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If everyone in the world is in debt, why don’t we just collaborate and pardon the debt? A reset if you will and keep it going. Or do nothing and ignore it, I am

If everyone in the world is in debt, why don’t we just collaborate and pardon the debt? A reset if you will and keep it going. Or do nothing and ignore it, I am not an economist so purely guessing here, but debt doesn’t seem to have negative impact on economies. Other things will but I haven’t seen one instance where the country is in bad shape of not because of debt. EDIT: I get that debt is not the same for all countries. I was only talking about canceling the percentage of debt that is common across all countries. Also, when I say ignore it, I am only talking from US centric view I guess. The US will probably never repay its debt and as long as the dollar is strong it keeps borrowing and the debt keeps increasing. So ignoring the debt is not done overtly to not repay but done so as to keep getting more debt and not getting forced to curtail growth plans.

WhompingWindows 6y ago
It's not unheard of, but it's pretty rare in the history of government finance. I believe this occurred in the French Revolution, wherein the monarchy's finances were in tatters. Ministers of finance took out multiple loans to keep up revenue and hide the clusterfuck of debts, but eventually something had to give...the French simply didn't pay a lot of their debts back due to national emergency and revolutionary upheaval (which came before/during/after this financial move). How the French govt got so indebted was partially exorbitant spending (like helping the US in its revolutionary war vs Britain), but also that they taxed their nobility at 0%. They couldn't change the laws because of a labyrinthine legal system and a power structure packed with 0% paying nobles. This is an extreme version of what we have today, where many rich people avoid taxes and pay effectively lower rates than poor people.
deleted 6y ago
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PragmaticPulp 6y ago
> Or do nothing and ignore it What happens when you ignore your mortgage or car payment? You lose the asset, because the lender has recourse against non-payment. Now what happens if we make it illegal for lenders to do anything about missed payments? Suddenly, the lenders are in a much riskier position. They can’t give out cheap loans if the recipients know they can simply ignore the interest payments and keep the house or car. As a result, interest rates much be way, way higher to make up for all of the people who choose to ignore their loans. Loans become much harder to get for anyone who doesn’t have a long credit history of repaying loans, meaning starter homes aren’t affordable until people are in their 30s or 40s, if ever. Same thing happens at government scale. If we simply stop paying the debt, trust disappears and the cost of borrowing goes up. We can’t finance our infrastructure and public services because no one has any desire to lend money to an institution that has demonstrated a refusal to pay it back. Does your city need to replace a bridge? I guess they need to save up the taxes for the next 10 years and then replace it, rather than issuing 10-year bonds at cheap rates. Or from another perspective: Imagine your friend needs $1000 to start a business. You loan him $1000 and he writes up a contract to repay you $1050 later. However, we declares a debt jubilee and now he refuses to pay you back. You’re now out $1000, have no recourse, and your friend has a business with no debt. Would you ever consider loaning anyone money again? If you did, you’d probably want a $1300 repayment on your $1000 loan to offset the risk of another debt jubilee destroying your investment again. Debt is just a contract to finance projects at a certain rate. A debt jubilee voids the contract. If you destroy the contract, you destroy the system that finances things.
ThalesX 6y ago
Just throwing in my two cents. I have a friend that got a 750.000€ credit to buy a house and a Tesla. Myself, I'm rather well off in terms of money, but not so wealthy, and I kept away from getting credit. What would happen in case of this pardon? Would he get to keep his assets thus increasing his wealth by almost a million euros just like that?

WhompingWindows 6y ago

It's not unheard of, but it's pretty rare in the history of government finance. I believe this occurred in the French Revolution, wherein the monarchy's finances were in tatters. Ministers of finance took out multiple loans to keep up revenue and hide the clusterfuck of debts, but eventually something had to give...the French simply didn't pay a lot of their debts back due to national emergency and revolutionary upheaval (which came before/during/after this financial move). How the French govt got so indebted was partially exorbitant spending (like helping the US in its revolutionary war vs Britain), but also that they taxed their nobility at 0%. They couldn't change the laws because of a labyrinthine legal system and a power structure packed with 0% paying nobles. This is an extreme version of what we have today, where many rich people avoid taxes and pay effectively lower rates than poor people.

deleted 6y ago

[deleted]

PragmaticPulp 6y ago

> Or do nothing and ignore it What happens when you ignore your mortgage or car payment? You lose the asset, because the lender has recourse against non-payment. Now what happens if we make it illegal for lenders to do anything about missed payments? Suddenly, the lenders are in a much riskier position. They can’t give out cheap loans if the recipients know they can simply ignore the interest payments and keep the house or car. As a result, interest rates much be way, way higher to make up for all of the people who choose to ignore their loans. Loans become much harder to get for anyone who doesn’t have a long credit history of repaying loans, meaning starter homes aren’t affordable until people are in their 30s or 40s, if ever. Same thing happens at government scale. If we simply stop paying the debt, trust disappears and the cost of borrowing goes up. We can’t finance our infrastructure and public services because no one has any desire to lend money to an institution that has demonstrated a refusal to pay it back. Does your city need to replace a bridge? I guess they need to save up the taxes for the next 10 years and then replace it, rather than issuing 10-year bonds at cheap rates. Or from another perspective: Imagine your friend needs $1000 to start a business. You loan him $1000 and he writes up a contract to repay you $1050 later. However, we declares a debt jubilee and now he refuses to pay you back. You’re now out $1000, have no recourse, and your friend has a business with no debt. Would you ever consider loaning anyone money again? If you did, you’d probably want a $1300 repayment on your $1000 loan to offset the risk of another debt jubilee destroying your investment again. Debt is just a contract to finance projects at a certain rate. A debt jubilee voids the contract. If you destroy the contract, you destroy the system that finances things.

ThalesX 6y ago

Just throwing in my two cents. I have a friend that got a 750.000€ credit to buy a house and a Tesla. Myself, I'm rather well off in terms of money, but not so wealthy, and I kept away from getting credit. What would happen in case of this pardon? Would he get to keep his assets thus increasing his wealth by almost a million euros just like that?