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The only ethical way out of this is a modern debt jubilee, as Steve Keen has been advocating for for years. Keeping nominal interest rates low will just contin

The only ethical way out of this is a modern debt jubilee, as Steve Keen has been advocating for for years. Keeping nominal interest rates low will just continue the malinvestment and speculative ridiculousness of the last decade (or three) and risk serious inflation and political instability. Raising nominal interest rates hurts everyone and, as always, the primary burden will fall on the now heavily-indebted working and middle classes (capitalism, red in tooth and claw, for the masses, socialism for the rich). The problem is too much debt, full stop. The fair way to address this is a modern debt jubilee: everyone gets the same nominal payout, debtors must use the payout to pay off debt, non-debtors may keep the money and do what they please with it. https://think-beyondtheobvious.com/reducing-debt-via-a-modern-debt-jubilee/ https://think-beyondtheobvious.com/reducing-debt-via-a-moder... Of course, Keen is completely ignored by modern economists becase "debt doesn't matter" and "we owe it to ourselves." Meanwhile, in the real world, the who are whomsting the whom, good and hard, and paying court economists a tidy speakers fee to not notice. So it goes. At the end of the day, we get what we deserve.

gruez 4y ago
>The problem is too much debt, full stop. The fair way to address this is a modern debt jubilee: everyone gets the same nominal payout, debtors must use the payout to pay off debt, non-debtors may keep the money and do what they please with it. Doesn't this fuck over savers who have their money parked in fixed income securities, while giving a huge boon to anyone owning equity in indebted companies? On a comparative basis, it also hugely benefits people in their late twenties/thirties who were able to take out massive loans (ie. mortgage) while not doing much for everyone else.
- recursivedoubts 4y ago
  Individuals (not corporations) get the same payout, rich, poor, everyone. If you don't have debt, you get that money free and clear. It does dig younger people out of crushing debt, yes. That's the point: they can start a life without exponentially increasing debt grinding them to dust. This lets them participate in the wealth of the nation and incentivizes them to work and build families, thus producing more real wealth, rather than checking out and making just enough to pay the interest and monthly subscriptions. There is no way out of this that doesn't involve helping young people throw off the yoke of crushing usury. A modern debt jubilee is the fairest way to do that: it rewards savers to an extent with free and clear money while paying off the debt of debtors.
  - aqme28 4y ago
    So debt has nothing to do with it, it’s a one-time universal payout?
    - recursivedoubts 4y ago
      Yes. Everyone gets the payment. The catch is that debtors must use the payment to extinguish their debt. Non-debtors get the money free and clear. This is as fair a mechanic as I have ever heard for a debt jubilee. Steve Keen is a genius.
      - CamelCaseName 4y ago
        This is simply a wealth transfer to institutions who lent money at low rates prior to the rate increases.
        recursivedoubts 4y ago
        It is not simply that, although it does ensure that the money that those institutions lent is paid back, rather than defaulted on. But let's be honest: what's really going to happen in the case of defaults is that the banks will seize the real underlying assets and sell them at fire-sale prices to other rich people. The important part is that the borrower is now out from under exponential debt and can get on with their lives, and total debt in the economy is brought down to a sustainable level. Non-debtors get something too: free and clear cash. Is it perfect? No, of course not. Nothing this simple could be perfectly fair. But it is simple, hard to game, addresses the core problem (too much debt) and is probably as fair as it will get, practically. Certainly the elites would scream bloody murder if someone important legitimately proposed it. Keen has been ignored and mocked for years. That's evidence enough for me.
        shjake 4y ago
        It also impossible to enforce. And is basically equivalent to “why don’t we just print more money and give it everyone?”. And anyway a terrible idea.. why do you want to penalize people who have low interest rate mortgages for instance? Anything they’d gain would be offset by inflation…
Xeoncross 4y ago
It's pretty terrible that we've moved to a model where it's expected you'll transact via insurance, debt, and litigation in the US. Even your microwave purchase uses a payments loan and has purchase protection insurance. Still, it's not that hopeless. I've seen a lot of people get out of debt. You don't have to go into debt for things and you sure don't have to remain in debt. People aren't as helpless as you think.
- recursivedoubts 4y ago
  I have zero debt. I am aware that it is possible to live life without debt. A modern debt jubilee would hurt me more than nearly anyone else on this site, in relative terms and in the short run. On the other hand, I recognize that the majority of people, and, importantly, young people have either been lured or forced into crushing debt for things like education, housing, medical care, trinkets and so forth. It is at the point now that, regardless of how you feel about the individual morality of a given debtor, it is threatening the whole economy. We need to reduce total debt in the economy. A modern debt jubilee is the fairest way to do it. Instead, we'll raise rates, crush the middle and working classes, and bail out the rich.
  - scarface74 4y ago
    You paid for your home with cash?
  - j2bax 4y ago
    Appreciate your thoughts on this. Most people in your situation are like the poster you responded to... "I didn't go into debt." Or "I got myself out of debt, anyone can do it..." Unfortunately, that mindset will only continue this spiral we are in where the less thans look down on the more less thans. One health/medical scenario or another could change any of our financial fate tomorrow. Just because we are currently in the no debt, healthy category, there are no guarantees that's where we will stay. I'm sure there are more than enough people that carelessly got themselves into debt... They bought into the consumerist world we live in. It's hard to resist. But there are also many that are stuck in generational economic turmoil, that don't have the tools to dig themselves out.
mattgreenrocks 4y ago
I never understood why Christian doctrine took issue with usury until I got older. I get it now. Over time, it compounds, and that compounding ends up magnifying and consolidating power, warping things in the process. Plus, the brunt of the pain is borne by those less fortunate. It is unsustainable.
- AndrewKemendo 4y ago
  This is reflected in the relative wealth of Christian vs Islamic communities, as Islamic communities religiously reject usury
  - skee8383 4y ago
    They also function in a tribal manner where judeo christians do not, jewish and islamic communities help each other they don't have as many factions and in fighting as christians do. when a muslim or a jew opens a business they hire family and friends and people from their religious community, christians will hire anyone because that's what the christian religion is about, helping people regardless of who they are. it's very noble but in a capitalistic economic system it doesn't give christians any advantage.
    - matt1555 4y ago
      [flagged]
      - skee8383 4y ago
        I never said that. lol. but they probably don't practice it amongst themselves.
    - snozolli 4y ago
      christians will hire anyone because that's what the christian religion is about I get the feeling you've never lived around Evangelicals or Mormons. Joining the right church is a long-standing method of business/career networking.
ramesh31 4y ago
This would be possible if we had functioning democratic institutions. But while witch hunts and vendettas are carried out on both sides, we are left with nothing but the fed (an unelected group of bureaucrats) to decide the most fundamental operations of our economy. Our society is sick and unable to care for itself.
pjc50 4y ago
Maybe, but if you've seen the politics around even the relatively moderate side of student loan forgiveness you can imagine how badly this is going to go.
bradDonniger 4y ago
[dead]
bequanna 4y ago
> Raising nominal interest rates hurts everyone Not really. It helps savers and punishes those who took undue amounts of risk.
bigtex88 4y ago
I listened to a 3 hr long interview between Steve Keen and Lex Fridman while on a road trip and he instantly became my new favorite economist. The man is absolutely brilliant. I don't remember him talking about a debt jubilee during that interview but I'm curious to go back and see. Thank you for adding this link.
jefftk 4y ago
> everyone gets the same nominal payout, debtors must use the payout to pay off debt, non-debtors may keep the money and do what they please with it Wouldn't this be very inflationary? It's approximately equivalent to "give everyone $X". I don't see any discussion at the link about how people would react to the dollar (and any dollar-denominated savings, wages, etc) suddenly being worth far less?
- TheOtherHobbes 4y ago
  You mean more inflationary than an economy based on extraction and profiteering which has increasingly impoverished more and more of the population? What's the difference between money suddenly being worth far less [1] and real income dropping so individuals have much less spending power - which is something that has been happening for most of the population since the late 70s? [1] Assuming inflation would be the result, which is debatable.
  - jefftk 4y ago
    > real income dropping so individuals have much less spending power - which is something that has been happening for most of the population since the late 70s? This isn't true, though, even if you restrict to the US? Here's inflation-adjusted median individual income: https://fred.stlouisfed.org/series/MEPAINUSA672N https://fred.stlouisfed.org/series/MEPAINUSA672N It's up 40% since the late 70s.
    - rybosworld 4y ago
      The problem with the Fred reports is that CPI is grossly undercalculated.
      - jefftk 4y ago
        How much do think, say, a 1978 dollar is worth in 2021 dollars? Why?
  - logicchains 4y ago
lxm 4y ago
"too much debt" for Person A is "using leverage wisely" for Person B. With rates approaching zero it was rational to load up on second mortgages, driving up the totality of the debt. If you managed to lock in a sub-3% loan few years back, it's irrational to accelerate repayment.
candybar 4y ago
> everyone gets the same nominal payout, debtors must use the payout to pay off debt I'm generally supportive of these types of measures especially in a financial crisis, but keep in mind that economically, this isn't too different from a bank bailout. The primary net effect of giving people money to pay off their loans is making lenders whole.
- PeterisP 4y ago
  > The primary net effect of giving people money to pay off their loans is making lenders whole. Well no, that's the net effect if you give insolvent people money to pay their loans; but if you erase the debt of people who would keep on paying that money for decades, then this has the immediate impact of freeing up a big part of their next paycheck - which otherwise would go to that loan payment - to be spent or invested elsewhere, and this doesn't happen if you just make a bank bailout.
  - candybar 4y ago
    Banks don't know which of their borrowers are insolvent - in a credit crisis, the problem isn't merely that the banks aren't paid what they are owed, but that there's a systematic increase in the perceived default risk of their borrowers on average. Giving money to everyone substantially lessens the overall risk of their loan portfolio. This encourages, of course, more lending. The rest of what you're talking about is fairly standard economic stimulus and it's not that controversial or unprecedented and has little to do with debt jubilee. I'm not necessarily against any of this - the point is more that the mechanism proposed (giving money to everyone with the intent of helping people pay off their loans) does not match the rhetoric (GP decrying too much debt and socialism for the rich).
Aunche 4y ago
> debtors must use the payout to pay off debt, non-debtors may keep the money and do what they please with it. First of all, this isn't what your article says. It says that savers must buy newly issued corporate shares and the funds raised by these new shares must be used to pay corporate debt. Second of all, this basically requires the government to perfectly micromanage billions of transactions, which is impossible. What's to prevent a debtor from immediately opening a new line of credit?
shjake 4y ago
What you’re suggesting doesn’t make much sense from a practical perspective? What is debt anyway? Let say I hold 100k in leveraged derivatives which are the equivalent of someone holding 400k worth of the underlying asset (they put down 100k and borrowed 300k). What happens under this scheme if everyone gets 100k? I buy another 100k of derivatives and the other guy has to spend it paying down debt… This is just a massive miss-allocated stimulus program (financed through.. you guessed it.. more debt) if that’s what Keen is suggesting maybe it’s one of the main reasons nobody takes him seriously?
nostrademons 4y ago
The modern debt jubilee is inflation, which, as a sibling comment points out, is what your comment is suggesting and also what the government is likely to do. Give everybody lots of money, some debtors will use it to pay off debts, others will buy shit with it, regardless it all goes into the economy and raises the price level, and then everybody's nominal debts are worth less in real terms.

gruez 4y ago

>The problem is too much debt, full stop. The fair way to address this is a modern debt jubilee: everyone gets the same nominal payout, debtors must use the payout to pay off debt, non-debtors may keep the money and do what they please with it. Doesn't this fuck over savers who have their money parked in fixed income securities, while giving a huge boon to anyone owning equity in indebted companies? On a comparative basis, it also hugely benefits people in their late twenties/thirties who were able to take out massive loans (ie. mortgage) while not doing much for everyone else.

recursivedoubts 4y ago
Individuals (not corporations) get the same payout, rich, poor, everyone. If you don't have debt, you get that money free and clear. It does dig younger people out of crushing debt, yes. That's the point: they can start a life without exponentially increasing debt grinding them to dust. This lets them participate in the wealth of the nation and incentivizes them to work and build families, thus producing more real wealth, rather than checking out and making just enough to pay the interest and monthly subscriptions. There is no way out of this that doesn't involve helping young people throw off the yoke of crushing usury. A modern debt jubilee is the fairest way to do that: it rewards savers to an extent with free and clear money while paying off the debt of debtors.
- aqme28 4y ago
  So debt has nothing to do with it, it’s a one-time universal payout?
  - recursivedoubts 4y ago
    Yes. Everyone gets the payment. The catch is that debtors must use the payment to extinguish their debt. Non-debtors get the money free and clear. This is as fair a mechanic as I have ever heard for a debt jubilee. Steve Keen is a genius.
    - CamelCaseName 4y ago
      This is simply a wealth transfer to institutions who lent money at low rates prior to the rate increases.
      - recursivedoubts 4y ago
        It is not simply that, although it does ensure that the money that those institutions lent is paid back, rather than defaulted on. But let's be honest: what's really going to happen in the case of defaults is that the banks will seize the real underlying assets and sell them at fire-sale prices to other rich people. The important part is that the borrower is now out from under exponential debt and can get on with their lives, and total debt in the economy is brought down to a sustainable level. Non-debtors get something too: free and clear cash. Is it perfect? No, of course not. Nothing this simple could be perfectly fair. But it is simple, hard to game, addresses the core problem (too much debt) and is probably as fair as it will get, practically. Certainly the elites would scream bloody murder if someone important legitimately proposed it. Keen has been ignored and mocked for years. That's evidence enough for me.
        shjake 4y ago
        It also impossible to enforce. And is basically equivalent to “why don’t we just print more money and give it everyone?”. And anyway a terrible idea.. why do you want to penalize people who have low interest rate mortgages for instance? Anything they’d gain would be offset by inflation…

Xeoncross 4y ago

It's pretty terrible that we've moved to a model where it's expected you'll transact via insurance, debt, and litigation in the US. Even your microwave purchase uses a payments loan and has purchase protection insurance. Still, it's not that hopeless. I've seen a lot of people get out of debt. You don't have to go into debt for things and you sure don't have to remain in debt. People aren't as helpless as you think.

recursivedoubts 4y ago
I have zero debt. I am aware that it is possible to live life without debt. A modern debt jubilee would hurt me more than nearly anyone else on this site, in relative terms and in the short run. On the other hand, I recognize that the majority of people, and, importantly, young people have either been lured or forced into crushing debt for things like education, housing, medical care, trinkets and so forth. It is at the point now that, regardless of how you feel about the individual morality of a given debtor, it is threatening the whole economy. We need to reduce total debt in the economy. A modern debt jubilee is the fairest way to do it. Instead, we'll raise rates, crush the middle and working classes, and bail out the rich.
- scarface74 4y ago
  You paid for your home with cash?
- j2bax 4y ago
  Appreciate your thoughts on this. Most people in your situation are like the poster you responded to... "I didn't go into debt." Or "I got myself out of debt, anyone can do it..." Unfortunately, that mindset will only continue this spiral we are in where the less thans look down on the more less thans. One health/medical scenario or another could change any of our financial fate tomorrow. Just because we are currently in the no debt, healthy category, there are no guarantees that's where we will stay. I'm sure there are more than enough people that carelessly got themselves into debt... They bought into the consumerist world we live in. It's hard to resist. But there are also many that are stuck in generational economic turmoil, that don't have the tools to dig themselves out.

mattgreenrocks 4y ago

I never understood why Christian doctrine took issue with usury until I got older. I get it now. Over time, it compounds, and that compounding ends up magnifying and consolidating power, warping things in the process. Plus, the brunt of the pain is borne by those less fortunate. It is unsustainable.

AndrewKemendo 4y ago
This is reflected in the relative wealth of Christian vs Islamic communities, as Islamic communities religiously reject usury
- skee8383 4y ago
  They also function in a tribal manner where judeo christians do not, jewish and islamic communities help each other they don't have as many factions and in fighting as christians do. when a muslim or a jew opens a business they hire family and friends and people from their religious community, christians will hire anyone because that's what the christian religion is about, helping people regardless of who they are. it's very noble but in a capitalistic economic system it doesn't give christians any advantage.
  - matt1555 4y ago
    [flagged]
    - skee8383 4y ago
      I never said that. lol. but they probably don't practice it amongst themselves.
  - snozolli 4y ago
    christians will hire anyone because that's what the christian religion is about I get the feeling you've never lived around Evangelicals or Mormons. Joining the right church is a long-standing method of business/career networking.

ramesh31 4y ago

This would be possible if we had functioning democratic institutions. But while witch hunts and vendettas are carried out on both sides, we are left with nothing but the fed (an unelected group of bureaucrats) to decide the most fundamental operations of our economy. Our society is sick and unable to care for itself.

pjc50 4y ago

Maybe, but if you've seen the politics around even the relatively moderate side of student loan forgiveness you can imagine how badly this is going to go.

bradDonniger 4y ago

[dead]

bequanna 4y ago

> Raising nominal interest rates hurts everyone Not really. It helps savers and punishes those who took undue amounts of risk.

bigtex88 4y ago

I listened to a 3 hr long interview between Steve Keen and Lex Fridman while on a road trip and he instantly became my new favorite economist. The man is absolutely brilliant. I don't remember him talking about a debt jubilee during that interview but I'm curious to go back and see. Thank you for adding this link.

jefftk 4y ago

> everyone gets the same nominal payout, debtors must use the payout to pay off debt, non-debtors may keep the money and do what they please with it Wouldn't this be very inflationary? It's approximately equivalent to "give everyone $X". I don't see any discussion at the link about how people would react to the dollar (and any dollar-denominated savings, wages, etc) suddenly being worth far less?

TheOtherHobbes 4y ago
You mean more inflationary than an economy based on extraction and profiteering which has increasingly impoverished more and more of the population? What's the difference between money suddenly being worth far less [1] and real income dropping so individuals have much less spending power - which is something that has been happening for most of the population since the late 70s? [1] Assuming inflation would be the result, which is debatable.
- jefftk 4y ago
  > real income dropping so individuals have much less spending power - which is something that has been happening for most of the population since the late 70s? This isn't true, though, even if you restrict to the US? Here's inflation-adjusted median individual income: https://fred.stlouisfed.org/series/MEPAINUSA672N https://fred.stlouisfed.org/series/MEPAINUSA672N It's up 40% since the late 70s.
  - rybosworld 4y ago
    The problem with the Fred reports is that CPI is grossly undercalculated.
    - jefftk 4y ago
      How much do think, say, a 1978 dollar is worth in 2021 dollars? Why?
- logicchains 4y ago

lxm 4y ago

"too much debt" for Person A is "using leverage wisely" for Person B. With rates approaching zero it was rational to load up on second mortgages, driving up the totality of the debt. If you managed to lock in a sub-3% loan few years back, it's irrational to accelerate repayment.

candybar 4y ago

> everyone gets the same nominal payout, debtors must use the payout to pay off debt I'm generally supportive of these types of measures especially in a financial crisis, but keep in mind that economically, this isn't too different from a bank bailout. The primary net effect of giving people money to pay off their loans is making lenders whole.

PeterisP 4y ago
> The primary net effect of giving people money to pay off their loans is making lenders whole. Well no, that's the net effect if you give insolvent people money to pay their loans; but if you erase the debt of people who would keep on paying that money for decades, then this has the immediate impact of freeing up a big part of their next paycheck - which otherwise would go to that loan payment - to be spent or invested elsewhere, and this doesn't happen if you just make a bank bailout.
- candybar 4y ago
  Banks don't know which of their borrowers are insolvent - in a credit crisis, the problem isn't merely that the banks aren't paid what they are owed, but that there's a systematic increase in the perceived default risk of their borrowers on average. Giving money to everyone substantially lessens the overall risk of their loan portfolio. This encourages, of course, more lending. The rest of what you're talking about is fairly standard economic stimulus and it's not that controversial or unprecedented and has little to do with debt jubilee. I'm not necessarily against any of this - the point is more that the mechanism proposed (giving money to everyone with the intent of helping people pay off their loans) does not match the rhetoric (GP decrying too much debt and socialism for the rich).

Aunche 4y ago

> debtors must use the payout to pay off debt, non-debtors may keep the money and do what they please with it. First of all, this isn't what your article says. It says that savers must buy newly issued corporate shares and the funds raised by these new shares must be used to pay corporate debt. Second of all, this basically requires the government to perfectly micromanage billions of transactions, which is impossible. What's to prevent a debtor from immediately opening a new line of credit?

shjake 4y ago

What you’re suggesting doesn’t make much sense from a practical perspective? What is debt anyway? Let say I hold 100k in leveraged derivatives which are the equivalent of someone holding 400k worth of the underlying asset (they put down 100k and borrowed 300k). What happens under this scheme if everyone gets 100k? I buy another 100k of derivatives and the other guy has to spend it paying down debt… This is just a massive miss-allocated stimulus program (financed through.. you guessed it.. more debt) if that’s what Keen is suggesting maybe it’s one of the main reasons nobody takes him seriously?

nostrademons 4y ago

The modern debt jubilee is inflation, which, as a sibling comment points out, is what your comment is suggesting and also what the government is likely to do. Give everybody lots of money, some debtors will use it to pay off debts, others will buy shit with it, regardless it all goes into the economy and raises the price level, and then everybody's nominal debts are worth less in real terms.