In retrospect, had I been willing to get a mortgage 10 years ago, my net worth would be will over $1.5 million dollars higher than what I have now. However I am a single women working in an unstable industry, and simply I was too scare too take on debt.

      But I also never imagined that Canadian real estate would be saturated with wealthy buyers both domentic but also increasingly foreign, who consider housing an asset to park their money.

      I never received a bailout for missing out on the corrupt real estate boom, and always insured I had enough cash on hand to weather any storm. So if those who are irresponsible with their money get a government bailout, than I want my equal share too. Especially since I have always paid more than my fair share of taxes, and was never able to obtain any housing or mortgage related deductions.

      1. Off The Street

        Frugality can be a generational trait, when one’s parents and grandparents told of life in the Depression or in similar straitened times. Hearing such stories around the kitchen table has an effect on a young person, causing some reflection prior to spending on anything. That same concept applies to viewing neighbors or others who spend without apparent care, evoking an ant-and-grasshopper feeling.

        Resisting the ubiquitous messages to keep up with the Joneses, or whomever, takes some more reinforcement in the digital age. Fortunately, one develops thicker skin over the years after hearing a few thousand too many admonitions to buy. Channel an inner Thoreau, or choose another, and keep accounts simple.

    5. Paradan

      So lets say small pox was still a thing. Maybe you have scars, maybe you’ve lost a friend or family member to the disease. One day, a group of scientists announce to the world that if we give them 100 billion dollars over the next 10 years, they can eradicate the disease for ever,and no one will have to suffer from it again.

      Are you really going to stand up and shout “That’s BS! I got smallpox, I’ve lost a friend to it, and you want to take my tax dollars and just give everyone else a free ride?”

    6. jackiebass

      This is the attitude of a self centered person. I hear this argument all of the time. Why help others when I won’t benefit from it? What ever happened to people caring about others? Sad, sad and sadder.

      1. Temporarily Sane


        It’s really sad and pathetic to see people conditioned by an inhumane economic system to bitterly denounce any measures to benefit those less than fortunate themselves. How crudely selfish can you get?

        It is also a cop out to call this vile attitude “human nature.” Appeals to human nature, while not always illegitimate, very often reflect the values of the time and serve primarily to legitimize and uphold the status quo.

      2. Elizabeth

        The argument that I’ve lived my life debt free and frugal reminds me of the argument against universal health care. Someone says that I’ve lived my life trying to be healthy, took care of myself, ate healthily, never smoked, etc. Why should my tax dollars be spent on someone who smoked, is obese, etc. To me it boils down to – what kind of country do we want to live in. Personally, I don’t want to see 3/4 of the country suffering from crushing debt (which won’t be repaid), people suffering from health issues that they can’t get treated for and more lives lost to despair.

    7. Shiloh1

      Looks like Michael Hudson joined Elizabeth Warren I’m laughing in the face of The Angry Iowa Dad who worked his ass off to pay his kids’s tuition and not getting any loans. Same with those without mortgages or who are paying them.

      How put this, instead of the corporate / TBTF bailouts everybody gets a check for $200,000 from Treasury. Must be used within 60 days to pay off debt, anything left over one gets to keep / deposit for savings, or spend as they please.Applies to all, even those with little or no debt. How much would this have cost in 2008 vs all of the Fed magic printing shows of the last 12 years?

      After that, no gov involvement of any kind in student loans or mortgages.

      I know that I would not be spending with airlines, casinos, tour boats however. Would not be using any TBTF banks, either,

      I am not saying this will cure any virus, but as a counter to those who will not let a good crisis go to waste.

      1. Edr

        Approx $2,000 Trillion to give it only to 100 million. Population is 350 million. Govt could maybe give $20k per taxpayer or voter or head of household, to be used to pay off any loans first as a requirement

          1. Randy Middleclass

            Mint the coins, won’t need to be any discussion about Fed gov “debt”. $30 trillion doesn’t really seem that much, to free so many people from debt tyranny. What a boom that would lead to, a modern Renaissance.

        1. Synoia

          Do you read Hudson’s work? Or read the articles here about MMT?

          If you had, you would understand that “Government Debt” is a fiction. Who is the creditor? Who can demand repayment?

    8. DavidP

      Stadist where is the justice in bailing out failing businesses Banks, Airlines, Private Equity etc. Where is the justice in favoring the wealthy class when most wealth is created by Government favoritism for the the few well connected citizens. As to frugality for those who consider it a virtue such as yourself where is your condemnation of the government that encourages debt. Think George Bush who during war time told the American people go out and buy things equating the taking on of debt as patriotic. Living frugally is admirable but deep down it is a choice a personal choice. My wife and I live the frugal lifestyle but it started out as a conscious choice. It has served us well but it is only one of many choices that people can make it does not either my family or yours superior to others.

    9. Ignacio

      In the case of my family it is worse than that. We are not only not indebted but have some rapidly shrinking savings which in some sense is even worse by comparison. Should the savings of those that have been living within their means be saved? If so, to what extent? I don’t mind very much if “loosing” because I live more frugally, I would have opted for that option even if someone promised that my debt would be cancelled. Knowing that I might have been able to take some more risk and tried more aggressive entrepreneurship.

    10. jefemt

      Are you more comforted with targeted Jubilee, like the 2008 Wall-street bailout by
      Hank “The Panic” Paulson?

    11. lyman alpha blob

      There are benefits to everyone with a debt jubilee.

      If you are a merchant, cancelling debt will give people more purchasing power. If they don’t have a mortgage on an overpriced home to pay off, they can then buy more things from you.

      If you are a buyer, merchants without loans to service can sell goods for less.

      Unless you’re a banker, a debt write off benefits everyone. And I doubt anyone is going to feel too badly for the bankers as they have had a very good run the last few decades. Time to get back to the days when bankers were on the golf course at 3:00.

      1. JTMcPhee

        And when there was Postal banking, and numerous small local banks and savings and loans. Though of course once George Bailey dies, the Mr. Potters, who like the “poor, you have always with you,” will be circling for the kill.

        I’m lucky to have no debt but a small mortgage. Took a lot of effort to pay down the debt. I have no resentment and am a booster of the Jubilee.

        Look at the people who are pushing back the hardest at the idea, the creditors/rentiers who have looted not only us mopes but the planet we live on. These are the people who insist that bond holders in failed businesses and ripoff “loans” to whole companies are ENTITLED to collect all the usurious interest on their “investment.”

        Bonds, like stocks, are risky paper. There’s not supposed to be some guarantee that the bond holder automatically gets his principal back, let alone interest on toxic debts or any bond debt that depends on all the conditions and vicissitudes of The Market. But bond holders almost always find a way, because money and lawyers and legislature capture, to go to the front of the line and not only get the biggest slice of any failed-business carcass or corrupted government system, they often get the “bailouts” that are far worse than a Jubilee — taking real wealth from the rest of us, dumping the debt and the burden of re-making a depressed economy on the little people.

        I and my wife will not resent the Jubilee relief from the vast toxic debt burden that is drowning and alienating the vast mass of mopes.

        Right now, as pointed out in today’s selections, there’s descriptions of what the rentier and looter classes are doing to choke the rest of us to further strip every bit of wealth from us and make “recovery” vastly more problematic, even as we have trouble breathing with viruses and out-of-control immune responses strangling us.

        “Forgive us our debts, as we forgive our debtors.”

    12. Dan

      I am with Stadist on this one. Either something goes out to everyone, or it doesn’t go out.

      I don’t have an issue with people being forgiven for student loans in which they have equivalently paid the principal back. But student loans were used for stuff OTHER than tuition – spring breaks, iphones, and I don’t think it is fair for the rest of us to subsidize that (and far more than the ‘free tuition’ mantra as well – which I support).

      I don’t have an issue with addressing debt incurred from getting raped from the health care industry. Hopefully assuming we also get past private industry out of it and bending us all over “because we like our private insurance and private equity profiteering”.

      A full scale debt jubilee just perpetuates moral hazard of people (corporations) running up debts (buying back stock), and someone will be there to bail them out and socialize their losses.

      f-that. grow up.

    13. Will Shetterly

      Stadist, justice has nothing to do with making sure everyone else suffers in the same way we did. The goal is to make a world where life is easier for those who follow us.

      1. Kevin Li

        I think the point is that:

        1. “I put a lot of effort into staying debt free and maybe even accumulating savings.”
        2. “The other guy did not put in as much effort and got into debt.”
        3. “Therefore, my net worth should be higher. Whatever the government does to help those in debt must maintain that inequality absent any significant effort by the debtor to increase his own net worth.”

    14. clarky90

      Hi Stadist
      You, obviously, are “wise and old”.

      We are surrounded by high net worth predators; who enthusiastically mesmerize the innocent/trusting into entering baited traps. (Gingerbread Houses).

      Would you hear the cries of Help! and rush to rescue Gretel and Hansel? When Push Comes To Shove, of course you must!

    15. Susan the other

      In connection with debt jubilee, there have been proposals (maybe Hudson and Keen, can’t remember who all) which consider giving the “frugal” debt-free citizen a cash bonus.

    16. lordkoos

      We have no debt at the moment, but I would have no problem with others being relieved of their burdens.

      It’s a selfish person who fails to understand that everyone does better when everyone does better.

      1. campbeln

        As I sit on the porch of my small house in old clothes, waiving to the neighbors driving away in their 35ft RV towing their jet skis heading off to one of their many annual trips to the lake…

        Savers need to be recognized as well, somehow.

    17. Michael Kaplan

      First, you do not “lose out”. You’ve benefited by not having a large burden of debt hanging over you. You do not face personal ruin for decisions you made years ago.

      Second, many people are in debt simply because the bottom 80% of incomes have been stagnant or have shrunk (e.g. industrial workers) in recent decades. People have gone into debt largely to cover basic expenses that their shrunken incomes can no longer pay for, not to buy outsized homes or take extravagant vacations in Shangri La. Do you really fault people who took out large student loans just to pay for education?

      Third, lenders and corporations have encouraged private debt as a way to juice their profits. Why should they not pay some of the cost of their own imprudence? Remember, debt is a contract between two parties.

      Fourth, and most importantly, high personal debt levels discourage economic growth, which hurts EVERYBODY, including you.

    18. Daryl

      Ive also lived without debt. However, it seems I am one cvd hospitalization away from having my substantial savings wiped out and then go into the negative.


      This is an important, if conventional response many social safety net proposals.

      So…I took this opportunity to write an extended response, I’d say is worth a look. You tell me whether that’s so.

    20. herman melville

      I don’t see how you are “loosing out” from stopping a depression. You lived frugal so you could watch the world burn?

    21. KFritz

      Are bankruptcies fair to debtholders? A debt jubilee is the equivalent of a mass bankruptcy. And life is sometimes unfair and unjust. That said IMLTHO, it would be better if a debt jubilee was administered on a case-by-case basis. That would involve expense, time, and effort that’s unlikely in the present environment.

      1. JTMcPhee

        Society has judged that bankruptcy is a necessary remedy to keep at least some debt under control and keep people moving and working. Debt holders generally are in a far better position to price the risk of default (or the likelihood of another government bailout) into their transactions.

        Go sit in a bankruptcy court room for a while, if you are allowed — it’s not what most people think. A whole lot of “bankruptcies” get turned into debt slavery in the form of “wage earner plans,” and the process for individuals is pretty horrid. Not the case for corporations, especially the ones set up by vultures and “private equity,” to unload privatized looting leading to entity debt, and legalize the theft of pension funds and other assets. Lawyers also tend to get paid first…

        And there’s the Biden Bankruptcy, where you get to continue to try to pay usurious student loans where the principal never seems to decline, under strict supervision that never seems to be applied to corporate bankruptcies…

    22. bold'un

      Biblically, you need a land redistribution as well as debt forgiveness for a true Jubilee. So if A does not own a house (because of fear of mortgage) while B has borrowed to buy two, B’s debt is forgiven but he has to share his second house with A…
      The problem remains that pension funds who were relying on interest payments are then in deep doo-doo.

      1. JTMcPhee

        And gee, who set up and administers most pension funds, and who loots those funds for private profit? Needed: a sufficient “Social Guarantee” of all basic needs, an end to usury, a return to those privileged things called corporations and other liability limiting devices having to establish their social utility, every year, or be dissolved.

        1. Yves Smith

          Don’t make stuff up. Look at CalPERS. Far and away the most significant remaining pension funds are for government workers, and they were set up and are administered by them. And as you can see from CalPERS, supposedly the best of breed, they are not run by Wall Street. The CIO has masters in financial engineering from Haas, a good but not great MBA program.

          And ex private equity (a very sore point) CalPERS fetishizes minimizing fees and costs, as in what it pays to run its in-house investments and what it pays to outside managers.

    23. Anthony G Stegman

      In order for a large scale debt jubilee to be both effective as well acceptable to a majority of the population is to go full communist. That is, a complete redistribution of total global wealth. No more billionaires. No more millionaires. No more mansions, private jets, yachts, multiple homes, etc…It’s not a bad idea at all!

    24. Nicholas Hazen

      Ah, the voice of entitlement… so American. If your social contribution is measured as “living frugally and avoiding debt” says to me that you haven’t been contributing much to the economy at all – an economy which is driven almost entirely by debt and has been for over 40 years and counting. That is why the national debt of the United States is more than $23 and a half trillion dollars.

    25. Merf56

      How would you possibly be hurt by a debt jubilee? Other than be a little annoyed you had no debts that needed forgiving? Wouldn’t you benefit from a healthier economy as well? Sound like you are just jealous someone might ‘get’ something you didn’t need but wanted anyway.

    26. H.Alexander Ivey

      I cry fowl, Stadist.

      First, you deliberately miss the point of Hudson’s argument, ie. when is it right to pay back debt, and the problems with trying to pay debt that can’t be repaid in like terms.

      Second, you came in first with a cheap, unthought through shot designed to sidetrack Hudson’s argument.

      Third, you were the first to post and with a too short argument to address any meaningful issue.

      I say fowl.

    27. TomDority

      How would you lose out – what would you lose? – You have not had to live with crushing debt – so what have you lost?
      I think it is great that you have been living frugally and well I hope.
      A lot of people are born into a world with costs of living far above actual cost with reasonable profit for the things necessary for living – Food, Water, Shelter, Medicine education etc.
      Everyone has been working hard but asset prices have have outstripped incomes directly because of speculative, non-productive, non-real “investements” driving asset inflation which are the laziest way to make obscene money while raising the cost of living and doing business for everybody else… and most important in my view – is that the asset inflation is totally enabled by the tax favored financial engineering driven by a captured government …. captured by the predatory financial system – the same one that tells us we can’t afford anything like healthcare or saving the planet.
      So for those not yet born — tough luck – the creditors are once again doing what they always have done – looking for the easy way to destroy civilization — not that they consciously want to do that destruction – but because in requires the least work and has been the lazy way to the top.The financial speculators who add no value (steal value) do a great dis-service to those very successful individuals who have put in very hard work to get where they are through economically productive great work. Those good companies and workers have the extra burden of the invisible taxes imposed by speculators who are directed to what they do by tax incentives enacted by their captured lawmakers.
      Taxes are meant to deter activities – or at least should be understood as such – So why do we deter workers so much or productive companies and instead deter financial predation and asset price inflation

    28. Mo's Bike Shop

      How much money was your Equal Attention Check made out for when TARP was paid out? Was it more or less than the check you got for QE?

      I guess I was snoozing when the Feds performed that little act of justice.

    29. Michael C.

      Well, then nothing would materially change for you and you won’t be affected. What benefits accrue to others would just be in line with taking pleasure in the good fortune of others. You actually gain in this situation.

  2. peter brown

    At least René-Thierry Magon de La Villehuchet had the decency to commit suicide when it all blew up. He locked himself in his office, slit his wrist, and thoughtfully placed his arm over a garbage pail to avoid leaving a mess.

    Having gorged on plenty of the $250 trillion of debt our wunderkind Central Bankers created, today’s grotesquely over-leveraged Hedge Funds demand, and fully expect, to be bailed out.

    Confirmed: Fed Bailed Out Hedge Funds Facing Basis Trade Disaster

    1. Susan the other

      But the guys making all the money hand over fist were also caught up in an absurd system.

  3. Norm de plume

    Justice takes a back seat to survival. And anyway, you and generations of Stadists yet unborn would not lose out, because you would all have a far better chance of a decent life in a relatively peaceful and prosperous nation. As opposed to a charnel house.

    And in any case, Steve Keen’s Modern variation on debt jubilees aims to credit savers to the same level as the debtors – the debtors must pay down debt and the savers can save if they wish, or spend their share back into a reviving economy. Businesses get back to their feet, all concerned pay taxes, hopefully designed to encourage reconstruction and sustainability and discourage rentier parasitism and the fragility it so obviously breeds.

    How are we going to get thru this without something like what Professors Hudson and Keen advocate? I am wondering how you feel about Boris Johnson’s 80% wage guarantee? Is that unfair too? This massive challenge needs massive responses and we cant keep doing what isn’t working.

    I admire those who have managed to plan successfully for a rainy day, and it is I’m sure often due to the possession of personal virtues not all of us are lucky enough to share, though very often in my experience it is not. Very often it is simply certain attributes, obviously being born to the purple being prime, but most of the others are tolerably unlovely.

    At any rate, the point is, moves to make distressed debtors whole in such a historic crisis is a measure for ALL of us. It is quite simply prudent, even if it is from some perspectives unfair. Survival beats justice.

    Who knows, maybe one day, thru no personal vice or virtue of your own, you’ll find yourself on your last legs. You might be a bit less miffed about debt relief then.

    1. notabanktoadie

      Steve Keen’s method is the way to go BUT let’s note that Keen would place restrictions on the banks to prevent them from blowing new bubbles.

      However, much better than attempting to regulate depository institutions, we should responsibly but completely DE-PRIVILEGE them in an ethical manner that leaves them 100% private with 100% voluntary depositors – this would greatly reduce their ability to “safely” create new deposits and drive the population into debt again.

      1. Susan the other

        That’s a good idea. One big question is how do we change the system because we are definitely idiots if we let this happen again. Because making them 100% private will not stop the instinct to hoard. It will only protect society to a minimum level – one that does not impair anyone or the economy.

        1. notabanktoadie

          Making banks 100% private means they would have to PAY (i.e. negative interest) for the use of the Nation’s fiat, much the same as any large user of a public utility. That should discourage large scale fiat hoarding.

          As for individual citizens, they should be shielded from negative interest but only to a reasonable account limit via inherently risk-free debit/checking accounts of their own at the Central Bank itself. That should discourage small scale fiat hoarding while allowing citizens to accumulate legitimate risk-free savings.

          Accounts for all citizens (at least) at the Central Bank are also needed so that private banks depositors are 100% voluntary and not, as now, forced to use one member of a usury cartel or another.

          And the cheery on top is an equal Citizen’s Dividend to replace ALL fiat creation beyond that created by deficit spending for the general welfare. This should also discourage hoarding in an ethical manner by precluding lazy, risk-free real gains from price deflation.

  4. The Rev Kev

    Yes to debt forgiveness but this is only half the answer. It is really treating only the symptoms of a sick & malformed economy. Unless you restructure the economy that led to this massive debt overhang, give another twenty years the same old level of debts would be back in place again with the same old problems that would engulf the next generation. Nothing really changed after the 2008 crisis and in fact the same system was doubled down on. Unless the problems are fixed this time, you will eventually have an implosion of the economy down the track. That or a 1789.

    1. norm de plume

      Not sure we have 1789 in us any more. I sense more whimper than bang, but then my family calls me the ‘glass half empty man’ so to paraphrase MRD I would say that, wouldn’t I?

      Lots of little electronic bangs perhaps, but a Big Bang? Hard to see.


      1. Dune Navigator

        the Big Bang is coming by ruinous historical necessity: when peaceful change becomes impossible, … and we realize are all Puerto Rico/Flint, MI/Boone Co., WV./Libya/Honduras

    2. Edr

      This is definitely the most important in my opinion too. Re_establishibg Glass Steagall so investment banks with their casino bubble and burst practices don’t destroy the economy again, for a minimum.

      And no bailouts nor subsidies to any industry without mailing the American people a check for the same amount, big preventive to corruption.

  5. jackiebass

    It would help but isn’t the thing that will solve our present virus problem. The economic effect will persist long after the virus is gone. Economic policy encouraging debt to drive the economy is coming home to roost. Perhaps previous economic policy that didn’t encourage debt , would have prevented us from having the disaster about to unfold.

  6. Astrid

    No. If they are too in debt, bankruptcy is the appropriate avenue to relieve the debt. All this debt jubilee is from a time when debt was restricted and bankruptcy wasn’t available. It is now available so use it.

    Sure, loosen up personal bankruptcy laws, but someone who borrowed more than they can pay shouldn’t get a house or car for free, when their more responsible peers get nothing. Otherwise you’re introducing moral hazard for future consumer behavior just as it’s already happening for corporate borrowing behavior.

    (Corporations who received bailout should be nationalized, all of their management made to reapply and reinterview for their jobs on panels that include their future subordinants and have strictly enforced salary caps based on ratio to lowest paid hourly worker – contractor or employee, and all equity and bond holders knocked to zero. In the future, non-TBTF companies can be spun out as employee cooperatives with prohibition from ever privatizing or selling to a private entity. TBTF companies can be broken into smaller chunks or remain nationalized.)

    If you want to stimulate the economy, give everyone the same amount of money until you reached the state you want. That’s far more fair and mechanically easier than debt forgiveness.

    1. Jesper

      I couldn’t agree more.

      The TINA in the headline of the article….. It is possible to give money to all, the claim that there is no option but giving it only to the borrowers is clearly and obviously false.

      It is amazing to see how the ones who are asking for all to get the same are called selfish by the people who argue for giving money to everybody but the poorest. The poorest would get the crumbs from the table and the ones who would get the most have no problem in blocking help for the poorest as they themselves would only get what the poor would get.

      The debt jubilee is designed as a gift to the ones who got to borrow the most – the ones who where given the biggest loans and those who got the biggest loans are the ones in secure and well paid jobs. Bailing them out and letting the worst off in society get the trickle down, the spillover, the crumbs off the table might be said to be many things but calling it fair is not one of them.

      1. Shonde

        Thank you for your comment. Since the “poor” in most cases are never able to obtain credit to any degree, their debts would be minor in comparison to “middle class” debt. Can we for once not shaft the actual poor among us?

      2. bayoustjohndavid

        Apologies if this is repeat — I couldn’t tell if it posted while I was trying to edit something

        Your comment comes closest to my thoughts, but I have a minor disagreement:

        “It is amazing to see how the ones who are asking for all to get the same are called selfish by the people who argue for giving money to everybody but the poorest”

        I think that’s an overstatement, I don’t believe it would give money to everyone but the poorest. My guess is that a debt jubilee (if poorly designed anyway) would primarily help the top 10%-30% .

        There are legitimate reasons why most people would benefit from student loan forgiveness — student is a major threat to property values and ~2/3 of Americans own their home, also student debt has facilitated the move private equity into dentistry, medical practices, and veterinary practices* with predictable results (I won’t repeat links that I got from this site). But to get self-righteous because your trickle-down program benefits more people directly than Republican trickle-down is a little much.

        Roughly 30% of the country went to college, roughly 2/3 own homes and roughly 2/3 of homeowners have mortgages,** so I’m admittedly a little fuzzy on who would benefit the most from debt forgiveness. Obviously people with mortgages & student loans, but my preventing a collapse in the real estate market wouldn’t it benefit all homeowners? Like I said, a minor disagreement

        On the plus side, it might increase class consciousness. People born after 1964 who don’t have big mortgages or didn’t go to college might stop falling for the “don’t blame my class, blame their generation” opinion pieces written by rich venture capitalists (Bruce Cannon Gibney) and graduates of expensive private universities (Jim Tankersley, Laura McGann).

        *student debt makes it difficult or impossible for young doctors, dentists, and veterinarians buy the practices of retiring doctors, etc.

        Reply ↓

    2. Carla

      “bankruptcy is the appropriate avenue to relieve the debt”

      Those who borrow for college do not have that avenue.

  7. MattJ

    Weird that you left massively underfunded pensions and health benefits off your list of large debts in arrears and likely default. An effective debt jubilee will leave retirees, whether pensioners or self funded, in dire straits.

    1. Samuel Conner

      At some point, it may be necessary to fold the underfunded State employee social insurance (medical and retirement) systems into an enlarged federal system, and US government can certainly afford to “fund” that, since dollars are created by the government and can be as plentiful as our rulers want them to be. The “funding” problem is not economic, but political.

      Self-funded retirement may be very hard for most private sector workers in future, if “growth” stagnates. Some on the left want to see SS expanded in light of this reality. That, too, is within the ability of the Federal government to fund.

      Of course, there is an economic problem, too — do we, or will we, have sufficient real physical resources to provide medical care, housing, food, etc to future retirees? We’re certainly facing physical resource constraints on medical care at the moment. One would like to think that such capacity limits are remediable with wise governance. Perhaps our governance will be wiser in future.

      1. jackiebass

        You already have a version of this. Unfortunately it gives people only a small part of what they are getting or promised. When you talk about the ability to fund that presently exists. It’s only a matter of where you want to spend the funds. We have the funds. Now we spend too much of our funds on war making. Just look at what is spent on things like new airplanes, ships, and bombs. I wonder how many pensions could be funded with the cost of one of the new aircraft carriers that still isn’t functional. The same with the cost of one nuclear weapon, if used would destroy the planet. Helping people doesn’t make anyone rich so we don’t help people. Instead we spend on things that will make a few wealthy. We have the best government money can buy. Ike a military man and president warned us. We ignored his warning so we ended up like we now are. You reap what you sow.

  8. Sound of the Suburbs

    Another example of debt deflation.

    The IMF predicted Greek GDP would have recovered by 2015 with austerity.
    By 2015 Greek GDP was down 27% and still falling.
    The money supply ≈ public debt + private debt
    The “private debt” component was going down with deleveraging from a debt fuelled boom. The Troika then wrecked the Greek economy by cutting the “public debt” component and pushed the economy into debt deflation (a shrinking money supply).

    Richard Koo worked out what was really happening in Greece, as you can see in his video (above).

  9. Samuel Conner

    The thought occurs that the adaptations in governance and social organization that are required to either contain/eradicate (assuming that is still possible, which it may not be) the pandemic could function as a useful “dry run” for the even greater efforts that will be needed to mitigate or (if possible) reverse, or in the last resort adapt to, climate change.

  10. Brooklin Bridge

    As others have pointed out, a debt jubilee solves one part of the problem but because the coronavirus is novel and therefore the need for isolation is ongoing for possibly a year or more, there needs to be more than just debt forgiveness. There are already millions of people without any income at all or the means to produce it since jobs are often social, in the physical sense of proximity, by nature. These people -most of us- need cash or material assistance every week to survive. For a country as twisted and wrapped up in the problem of me first vs. the well fare of us, in the US (the us part of that), this is going to be a very hard, wrenching slog.

    As to the justice, or injustice, of those who play by the rules, it’s an excellent question and the answer seems always hard fought and rather personal, except suddenly in instancers where great social upheaval suddenly take precedence as Nom de Plume points out quite well. I don’t have the answer, but I’ve noticed commenters on this site (and in my own life) who I suspect provide good clues in that their lives seem always rich or a little richer, regardless of circumstances, not to say they wouldn’t be happier, less worried, etc., with a little more “justice”.

    1. Susan the other

      distribution is a problem. I can see how they can send out checks to everybody logged in at the IRS and/or unemployment agencies; and forgivable loans to small business – but how do they fund people getting by on odd jobs under the table or the 500,000 or more homeless? One way to handle the homeless is to send money to the states for that specific purpose – to house/feed/medical the homeless. To that end the Fed just announced it would buy Munis – that is something it has avoided like the plague. Ugh, all those filthy rabble. Can anybody else hear the cluck clucking of chickens coming home to roost?

  11. GlobalMisanthrope

    It doesn’t seem to have occurred to most people that the global economy is being intentionally crashed. Why would the elites permit that? Because they know they’ve sucked the body dry. An “organic” crash was heading toward us like a wall of water and it would have caused uprisings all over the world. This virus is an exercise in containment. There will be others.

    A debt jubilee of some configuration may well become part of the plan, but I wouldn’t welcome it necessarily. Not because I think it unjust, but because I think it will be used to further consolidate corporate/state power. We’ll have to trade something for it. Probably many things.

    Don’t get me wrong. I don’t think any of what elites are doing will be sustainable in the long run. The balance will tip, but not soon. I’m sad because I’m 60 and there will be absolute hell to pay in the meantime.

    1. DHG

      Someone who gets it, I knew the virus was cover for this and even more since day 1. I wont be ruled by fear and will approach all with logic and critical thinking. So many are spreading fear all over the place when its so unnecessary.

      1. GlobalMisanthrope

        Calm thinking, yes. And gardening. It’s what we’re built for! I’m totally focused on loving the best I can and making my life so small (and pleasing to me and mine) that nobody will want what we have. Best to you.

    2. Brooklin Bridge

      Agreed, the coronavirus wasn’t put here for our elite to learn something so much as it came about because they have not learned it, or have unlearned it, but that said, your version of the unlearning seems over the top or unnecessarily complicated. Simple greed describes our elite more nicely than diabolical.

      1. GlobalMisanthrope

        Greed at that level is diabolical. Weird to me that you think what I’m saying is complicated. It seems very straightforward to me.

        I’m curious what you think is discussed at Davos and Jackson Hole.

        1. Susan the other

          Davos and Jackson Hole? How to maintain the profits and power of the elite. Why else would they congregate so publicly, trying to make it look like they are designing the prosperity of the future.

          1. Brooklin Bridge

            Yes. They are more or less of a one pony show: more profit and shouldn’t be credited with the smarts for diabolical schemes. To paraphrase something Yves said recently, or mangle it, Don’t attribute to malevolence that which can be explained by stupidity.

    3. Noone from Nowheresville

      So many “people” keep saying that Trump is criminally incompetent. What a distraction that is. When was the last time we had a competent federal government response? Who what was competently saved?

      The whole criminally incompetent meme implies that if only Trump were replaced then things would get back to normal. Gee, that has all the flavors of RussiaGate and UkraineGate right there in the forefront. Plus “normal” I do not think that word means what “you” keep saying it means.

      Chomsky is right. The corporate liberal’s propaganda responses are much more interesting to attempt to unravel.

      So this crisis will be used perhaps even drawn out. Although to be fair the virus won’t care one way or the other since it’s more zombielike in choosing its hosts.

      I agree that I don’t think this will be sustainable in the long run but we’re barely begun our journey into the worldwide pandemic. We barely see the tip of the iceberg of possibilities that the “elites” have been preparing for for decades. Yes. there is all kinds of incompetence in their ranks and their plans. They aren’t nearly as clever as they think they are. But the one thing we can be sure of is the creme de la creme have someone competently and effectively working on their behalf. The other thing we can be sure of is that there will be some very clever grifters / feral hogs who will also power their way through.

    4. cnchal

      > . . . the global economy is being intentionally crashed.

      This is a line of thought that has no logic. This virus was not planned as an elite exercise in furthering their pile of money and power. Look at the despair of stawk holders as reality asserts itself. The big criminal banks of Wall Street have been cut nearly in half, with more downside to come. This looks like elites losing control, more than some planned exercise in inhumanity.

      Granted, the multi trillions in bailout money will no doubt be scarfed up by the elites, but that is just them taking advantage, politically, of whatever situation is presented.

      Another line of thought is some kind of CT to force everyone to stay home and become super controlled, and the subsequent crashing of the economy is planned by, well I have no idea who. That keeping bars and restaurants closed during the duration of this disaster is a deliberate attempt to further that control and that if these shutdowns were not happening the economy would be OK.

      What I never read by those that believe that is, what would the economy look like were this virus allowed to run rampant in society unchecked. Would that save Disneyland, cruise and air lines, and all the other closed businesses? Right now, we have Amazon whipping their warehouse workers, FedEx and UPS whipping their delivery drivers, making them work when sick, guaranteeing that the duration of this is indefinite, while they make each other sick, while Bezos’ pile get’s higher. These desperate employees work side by side, crowded into lunch rooms with no time to even take a crap, they are pushed mercilessly by the managers, which are themselves pushed mercilessly by their higher ups, until you get to the top of the heap, which get’s the profits from the chain of cruelty.

      The global economy is being stupidly crashed, but shutting down where people congegrate willingly and leaving workplaces such as Amazon, Gibson Guitars UPS and FedEx, still churning stuff out while spreading this thing far and wide is an elite and political failure. Not a plan at all in my book.

      Still flying + still shipping crapola all over the place = Total Fail

  12. templar555510

    Anyone who reads this blog regularly like me and most of you commenting on here who own books analysing the bailout of the 2008 GFC take them down off your shelf and burn them . The financial future isn’t going to look anything like the financial past. Period.

  13. Debt Junky

    This is a great idea, but set the law that there is a debt Jubilee every 10 (100) years, so that I can starting spending as much as possible now, take out as many loans as possible (new house, car, and student loans) and risk everything (buy FANG stocks) knowing that it will all be forgiven in 10 years.

  14. Mr. Magoo

    Too much discussion amongst the choir. I am a Bernie supporter/contributor. Seems to be above average support for Bernie on this site.

    However, Bernie’s ideas on debt forgiveness for what might be considered more ‘altruistic’ causes such as tuition and unexpected medical expenses doesnt appear to have been received very well. You might say, it was part of the failure of his campaign.

    So now the proposal is to cater to the people who bought big screen TVs and F-150 trucks when they really couldn’t afford them? It doesn’t matter that corporations got away with socialized losses, stock buy-backs, etc – most of the population isn’t aware of that thanks to the corporate media.

    Just give everyone the same amount – and sort it out at the end during next years tax season.

    1. edmondo

      We used to have a debt jubilee. It was called bankruptcy. All the debts disappeared and you got to keep the house and start all over again. Even lenders were protected because it was a legal process and the record was available for all to see. Why not ask Uncle Joe to bring it back?

      1. Mr. Magoo

        Relief payments and bankruptcy make sense to me – as well as palpable by a majority.

        Uncle Donald seems to have a special place in his heart for bankruptcy as well, so don’t have to depend on Uncle Joe.

    2. Susan the other

      Debt and debt service should have contracts with release clauses. If I can’t pay it I won’t pay it. And the justification for allowing private debt at all should not be based entirely on ones current ability to pay it back until it includes a clause of forgiveness for whatever act of god might also occur. All those docs we have to sign and income we have to prove are fine, but they are worthless when there is a worldwide or national emergency or even when we have a national recession that is so mishandled by some rube like Obama that we are thrown into endless misery. When we brainlessly bestow money itself with an intrinsic value of its own and we then equate money with debt we are setting up a dictatorial oxymoron of debt, with no nuance whatsoever. Money is mechanically introduced into the system by debt accounting, but money is not debt. Money at its simplest is human cooperation. But our system of money destroys itself in any crisis. Which is far more expensive in the long run that distributing it in times of extreme need.

    3. Tomonthebeach

      Odd that I did not see a suggestion for a partial jubilee. The reckless financial sector started this mess – again. They should bite the bullet this time; not taxpaying citizens. We could wipe out 50% of student debt from any federal program (fair to those who paid their debts off), demand banks forgive the next 2 years of mortgage debt (it is a small profit cut at worst), and 100% of unsecured credit card debt up to say $10K – a penalty for reckless credit issuance – deserved pain to WS. That would give Main Street breathing room for several years and it would not seem as unfair to those who have been frugal savers and living without $50K F150’s and $35K bass boats, $2K TVs, etc.

      As for corporate bailouts. This shit’s gotta stop. Unless Corporate America feels some pain, we will be living in 2Big2Fail-America, forever bailing out billionaires. Take American Airlines. They want billions in corporate bailouts. So? Any bank dumb enough to foreclose is instantly in the airline business as there is no market for excess airplanes. As long as the employees are not starving (jubiliee), American Air and its management will survive. The same applies to Detroit. They were already in a deep slump when UAW struck. Why make more cars when you cannot sell the ones on the lot? Moreover, most are re-tooling for hybrids and EVs. Perfect Green-New-Deal timing.

  15. Jackson Q

    Not sure who is supposed to “absorb the cost” here. Would creditors be paid out at face value using tax-payer money? Don’t see this as fair given that creditors knowingly took on default risk and received interest in exchange for it.

    A massive coerced write-down in which the creditor takes the hit seems like it would only result in more expensive consumer/student/medical debt in the future, as the previously unforeseen risk of an arbitrary “debt jubilee” is included in the creditor’s calculus. In turn debt forgiveness would encourage even more borrowing (maybe from those can’t afford it) as debtors come to expect more forgiveness in the future. Using Hudson’s logic this would only take more spendable cash from consumers and give it to this so-called “financial class”.

    Of course it isn’t true that debt replaces spending, but instead smoothes and distributes spending between periods. The article wrongly characterizes debt as an inherently evil tool designed to exploit the poor. But both the creditor and the debtor knew the costs and benefits of the financial transaction before it was made. Debt forgiveness throws the whole system off-kilter and may make all the problems Hudson is citing even worse.

    1. JTMcPhee

      “ But both the creditor and the debtor knew the costs and benefits of the financial transaction before it was made.” Teally?

      Maybe you and I are smart enough to recognize the costs and benefits, but the average person is a babe in the woods in most retail credit and mortgage transactions. The “making” is via a “contract of adhesion,” where the lender has all the rights, powers and security in the deal, and is riding a wave of manufactured demand and desire or practical need generated be the operation of the system, built and maintained by the rentiers to their advantage.

      Like the vast fraud of student loans, from which there is not even the feeble relief of bankruptcy discharge.

      Lots of piecemeal discussion here of what’s wrong. Anybody got a model to propose of what a decent and sustainable political economy should look like and be built on?

        1. JTMcPhee

          Not to mention all the “service agreements” for cell phones, ISPs, home security, and even car purchases. And how about those mandatory arbitration without recourse even to the mostly broken and business-biased courts?

          “How do we cheat you? Let us count the ways…”

          Still wondering what a decent political economy might look like.

    2. periol

      A massive coerced write-down in which the creditor takes the hit seems like it would only result in more expensive consumer/student/medical debt in the future


      The point is all this debt is actually, genuinely bad for the real economy. So it’s use should be discouraged, and when debt is used it should be carefully managed and properly put to work, again, for the real economy.

  16. Senator-Elect

    It all comes down to putting the real economy ahead of the financial economy (accounting). The latter is supposed to facilitate the former. Once it starts being an impediment, clear it out of the way.

  17. Michael Hudson

    If people have run up debt, most of them couldn’t afford to live with their existing income. Those are debt free were able to do so (by definition). Most people are not spendthrifts.
    So the question is: Is it worth bankrupting society with debt deflation just so some not-so-needy debtors won’t get a free lunch?
    A Clean Slate is done for practical reasons, not utopian idealistic ones.

    1. JTMcPhee

      There’s a lot of one-eyed peasants among the mopery (see my comment below.) Why is that? And how many have debt because the rentiers don’t pay a living wage and their speculations in the housing market and other casinos have run up the cost of living?

      Those who say personal bankruptcy is the answer to personal debt, so often created by the looters, have never been through a personal bankruptcy and have no idea about the limitations and destructiveness of that function — many come out worse than they went in, and of course student debt (thanks, Biden) is virtually non-dischargeable.

    2. Astrid

      Not if you can accomplish the same stimulus by just giving everyone same amount of money now and more until the economy is on better footing.
      That’s far more fair and more likely to encourage spending, without as much moral hazard of encouraging people to borrow more the next go around, knowing that they’ll get bailed out if things get bad enough. Just like the companies who got 2008 bailout and then did stock buybacks did.

      Why are you focused on debt jubilee when there’s a clearly superior solution to resuscitate the economy and keep people, indebted or not, from falling into financial abyss?

      1. periol

        Let’s be honest, there is a fundamental axiomatic difference between a debt jubilee and giving everyone cash.

        – The cash handout clearly is intended to keep the current system intact, with a boost.

        – A debt jubilee has as it’s premise that we need to start over, essentially from scratch.

        1. Jesper

          The debt jubilee is the one policy that supports the status quo keeping class differences and keeping the poor poor. It will allow the upper middle class to spend more and hire more household servants etc. Zero-hour workers would just have to be happy about being given the opportunity to serve their betters more…
          The poor has to earn their income, the beneficiaries of the debt-jubilee would get unearned benefits. The poor has to build their character by working, once their characters are good enough then and only then they can be allowed to get unearned income?
          Is the upper middle class making a big sacrifice of protecting the poor from getting unearned income by taking all the unearned income for themselves?

          And since nobody is arguing against the headline stating that a debt jubilee is the only way to avoid a depression then it would seem that the jobs-guarantee is no longer worth discussing.

        2. Astrid

          Zero strings debt jubilee is just rewarding the gamblers for their bad bets. We already seen how this plays out at corporate level 2008-2020. What makes you think it’ll go better for consumer debt? What incentive is there, ever, to not gamble and spend with other people’s money, if the losses are socialized.

          If you are advocating for a system where debt is no longer permitted. Okay, I will listen to your ideas. But debt jubilee by itself just is like clearing debts for a gambler. Now that gambler can go off and gamble more with someone else’s money. It’s distributing money to the least responsible portions of society to the detriment of everyone else. Just tell me how that’s a good idea.

          1. Michael Hudson

            You are suggesting the biggest giveaway to the rich in history, since the Russian 1991 privatizations.
            You would give trillions and trillions of dollars to the creditors. The debtors would be free of debt, and the creditors would become the new ruling class — and would quickly monopolize everything and reduce you to debt peonage as their business plan.

            1. Astrid

              Please explain. This makes no sense. By giving money to everybody, to buy or save or pay down debt or initiate bankruptcy proceedings…would be giving away trillions to creditors?

              If you just think creditors and banks are evil and always out to get the little guy, go ahead and say that and do something about it head on. I don’t know how a debt jubilee does anything, other than penalize debt holders, most of whom are just pensions and retirement accounts and such. It’s not as though the banks would suffer directly from the cram down.

              If saving economic activity and helping people survive is important, having money in their pocket is the most important thing. If it’s just to settle a vendetta again bond holders, I guess jubilee will do it.

            2. notabanktoadie

              The debtors would be free of debt, and the creditors would become the new ruling class — and would quickly monopolize everything and reduce you to debt peonage as their business plan. Michael Hudson

              Except a Steve Keen type jubilee should also be combined with completely de-privileging the banks and land reform – both of which are entirely Biblical.

              And de-privileging the banks could be done shrewdly yet ethically to reverse a lot of wealth inequality by, for example, reducing bank reserves in the system at the same time the banks desperately need them as people withdraw deposits from their formerly insured private bank deposits – this would force banks to sell assets on the cheap and land reform would prevent the rich from accumulating land.

              And your method ignores that government privileges for the banks cheat non-borrowers too, many of whom are not rich but simply can’t or won’t “borrow.”

              As for debt-peonage, it’s government privileges for the banks (and lack of land reform) that drive people into debt. What would you do to eliminate those privileges?

      2. Greg Taylor

        Your solution assumes our economic laws and the current distribution of wealth/power are somehow “fair” and need to be maintained. Hudson’s solution has no such restrictions and implicitly resets the economy by changing the power/wealth structure. This would hopefully lead to a new set of rules that support a less fragile economy and more equitable distribution of wealth. Rules that make getting very rich possible (IP, monopoly, licensing, financing,…) would likely get changed in favor of debtors. Since rules tend to be changed over time to favor creditors, periodic resets like debt jubilees may be the least destructive of the potential solutions to debt servitude.

  18. Lisa

    Interesting idea. But where would the money come from to plug the resulting hole? A printing press? A pot at the end of a rainbow?

    Example – millions of individual retirees and pensioners look to fixed income, and many have retirement accounts funded by years of their labor (often in positions helping out as public servants, such as teachers, police officers, etc.). Those accounts invest in fixed income funds, which in some cases hold corporate bonds or other assets-backed securities (including bonds backed by student loan receivables). Are we proposing to just mark many of those bonds down to zero as part of the jubilee? . . . because that is what essentially happens if you just wave a magic wand and forgive debts – unless the gov is just paying the bondholders back at par, and then sending the bill to taxpayers in a giant circle-jerk of economic malaise, while printing us into hyper-inflationary oblivion that pushes us out to the extreme of the Laffer curve (please look it up).

    Folks who throw philosophical ideas about “jubilee” around need to please be mindful that erasing debts does not just flow through to and hurt “hedge funds” or “the elite.” It goes right back to our society as a hole (and a whole), caused by the borrower taking a risk, and not using the borrowed money in a fashion that exceeds in “value” the interest cost that they signed up to bear. If a creditor takes a risk, they generally should be paid, and if the rule of law in our society is impaired by mass deconstruction, what can we expect to tell somebody who is retiring? Sorry, no fixed income for you, no pension because the government printing press overheated, and you should have just spent your life buying things at will instead of working and saving for your golden years?

    No. Just no. If the folks who want a jubilee would instead spend their time and energy focusing on more productive endeavors, they might actually create something more useful for our society than destabilizing and fundamentally destructive ideas. Here’s a better idea: if you borrow from somebody, pay it back. If that was a bad choice, or you can’t then ok, Go reset personally (via bankruptcy, or otherwise) but stop throwing your hands up in the air and expecting the government or society to bear the burden of your misfortune.

    Ok, those of you who want to throw flames because I sound like a neo-con right-wing hedge fund banker, go have a party with your keyboard. Just be mindful I am actually a frugal and sensible liberal, and libertarian, squarely set in my opinion that our society should encourage people to honor their commitments, invest in themselves, and look for government to help them individually in time of need rather than looking to the government to just issue broad and economically destructive edicts that screw up our society even further.

    If there is an opinion that many folks are hurting because of debt, I don’t disagree at all. If there is an opinion that we are currently facing deflationary or depressive times because of a loss of money velocity, I don’t disagree either. Just be aware of killing society by using the wrong medicine on some of the patients. Economic prosperity is not an exercise in resetting haves versus have-nots – it’s an exercise in folks working together as ants and kindly helping the grasshopper to take its head out of its ass.

    1. notabanktoadie

      Here’s a better idea: if you borrow from somebody, pay it back.

      Except “Bank loans create bank deposits.” Where’s the borrowing in that?

      Not only that but government privileges for the banks allow them to create vastly more deposits than they otherwise could and expect to get away with it.

      So your idea of repaying debt to banks is based on a “loan-able funds” banking model that does not exist and never has.

  19. juliania

    Please, people, take note of the examples Prof. Hudson is giving, and step out of your own righteous indignation for a moment. It is clear what happens if this is not done on a national level! Cannot we see it at present in the dire consequences imminent for all exposed to this virus — all!

    I too have done my best to remain debt free, paid off my one medical bill, which took me three years to do. In that time I have not been buying anything more than necessities, while I have seen the inequities in wealth grow larger and larger for my children, who have struggled to provide for theirs. I have been most fortunate to stay healthy, but I am aging and we aging are going to crash your precious economy, not because we wish to do so, but because that’s what happens when it is debt piled upon debt. We’ve been propping you up, you with your out of control ‘economy’ that never punishes wealthy wrongdoers!! You selfish things!!! Let the trumpet sound!!!!

    Now the catastrophe is not just for the poor; it is threatening the rich as well. Your ‘economy,’ such as it is, is on life-support. Take this gift. You need those you count as worthless to be made whole again.

    Take the wise advice. The Washington Post is publishing it. It couldn’t be more plain.

    I’m sorry to shout. Someone has to sometimes.

    1. JTMcPhee

      There’s a lot of people of good will out here, trying to help each other and take care of themselves and their neighbors, and in the case of the medical professionals, at great personal risk, to take care of the sick and unfortunately dying. Thank you, Juliana, for your message.

      That old story about the peasant collecting wood to heat his house comes to mind. He digs up the roots of a toppled tree, and finds an old stoppered bottle in them. He opens the bottle and out pops a djinn. “Thank you for freeing me from that prison,” says the djinn. “I will grant you a wish. But think carefully about what you want, for I will also give your neighbor double of what I give you.” The peasant thinks a long while, remembering all the grievances he has against his neighbor, who owns his land, has several head of cattle, and a much nicer house. Finally, he tells the djinn, “Make me blind in one eye.”

      There are none so blind as those who will not see. Or put another way from one of the Christian Gospels (similar observations in most other holy texts),

      12Whoever has [speaking now of spirit, not money] will be given more, and he will have an abundance. Whoever does not have, even what he has will be taken away from him. 13This is why I speak to them in parables: ‘Though seeing, they do not see; though hearing, they do not hear or understand.’ 14In them the prophecy of Isaiah is fulfilled: ‘You will be ever hearing but never understanding; you will be ever seeing but never perceiving.…
      Berean Study Bible

      In that tradition that conservatives are so adamant that this country was founded on, there’s also this hymn that gets little play: https://www.hymnal.net/en/hymn/ns/720 Maybe it’s time? If us mopes can gather enough power, while we are forced into social distance and self-quarantine by circumstances, to keep the bastards who already own most of everything from using this crisis to steal the rest… Where’s the mope equivalent of the Powell Memorandum?

  20. Martin

    Matthew 20: 1-16
    For the kingdom of heaven is like unto a man that is a householder, which went out early in the morning to hire labourers into his vineyard. And when he had agreed with the labourers for a penny a day, he sent them into his vineyard. And he went out about the third hour, and saw others standing idle in the marketplace, And said unto them; Go ye also into the vineyard, and whatsoever is right I will give you. And they went their way. Again he went out about the sixth and ninth hour, and did likewise. And about the eleventh hour he went out, and found others standing idle, and saith unto them, Why stand ye here all the day idle? They say unto him, Because no man hath hired us. He saith unto them, Go ye also into the vineyard; and whatsoever is right, that shall ye receive. So when evening was come, the lord of the vineyard saith unto his steward, Call the labourers, and give them their hire, beginning from the last unto the first. And when they came that were hired about the eleventh hour, they received every man a penny. But when the first came, they supposed that they should have received more; and they likewise received every man a penny. And when they had received it, they murmured against the goodman of the house, Saying, These last have wrought but one hour, and thou hast made them equal unto us, which have borne the burden and heat of the day. But he answered one of them, and said, Friend, I do thee no wrong: didst not thou agree with me for a penny? Take that thine is, and go thy way: I will give unto this last, even as unto thee. Is it not lawful for me to do what I will with mine own? Is thine eye evil, because I am good? So the last shall be first, and the first last: for many be called, but few chosen…

  21. John

    There is all this talk of irresponsible borrowers getting away with something and it’s not fair…what about the predatory irresponsible lenders. The loan sharks. The mafia banksters loan grifters.
    Reviving bankruptcy and usury laws for every type of debt and institutionalizing a recurring Jubilee just might concentrate the minds of the loans sharks.
    Predatory lending is one of the oldest criminal gigs in the book
    Time to cleanse the temple.

  22. fwe’zy

    Where are these Stadists and righteous Frugality Paradoxists and very “smart” kilter-apologists when wealthy losses are socialized and gains privatized (the status quo)? Kiss up and kick down, eh? Hudson makes it clear that it’s not about altruism but rather pragmatism.

    Rev Kev is right: we need systemic change and this coronavirus reset will give us one, either starkly fascist as it’s been shaping up (like 2008, when Obama swept into office on a mandate he could’ve used to avoid what we face today, but instead doubled down on FIRE sector consolidation and immiseration of working families across the land) … or one that meets the challenges of climate change and needs of living beings.

    As for corporate/government power, please do not conflate the two. At least Astrid understands the benefits of nationalizing. Without government power we are at the mercy of the most ruthless. Frugal folks love to believe in their own self-sufficiency. Unsustainable and a vanity choice, without social cohesion. /a frugal person who didn’t have kids and now realizes how stupid/

    1. Susan the other

      What we are doing – handing out money as fast as we can – is sort of a jubilee. But we need to change the underlying structure of our society if we want to move forward. MMT is the best place to start because it has been studied for 4 decades by very smart economists for this very purpose – to equalize society and allow the good instincts of capitalism to survive. Which is why I cringe at Nancy pretending congress has made the decision to cover the uninsured in a pandemic (are you kidding me Nancy?) and Mitch McConnel has the temerity to walk up to the mike and say “This (money distribution) is not political, it’s a national emergency.” If Mitch had stepped up at anytime over the last decade we wouldn’t be in this mess up to our alligators. We’d still need the government to insure the economy but it would not be this desperate. Mitch and Nancy will never acknowledge that reality. They need to retire. And we need to seriously restructure our society. The stuff on the German Currency Reform is instructive. When they exchanged the Reich’s Mark for the Deutsch Mark they effectively did start a clean slate – of cooperation. The thing they had to get rid of was debt, all that is true. And it worked up until a decade ago. But nobody has ever addressed how we prevent money from becoming a burden rather than a facilitator. One way would be to prevent money itself from acquiring any intrinsic value – to instead keep it restricted to being only a medium of exchange which only acquires value when it is exchanged for some thing of value in the real world. That would curb the excessive hoarding of money and the income that money itself makes just sitting around in a savings account or bonds or treasuries. That would also help encourage putting money into the real economy and keep prices steady. And etc. Money should not be a store of value because money has no value.

      1. fwe’zy

        I think the rub is in “the good instincts of capitalism” – whether they exist in the “long run” – but MMT is definitely key to structural transition.

        1. fwe’zy

          And by MMT I simply mean a planned economy with the infrastructure to carry it out. Anarchy of production being an issue both for climate change and financial/ economic crises.

  23. HotFlash

    I have been trying on the debt jubilee solution to the life circumstance of people I know/know of and conclude that debt jubilee is not up to the task of the times. A reset is needed, not just of where we have gotten to, but how we got there.

    Who do I know? Well, some rich people. I was in the kitchen with a couple of them when they watched their retirement slide away with the stock market. I will never forget them looking at the computer, first in horror then terror as it sank in. I know many, many people involved in the arts, mostly music. All gatherings of 50+ are cancelled, including concerts and church services. Bang, that is violinists, conductors, stagehands, office staff, ushers, church organists, dancers, instrument builders, sellers, movers, and repair people. You can make your own list. Margaret Attwood observed that more Canadians make their living from the arts than from mining, fishing and agriculture combined.

    Restaurants are take-out only now, most taverns closed entirely. A local wateringhole has a sign on the door “See You Post Apocalypse” — you can’t take out beer here. So, servers, cooks, bartenders, the wholesale food services people who cater to them, and on up the line. W, ho else? Couple next door are a teacher and a social worker. His school is closed, her shelter is closed. Next to them, a couple 93 and 86. the highlight of their week were grocery shopping and the weekly seniors club (distant suburb, Old Country language). Can’t do either now, Astrid shrugged, “We just put a candle in the window and pray.” And where do the homeless go? Where do they eat?

    Previously, discussions of various means of equalizing wealth/societal inequality, whether complete debt jubilee or selective cancellation (eg student, mortgage, medical), income guarantees, whether basic (BIG) or complete (eg, SSI), a Jobs Guarantee, reparations, Medicare 4All, SNAP, all very theoretical. All of these devices are rendered moot by the *necessary* quarantine conditions that are the only way we are able to fight the corona virus at this time. That is, we can’t be in places in groups. We can’t work, we can’t go to school, we can’t harvest food, we can’t shop, we can’t help one another in normal human ways. Meanwhile, most of us have bills of some sort, and *all* of us have to eat. Opinions vary on how long humans can live without food, but I think we can agree we get some snarly before we die of starvation. Relief must come before people are starving. As in, this week.

    The only way I can see a CoViD response working out well (well, best possible, IMHO) is direct money to people. Direct deposit, I like the $2000 up front, $1000 per month thereafter, to every man woman and child in the country. Then you won’t have to bail out the businesses. Tax back excess later, if there is a later.

    Cheques dumb, leave out un/underbanked and various unpersons. Account at the post office or central bank. Voter rolls leave out felons, non-citizens, ‘purged’ voters, and many others. Who goes everywhere, counts everyone, but once and only once? The Census, that’s who. Bringing a cash card will also make census-takers less likely to get shot at.

    One last thing: I keep reading and hearing that this is not like other bad times, not 2008, not the Great Depression, not the Spanish flu, but it is like something we have had in the past and that is the Irish Potato Famine. The potato blight spread throughout Europe, but was a famine only in Ireland where millions died, emigrated or just weren’t born due to (English) government policy.

    Good news: the universality of this pandemic gives us billions of people from all stations of life who have skin in the game. Perhaps together we can quickly explain to TPTB how quickly they can become TPTW.

    TLDR: Forgicving debt won’t pay monthly/weekly bills or buy groceries. We need an income guarantee which is universal, substantial (eg $2,000 now, $1000/mo for the duration), and STAT. Cash cards thru Central and/or postal banks, delivered by US Census takers, other countries similar. There are about 8 billion of us to help make our governments do it.

  24. VietnamVet

    The only sure thing is that Republicans will scapegoat the Chinese as the culprit for the economic depression and the dead, Democrats the Russians. If the Western Empire had followed the lead of Singapore, South Korea and Taiwan and instituted testing, containment, mitigation and closed its borders; North America and Europe would not now be facing a mass causality event like Italy.

    The future was clear on January 23, 2020 when Hubei Province was quarantined. Nations do not take such draconian measures unless facing an existential crisis. This was pointed here over a month ago. Yet, Boris Johnson and Donald Trump did absolutely nothing until the looming collapse of their healthcare systems became obvious. The deaths and economic depression are due to external factors other than the Wuhan Coronavirus. Yes, the virus is nasty. But with ventilators and extreme medical care, the death rate is only order of magnitude greater than season flu. What is different is the virus is highly contagious while being asymptomatic. Measuring temperature only catches around half of the ill. The other half are free to shed the virus anywhere. Whole populations get sick clogging up the healthcare system and the death rate skyrockets. When facing this fact, politicians were forced to isolate their populations at home. But it was too late. Due to profiteering from privatization and offshoring, there are no PPE to protect medical staff, insufficient testing, no contact tracking and ventilators. Food distribution is collapsing. Bodies are piling up.

    Multinational corporations could care less about bodies just the bottom line. Crooks will exploit the chaos. Only government can address the crisis and save people’s lives.

  25. McWatt

    Congratulations are in order Dr. Hudson. Your ideas have finally reached the main stream.

    Let the debate begin.

    Well done!

  26. Billy

    I wonder what the credit card default rate is going to be in few months as people who can’t put 400 bucks together stock up in panic on food and toilet paper with their credit cards.

    Maybe Trump will just order banks to eliminate all interest on credit card debt, that way the cards are not in default and all looks well :-)

  27. Fraibert

    I know this is a late point but a straight debt jubilee in the U.S. is probably an unconstitutional taking contrary to the Fifth Amendment. To avoid the issue, the federal government would have to pay the fair market loan values to the lenders. (My guess is generally speaking net present value of the loan based on its terms would be legally defensible–though in reality some loans are worth much less than that value due to probability of repayment.)

    I just wanted to throw that in as a practical consideration.

  28. AchillesMe

    Debt write downs by state owned public sector banks have been tried again and again and have failed in lifting people out of poverty. I agree in principle that a debt write off for an overburdened population out of jobs is necessary. But how it is done is more important than the idea itself.

    At the heart of the problem – education debt, medical debt, mortgages are unscrupulous lenders and their arrangements with corporations. Products and services, especially education and insurance or medical care have been sold at highly inflated prices. People have been borrowing to inflate their on debt balloon and then borrow more to invest in stock market , take vacations, go on cruises, and hoard. Writing a check to pay off all debts will only exacerbate the addiction to spending, to investing on debt and on consuming overpriced non-essential services.

    I believe the solution is in letting all major lenders and their affiliates fail and nationalize them. This should lead to many a medical and education corporations being nationalized together with the lenders. A GM and RBS nationalization with more teeth and placing control of these companies in hands of boards made of activist invetsors to start preparing for quick or immediate re-privatizations with ongoing public stakes. What is the key here? Not to issue money to save companies but to unsave the companies as they are, to restrutcure them, as precursor to saving the banks and companies. The goal is a hard reset of the economy and to deflate every bubble to give relief to population and to ensure they do not walk into the same trap instantly.

    Only after that debt write off should happen and checks should be written to population for extra cash in their pockets, to participate in re-privatization as investors but this time the cost of services should be brought down that education and medical care are essential services and cannot be inflated.

    To print $ 1 or $ 2 trillion , to give cash to people, so they can keep all these corporations afloat will be a folly.

    Money issued to population should be linked not to debt repayment but to part immediate needs and rets investing in future. If you let corporations and Universities charge such money for useless education for which there are no jobs, and bill people Godzilla amounts for basic healthcare then you will have the same situation in 5 years and then again in 3.

    This is a full factory reset of economy and it takes time for it to get online. But if the same virus and malware that has been festering inside for years reboots, then what is the point. You are kicking the can down the road and next crisis could be triggered by something else.

    Help the borrowers but do not give a free pass to any lender. take them over, cut salaries, abolish bonuses, impose new controls on splurging.

  29. Noone from Nowheresville

    Prof. Hudson,

    I understand the broad strokes and I do agree that debtors need a debt jubilee. For the others in the comments who worry about moral hazard, I say oh, well, on a certain level we’ve given the creditors debt jubilees multiple times. Yep, they keep coming back so there is something to that moral hazard piece. On the other hand, they –the creditors– are the ones who set up, change the rules and benefit from the system that’s been established. When they get their version of a debt jubilee, it never trickles down. The entire system needs to be rebuilt from scratch. And I have no problem giving debtors around the globe a debt jubilee. Global extraction politics needs to stop.

    That said, Prof. Hudson / commentators, could we get a little more specific and engage with the abstract idea? Just stick to the US for the moment.

    Let’s start with student debt. A student borrows it either via the school system or via a bank. Forgive me I never took out a school loan. back in my day a Pell grant, work study and a summer job could pay for school (tuition, books, rent, food, and the ever increasing user fees). So I have no problem with returning to free or very low cost tuition.

    So that loan is made? (or created?) by the US government or is made by a third party and guaranteed by the government? Either way is it simply a matter of a keyboard entry in an accounting system or is it a case that a bank needs to have actual deposits to loan out? If deposits is it a one-to-one ratio or does the financial entity get to leverage those deposit and loan the same deposits out multiple times? Perhaps even sell / fraction the risk off?

    So the borrow pays the government back or a servicing company back? If a borrower has say a 6% interest loan, how much of that goes to government or loan originator? servicing company? which entity gets late fees?

    If this is a keyboard only loan, then isn’t it really an accounting loan? If so, why is it a big deal to wipe that loan out? For those of you who say pensions, ha ha ha have you looked around the country which pensions are fully funded? the debtor there is the local and state tax payers, which many times includes the pensioner as well. Plus those “public employee” pension funds can cause a lot of destruction or create opportunities for ordinary people with their investments depending how they are used. (another story for another day)

    Also when we talk loans and interests, how long does it take for the creditor to break even? Meaning take away the interest and put 100% of the money toward repaying the original borrowed amount. The reason I want to know that is because I’m left wondering on the “moral hazard” piece how much, if any, creditors end up taking a haircut on the original loan? What’s the real moral hazard or is that cost to the creditors?

    So in a sense, we have multiple debtors in the system. Multiple creditors as well. So purposeful complex system to obscure the players. Can anyone simplify or point me to a visual example of what that looks like and how the debt jubilee just with say a “simple” student loan would work?

    My question isn’t as clean cut as I’d like and I meandered. Sorry. But I hope someone start the conversation down this avenue of inquiry. Thank you for your time.

    ETA: I think this line of inquiry is important because a debt jubilee helps society as a whole a lot more than simply wiping out the debt of a single borrower.

    1. Noone from Nowheresville

      Sorry, another question.

      I went to school for low cost back in the day. What did that look like from a government level? Did the federal government give money to the states and the states filtered that to the schools and now they’ve stopped? If so, what was the national budget? state budget? and what is that budget being used for now? Also how is it that there used to be more professors and adjuncts who were paid well or at least had a livable wage / salary. And workers like janitors did all right too. Which by extension helped the communities they existed in.

      So where has all that money gone?

      I realize that the questions wouldn’t seem to directly link to debt jubilee of the individual but I can’t help feeling that this is intimately entwined with showing how the system has become so extractive.

      ETA: What does that mean if the federal government used to budget for the expense as an investment to the nation but now gets interest payments back from the system to filter out to other budgets?

      Thank you Prof. Hudson for taking me down these paths.

      1. Noone from Nowheresville

        And ha ha ha ha (I want to cry) Isn’t this a version of a debt jubilee for the creditor class?


        Matt Stoller @matthewstoller
        A #BillionaireBailout is happening *right now* authorized solely by the Federal Reserve.

        Honestly @mtaibbi could just republish his articles from 2008, change a few names, and there we go.

        Quote Tweet
        Matt Stoller @matthewstoller
        · 11m
        The Federal Reserve is lending to speculators and the loans are non-recourse, meaning that the speculator doesn’t lose anything if they can’t repay the loan.

        This is a *direct* billionaire bailout.

        1. Noone from Nowheresville

          By extension, doesn’t this also mean that the US Federal government is implementing a policy which will end up creating more debtors and more debt bondage? Then further increasing the debts by extracting the excessive liquidity out of the system by taxing and user fees at the federal, state and local levels on that same debt peon rather than taking it back from the debt jubilee creditors?

          Am I thinking about this in the right manner?

  30. McWatt

    This conversation is a very important one. Any way that Yves and or Lambert can keep it going on daily basis
    in some kind of sidebar? Hope so.

  31. Borrower

    Countries with unpredictable loan repayment and high political risk of repayment aren’t countries in which you want to live or borrow. If you like the availability of low-interest 30-year mortgages so a home is possible to buy, you want predictable enforcement of debts that finance homes. If you like easy availability of credit cards, you don’t want to threaten those who make them possible by automatically giving everyone – even those who don’t need it – what amounts to a free bankruptcy.

    1. notabanktoadie

      With an ethical finance and economic system there’d be much less NEED to borrow in the first place because Equity would be much more justly and broadly owned.

  32. Chris Horton

    Every dollar of debt is a dollar of property, generally someone else’s property. So a debt jubilee is also a confiscation. We can moralize about it but it will be fiercely resisted, and will require a political revolution to enact – or perhaps a transfer of the debt to the society as a whole, but that merely postpones the day of reckoning. The sides in this struggle will be unclear, since cancelling the debt will also wipe out the wealth backstopping pension funds, retirement savings, endowments and even the Social Security fund.

    And yet, the mountains of debt are destroying people’s lives and destroying the economy, and one way or another they will have to be liquidated, either by government action or by something resembling a natural catastrophe.

    A reset could be something like a hyperinflation wiping out the money and the debts. Or, it could be engineered. If engineered it will reflect the political balance of power between the various classes. But in any case it will be devastating to the wealthy and even the semi-wealthy.

    The question in either case will be who controls the reset, what survives it, and who controls the restitution if any to its former owners.

    Will the lost pension funds be replaced with a more generous Social Security based not on investments but a simple income transfer principle? Or will the wealthier retirees just be wiped out, (like my grandparents were?)

    Will the claims by banks and investors on people’s land and houses be wiped out? (From what we’ve been seeing they’re mostly fraudulent anyway, the title having been hopelessly compromised by the mechanics of securitization, but they are being fiercely defended and upheld by the courts!) Or will the banks be able to claim that property and make their owners the new rentier class and masters of the reset?

    Will we have a new fiat currency backed by and balanced with the wealth being created in the economy? Will it be a gold-backed currency making the gold hoarders the new masters of the universe? A land-backed currency perhaps?

    These are all political questions, and they will not be resolved by well-meaning wonky professors. (Not calling you that Michael; if the shoe doesn’t fit don’t put it on!) These are not just abstract or logical questions. The issue will be decided on the battlefield of the class struggle, and the various ideas about it will be brandished as weapons in that struggle.

    1. notabanktoadie

      A reset could be something like a hyperinflation wiping out the money and the debts.

      That’s not necessary since de-privileging private depository institutions, aka “the banks”, would be massively DEFLATIONARY by itself and thus allow a massive equal Citizen’s Dividend to counter that deflation.

  33. Allen Berrien

    My youngest daughter is a 35-year-old RN. Two weeks ago she contracted COVID-19 at the hospital where she takes care of her fellow human beings.
    She convalesced at home and yesterday she went back to work for a 12-hour shift on the COVID-19 hall at her hospital.
    She also contracted $52K in student debt to get her nursing license.
    I think a debt jubilee might be a good idea for some members of society.

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