Idea of a debt Jubilee takes shape, gains a little steam

And you shall proclaim liberty throughout the land to all its inhabitants. It shall be a jubilee for you. …

Leviticus 25:10-11

E.D. Kain of Forbes (!) likes the idea of Jubilee to end or mitigate oppressive debt, noting that the principle has support not just from the Bible, but also from South Park.

A debt forgiveness program is a great idea, but it won’t go far enough if we don’t find ways to breathe life back into real wages, fix our lousy healthcare system, and propel our economy into the 21st century.

Reuters’ Matthew Goldstein and Jennifer Ablan, meanwhile, follow up on their earlier report on the idea of a Jubilee:

Earlier this month, we wrote about how a growing number of economists and even some institutional investors are seeing the need for some meaningful debt reduction – mainly mortgage reductions – to fix the economy. Others are calling for a full-scale debt Jubilee – or debt forgiveness – to get consumers out a deep whole. That’s because without the consumer, the U.S. economy and world economy will like sputter and creep along for years.

But the bankers have been largely silent on the issue of significant debt reduction. And until there’s some true confession from Wall Street about its role in the financial crisis and a real solution for moving beyond the fallout, there’s a good chance the protests will keep on going.

Alex Pareene of Salon — following the lead of David Graeber — also gave the idea a boost, proposing that a debt Jubilee should be one of the main demands of Occupy Wall Street:

So my immodest proposal is simply this: Individuals and households in the bottom 99 percent who owe debt to any large financial institution that received federal government support during and after the 2008 crisis should see their debt forgiven. That would certainly stimulate the economy, as most people would suddenly find themselves with a great deal more money to spend on iPads (and food, and clothing, and housing, and healthcare). The debt can be forgiven by decree or if the government really wants to it can step in to pay it itself; I don’t much care either way. (Though it’d be nice to see it just wiped off the books, to enrage the banks.)

Let’s wipe the debt of the 99 percent off the books, tell the financial sector to eat it, and get on with our lives.

Brian Davey recognizes that it might not be quite that simple, but he explains how a Jubilee could actually work, producing “Debt cancellation without chaos.” His proposal also has the added benefit of reducing the “Too Big To Fail” aspect of the big banks:

… the current dilemma is that if you cancel debts then the bank deposit money created by lending is no longer backed by anything and the banks goes bust. However, this is solvable if the central bank creates an equal amount of non debt money to replace the deposits that are no longer backed by anything.

… So the banks will find themselves with lots of cash but far fewer remaining loans outstanding from households. Because the banks make their money through loans the profitability of banks would fall – but they will still be solvent as they will be sitting on lots of cash. Unlike a straight bank loan write-down this will mean that most banks would probably survive. However, they would shrink in size and importance as their importance is based on the debt they own. If debt is being paid off their power would shrivel. Conversely the burden on households would be reduced – although those imprudent enough to borrow very large amounts would still be on the hook for some of their earlier borrowing.

That addresses much of what Martin Hutchinson and Robert Cyran warn would be “The Downside to a Debt Jubilee.” And the rest of what they fret about — “teaching the wrong lesson” — is sanctimonious nonsense smacked down millennia ago by the same biblical prophets who gave us the idea of Jubilee in the first place. What lesson have lenders learned over the past four years? It’s unseemly to worry about “moral hazard” with regard to the indebted working class, while exempting reckless Too-Big-To-Fail megabanks from the same concerns.

Of course, another way to eliminate some of our odious debt would be to amend our bankruptcy law so that families who are bankrupt could actually declare bankruptcy, as Karina Frayter reports for CNBC: “Bankruptcy Law Change Could Help Consumers Recover.”

In “QE4 – forgive the students,” Ellen Brown proposes a Jubilee similar to Brian Davey’s proposal, but targeted specifically at student-loan debt, which now exceeds $1 trillion:

To prevent another disaster like the one caused by the toxic debts on the books of Wall Street banks, we need to defuse the student debt bomb before it blows. But how?

The Federal Reserve could do it in the same way it defused the credit crisis of 2008: by aiming its fire hose of very-low-interest credit in the direction of the struggling student population. Since September 2008, the Fed has made trillions of dollars available to financial institutions at a fraction of 1% interest; and in audits since then, we’ve seen that the Fed is capable of coming up with any amount of money required or desired. To the Fed it is all just accounting entries, available with the stroke of a computer key.

The Fed is not allowed to lend to individuals directly, but it can buy Treasury securities; and with the Student Aid and Fiscal Responsibility Act (SAFRA) of March 2010, the Treasury is now formally in the business of student lending. The Fed can also buy asset-backed securities, including securitized student debt; and there is talk of another round of quantitative easing aimed at just that sort of asset.

Heather Stewart says a Jubilee would be much likelier to succeed than Angela Merkel’s latest plan to solve the Greek debt by lending them more money:

Erik Britten of Fathom Consulting puts it this way: “The term bailout is used in a number of ways. One of them is allowing a country to finance their deficits without borrowing from the markets, and their debt-to-GDP ratio continues to go up. The other kind of bailout is one that says ‘we accept that we have lost the money that we lent you: we’re writing off that debt’.”

That’s what campaigners against the insufferable burden of developing country debt used to call a “jubilee” – but it’s not exactly what Angela Merkel has in mind.

Germany, which will ultimately pick up the tab, is understandably determined that there must be a heavy price attached to fiscal failure. But Greece’s plight reveals the catastrophic consequences of tackling a debt crisis by handing out more loans while systematically slashing away at the economy’s productive potential.

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  • http://twitter.com/mcclure111 mcc

    “Bailout for the 99%”. See, it even fits on a piece of posterboard.

  • Anonymous

    It continues to amaze me how much fantasy is written into the supposed hard-nosed business world. They continue to pretend that their loans are payable, even when borrowers are unemployed or underemployed or clearly incapable of paying. Still they insist on using the face value of the loans as a recorded asset, and base their earnings on people paying them.
    People make decisions about borrowing that turn out to be wrong (such as the housing market tanks, their stock portfolio collapses, or they lose their jobs) and the banks still want their blood from the stone. But the bank lent the money based on the same assumptions as the borrower did, but they are protected from their incorrect decision.

  • http://www.facebook.com/people/Charity-Brighton/100002974813787 Charity Brighton

    I don’t really understand the pictures with this article. Is that an OWS thing?

    Anyway, this idea seems pretty smart but there’s no WAY it’s going to work. People — not just banks, but ordinary people — got really, really mad when they heard about the proposal to help people out with their underwater mortgages. The people that I know said things along the lines of, “I worked hard to pay off my loans — why should other people get theirs reduced or eliminated for free???” It’s going to be really hard to get people to go against that instinct and without a massive outpouring of support (I mean MASSIVE, even bigger than OWS or the Tea Party combined) I don’t think that this Congress or even President Obama will even suggest this idea.

    It continues to amaze me how much fantasy is written into the supposed hard-nosed business world. They continue to pretend that their loans are payable, even when borrowers are unemployed or underemployed or clearly incapable of paying. Still they insist on using the face value of the loans as a recorded asset, and base their earnings on people paying them.

    Banks usually create allowances for a certain percentage of their notes receivable, don’t they? I know that they write down the actual value that they lose (from bankruptcy and stuff like that) periodically. The issue isn’t so much that banks never recognize that some of their debt is no good — the issue is that they might not be willing to recognize / accept that ALL of their debt is no good.

  • http://mistformsquirrel.deviantart.com/ JJohnson

    It’s the character Jubilee from the X-Men.  It’s a visual pun >_>

    <— is a nerd (T_T)

  • http://www.facebook.com/people/Charity-Brighton/100002974813787 Charity Brighton

    Gotcha! Thanks!

  • Laertes

    “I worked hard to pay off my loans — why should other people get theirs reduced or eliminated for free???”
    That’s a natural reaction.  That that reaction is counterproductive, that it’s classic crabs-in-a-bucket thinking, is important to understand.

    I’m not underwater on a mortgage.  I don’t have any credit card debt.  Any kind of debt-forgiveness plan isn’t going to directly do me any good.  It doesn’t necessarily follow that it’s a bad idea.

    Sure, in the near term it does me a little harm.  Sure, it offends me sense of fairness.  But there are more important things in this world than my feelings, and sometimes it seems to me that we’ve got a political culture that’s build on the idea that there isn’t.

    Seems to me that we’re in a big mess, with no easy way out.  If a Jubilee gets us out of this mess, at some bearable cost to my own financial position and some bearable injury to my own sense of fairness, isn’t that maybe worth considering?

    Or should I think no farther ahead than that the crab over there might get out of the bucket, which is like totally unfair, and I should maybe grab his leg?

  • Daughter

    Amen, ditto, co-sign, echo, preach!!!

  • http://twitter.com/jennifersussex Jennifer Sussex

    I think that if you were in a position not to require loans, you should examine the dynamics of your financial aid award package. You might have been from a single-income family or had parents who made less than X amount a year. If you do more research on the rules behind the annual family contribution and whatnot, you might be surprised. 

  • Laertes

    “I think that if you were in a position not to require loans, you should…”
    Of course I required loans.  That was a frightfully long time ago, however, and they’re long since paid off.  My point was that I’ve got no currently outstanding debt, and so a Jubilee won’t do me, personally, any good in the near term.  Despite this, I still think it’s probably a good idea.

    But of course that was a side point anyway.  I didn’t come here to say “neener neener I’m not in debt.”  I came here to say that fairness, or let’s say one person’s hastily-formed and ignorant-of-the-big-picture conception of fairness, is important but maybe shouldn’t be driving our entire policy response.

    When someone says “Why should so-and-so get something I don’t” my response is “why is that question important?”

  • Bethany

    Morilore is right: there seems to be a long history of concern for fairness, biologically.  Capuchins who are perfectly willing to work for cucumbers stop and sulk when they see another capuchin getting a grape in exchange for the same effort.  (Google “capuchin fairness video” for a cute BBC clip on the subject.)  Dog do it, too, and while I hadn’t heard about the parrots yet, I believe it.  So evolutionally I think there’s reason to believe the idea of “equal pay for equal work” predates our existence as a species.
    As for why – well, different people have different feelings about how much they believe in evolutionarily psychology, but AFAIK the current theory is that perceptions of fairness are necessary to living in an altruistic society.   In a group of altruists who didn’t worry about fairness and were perfectly willing to let other people take advantage of them, takers would have a huge selective advantage and would eventually take over.  Thus the argument is the only way for an altruistic society to exist in the long run is for altruists to be altruistic – but not so altruistic they let other people take advantage of them.  (These theories often make reference to the iterated prisoner’s dilemma game and the Tit-for-Tat strategy – the idea being that the most successful strategy is to cooperate with people who are willing to cooperate with you, and to protect yourself from the ones who won’t.)
    Hence a preoccupation with fairness, and a desire to catch “cheaters” that can at times get carried away.
    “That’s not fair” is an argument everyone can use, but that doesn’t mean that fairness is an irrelevant or invalid concept.  Why are we so upset about the fact that 0.1% of the people own so much of the resources, if not because it violates our sense of what’s fair?

  • Bethany

    More formatting issues.  Sorry, I’ll get the hang of this sooner or later.  Let me try this again with spaces this time, so it’s actually maybe more-or-less readable:

    Morilore is right: there seems to be a long history of concern for
    fairness, biologically.  Capuchins who are perfectly willing to work for
    cucumbers stop and sulk when they see another capuchin getting a grape
    in exchange for the same effort.  (Google “capuchin fairness video” for a
    cute BBC clip on the subject.)  Dog do it, too, and while I hadn’t
    heard about the parrots yet, I believe it.  So evolutionally I think
    there’s reason to believe the idea of “equal pay for equal work”
    predates our existence as a species.

    As for why – well, different
    people have different feelings about how much they believe in
    evolutionarily psychology, but AFAIK the current theory is that
    perceptions of fairness are necessary to living in an altruistic
    society.   In a group of altruists who didn’t worry about fairness and
    were perfectly willing to let other people take advantage of them,
    takers would have a huge selective advantage and would eventually take
    over.  Thus the argument is the only way for an altruistic society to
    exist in the long run is for altruists to be altruistic – but not so
    altruistic they let other people take advantage of them. 

    (These
    theories often make reference to the iterated prisoner’s dilemma game
    and the Tit-for-Tat strategy – the idea being that the most successful
    strategy is to cooperate with people who are willing to cooperate with
    you, and to protect yourself from the ones who won’t.)

    Hence a preoccupation with fairness, and a desire to catch “cheaters” that can at times get carried away.

    “That’s
    not fair” is an argument everyone can use, but that doesn’t mean that
    fairness is an irrelevant or invalid concept.  Why are we so upset about
    the fact that 0.1% of the people own so much of the resources, if not
    because it violates our sense of what’s fair?

  • Lori

      So evolutionally I think there’s reason to believe the idea of “equal pay for equal work” predates our existence as a species.  

     

    The idea may predate our existence as a species, but it’s pretty clear that it’s easy to trick this perception of fairness. There’s a reason it’s called the just world fallacy, not the just world truth and yet most of our economy is built on it. 

    The question is not whether people have some inherent desire for fairness. The question is why do we strain at a gnat and swallow a camel and then try to congratulate ourselves for the great compliment that spitting out the gnat supposedly pays to our morals? 

  • Carmiac

    The pictures are of Jubilee, a Marvel X-Men character.

  • http://profiles.google.com/anoncollie Anon Collie

    Mcc, I approve of your avatar. We need more Fluttershy in this world.

    A student loan jubilee would put 250 bucks in back into my back account every month, and considering my chosen profession, theology teacher, that would help things tremendously. I’d happily put that 250 a month towards getting myself a dog, for starters. And dogs eat food, and need vet care, etc. And being alone in a new city, I could use a little companionship.

    But, no, I’ve got 250 in student loans, that is slated to go on for quite a while.

    And Fred, Kudos on your X-men pics, even if I did prefer that Southern Belle Rogue.

  • http://twitter.com/MarySueTwiteth Mary Sue

    A debt jubilee would put $300 in my account a month that is usually sent off to the loan sharks, and would make the difference between me renting for the next 20 years, and owning a house in the next 6 months.

  • Anonymous

    I’m pretty lefty, but even without phrasing it as “I worked hard and paid my bills, why should other people get off?”, I don’t think this sits all that well.  If my mortgage happens to be with BOA, it gets paid off, but if it’s with a local bank, it doesn’t? 

  • http://apocalypsereview.wordpress.com/ Invisible Neutrino

    Definitely, this needs to happen. In some form, in some way.

  • Anonymous

    I’m uneasy for the same reasons DonBoy is.  That goes for the student loan thing too.  If you want to make student loans dischargeable in bankruptcy, then fine, but lots of people chose not to take student loans just because they didn’t want to take on that debt, and blanket student loan forgiveness means you’re going to feel pretty screwed if you went to a less prestigious university (or no university at all) than you could have with student loans.

    Same thing with the Brian Davey plan.  And, like DonBoy, I’m pretty liberal as Americans go.  There’s no way you’re getting popular support for giving substantial relief to people in lots of debt which leaves them better off than people of similar backgrounds who are now in less debt.

  • Anonymous

    You know, it would be great if we lived in a world where personal virtue and outcomes were completely correlated.  Where no one got tuition hiked on her in her second year.  Where no one was duped into going to an expensive school by high school counselors and a national culture which urges people to care more about prestige and campus “atmosphere” than whether you can pay the bills.  Where no one’s parents or benefactors got in a car accident or had a heart attack that devastated the family finances right in the middle of her undergraduate career.  Where no one had to deal with a society that has completely given up on secondary education and just teaches everything you need to know in college, so that more and more jobs require an expensive college education when that wouldn’t be necessary if high school didn’t suck.  Where vocational programs in secondary school that would help people get a job in the trades hadn’t been completely gutted in favor of bureacratic test prep.

    We don’t live in that world.  The complaint that people in trouble don’t deserve to be rescued because you were good enough not to need rescue in the first place and you don’t deserve to end up behind them is null and void because there is no such thing as “deserve.”

  • http://pulse.yahoo.com/_5V7WB5LWONXO22R6D4CYEZGYFE Alan

    How about a targeted Jubilee? instead of forgiving all student debts or mortgages (which I agree would be unfair to everyone who struggled to pay off a mortgage or student loan), have the government assume payments on all student loans and/or mortgages of teachers, first responders, lawyers who do public interest work, doctors and nurses who work with low income clinics, people who make below 125% of the poverty line, soldiers, etc.  I don’t have a problem per se with the government providing this benefit to help people out, but I rebel at the idea of someone who got a business or finance degree from a top tier school getting a benefit without giving anything back.

  • http://mistformsquirrel.deviantart.com/ JJohnson

    Would those people not still be paying taxes however?  And with any luck I’m hoping the top tiers of tax brackets will be moving up to more reasonable levels sooner rather than later, so the person in question IS giving back – they just don’t need to pay back those initial loans.

    This is especially important for people who just barely afforded college but managed to get a really good degree and a good job out of college – you’re making good money, but very often you don’t have that money in your pocket yet.

    I’m not saying it needs to necessarily be a free for all; I think this is one of those ideas that starts out very nebulous and then becomes more concrete toward implementation.

    I will however agree with DonBoy that it shouldn’t be limited to consumers of specific financial institutions.  Imo it should be broad reaching and if limited at all, be based on income level.

  • http://twitter.com/jennifersussex Jennifer Sussex

    Individuals with private student loans are unable to claim them on tax deductions. You are only referring to federal student debt.

  • http://mistformsquirrel.deviantart.com/ JJohnson

    I said nothing about tax deductions.  I said they’re still paying taxes in-general.

  • http://twitter.com/jennifersussex Jennifer Sussex

    I think that if there were student debt forgiveness, it should benefit those that were originally not qualified for financial aid. You have to look up the federal requirements for financial aid, then calculate backwards. Find the people that did not qualify for the gentler student loan programs (federal loans, scholarships, etc.) and look them up. You would be surprised, also, that there are people who are on the top who’s parents make too much for them to qualify for basic FAFSA aid. Their parents might not help them. This situation is governed by individuals of all class orientations, not the classes themselves (i.e. classes as defined as x income or professional bracket). 

  • Anonymous

    Here’s the nub of it – we have a finite amount of resources that we can assign to everybody.  Of people who physically possess at least some stuff, some people own a ton (some of this in the form of IOUs), a lot of people own a little, and a lot of people own very little or negative amounts (because they have lots of IOUs out there).  In general, people in the second group haven’t benefited at the third group’s expense, but have in fact sometimes been made worse off themselves because of the third group bidding up prices on various things.  The first group has benefited enormously at the third group’s expense.

    No matter what specific form a solution takes – whether it’s debt forgiveness or printing lots of money and handing out vouchers or whatever else you like – it’s going to in essence be stripping some people of a property right to something and assigning that right instead to other people.  If you’re canceling debt by printing money to pay off the banks, you’re helping the first and third groups (and causing a bit of inflation), and substantially worsening the second group’s relative position.  That seems bizarre – isn’t it beyond obvious that if anyone should be made relatively worse off, it’s the first group, which benefited from creating the whole situation?  Wouldn’t it be a lot more fair to take relatively more from the first group and give relatively more to the second group?

    I understand that Brian Davey’s plan involves sending vouchers to everybody which can be used to either pay off debt or to pay for energy efficiency improvements, but, again, this just doesn’t seem at all fair to the people without debt, nor does it seem to make much sense as a way to pursue improvements in energy efficiency.  First, I bet most people would much rather have $20000 worth of stuff they wanted than $20000 worth of energy efficiency.  Second, the people in debt also have houses (bigger houses, even!) that we want to be energy efficient, so it seems silly not to give them the energy efficiency vouchers too.  Whether or not someone’s in debt has very little to do with how effectively they could use energy efficiency vouchers.

    Edit: To be clear, I was writing this at the same time as Alan was posting. This is not in response to his post.

  • http://twitter.com/jennifersussex Jennifer Sussex

    I think that your argument is biased because you are using the position of the third group to jockey the position of the second group at their continued expense. 

  • carovee

    I haven’t read all the links but the way it was explained on the local radio was that debt forgiveness was different than paying off the debt.  Under debt forgiveness the banks are the ones to take the hit.  Since people don’t have to pay off the bank, whatever money they manage to earn goes can be used to pay for necessities and luxuries giving the economy a giant boost.

  • Anonymous

    I love the idea of a debt Jubilee, but I doubt it would ever happen.  It would be great if one big company would start it and get the ball rolling.  Everyone would love them and they’d get tons of new customers, and that might encourage other companies to do the same.

    As for student loan debt, mine is very manageable.  I doubt I will ever have a problem making the modest monthly payment.  I have even continued to make payments during the 5 months I’ve been unemployed.  So paying it or not won’t make or break me personally.  But if that debt were forgiven, I could help someone else out with the extra spending money.  I have been hoping to get laser eye surgery for a long time.  I would be able to save up for it just that much sooner without my student loan debt, which is the only debt I have.  So it would stimulate at least one industry in my case.

    I have never had major debt.  I have never had credit card debt and I don’t even buy things on layaway or with payment plans.  I’m even planning to pay cash for a car in a few years when I need a new one.  But I don’t feel a tinge of jealousy or resentment at the idea of other people being released for their enormous debt.  I just don’t understand why so many people have a problem with others benefiting.  It just seems so childish and selfish to want others to suffer because they were “irresponsible” with money or made a bad decision or something.  And of course anything to stimulate the economy will me indirectly by increasing my job security.

  • http://stealingcommas.blogspot.com/ chris the cynic

    My mother definitely responds to ideas like this by feeling they’re very unfair because she’s had to make sacrifice after sacrifice to stay out of debt so the idea that she could have not done that and ended up better off* than she will having done it is hurtful to her.

    The best response I’ve been able to come up with is that we don’t think the welfare system should be done away with just because [specific relative] is cheating it by faking a disability**.  Rewarding people who do bad things is an acceptable side effect of helping those who need it. You don’t have to like it, I’d argue that you should actively dislike it, but it’s not a reason not to help in the first place.

    Our thoughts might go to, “If I had done irresponsible/dishonest thing X then I would be rewarded for it, but I didn’t so now I’ll be worse of than those who did,” but it is almost certainly the case that the vast majority of people helped didn’t do thing X either.
    -* Because if, say, credit card debt is forgiven then whatever you used the credit card to buy is still yours.  So, all else being equal, a person who spent irresponsibly is better off than one who did not.  If mortgage debt is forgiven then she would have been better off using the money she spent paying down the mortgage paying for something else instead.  Or even just holding onto it in savings.

    ** Morally it is almost certainly the case that we should try to alert the proper authorities that she’s cheating the system.  In practice it’s not that simple when the person doing the cheating is someone you love and don’t want to cause problems for.  She may not really have a disability, but she has so many other problems.  For that matter, based on her mental state, she may very well have a disability, just not the one she claims to have.

  • http://twitter.com/jennifersussex Jennifer Sussex

    I think that it could potentially be difficult speaking with someone who brings morality into fiscal topics. 

  • Anonymous

    Rewarding people who do bad things is an acceptable side effect of helping those who need it.

    Yes, this is such an important point.  And it still astounds me just how often issues boil down to this one point.  When you have to decide between punishing bad people and helping needy people, where fall on that compromise is at the heart of so many of these disagreements.  So far it’s the most effective scale of progressive to conservative that I have found.

    Here’s a list just off the top of my head of all the issues that revolve around this, in addition to the topic of the thread:

    How to handle the “war on drugs”
    How easy or hard it is to qualify for welfare and food stamps
    How illegal immigration is treated
    Funding for early childhood education
    Birth control
    Treatment and prevention of STDs, especially HIV
    Abstinence-only sex ed
    Volunteering at a soup kitchen (in my personal life)

    I’m sure there are many more.  In fact, I’m having a hard time thinking of any issue that doesn’t boil down to this.

  • Anonymous

    Why should anyone talk about “fairness”?  “Fairness” is the most primitive and unsophisticated form of justice, the word we learn to say as toddlers to get more of what we want.  What matters here is outcomes.  If a Jubilee injects demand into the economy and reduces FUD for millions of Americans without causing any catastrophic problems then it’s a good idea.  Whiners who complain “but it’s not fair to people who paid off their debts responsibly” (who PS are incredibly lucky) contribute nothing to the conversation.  If I have a little debt, and my neighbor has a lot of debt, and my neighbor’s debt is forgiven while mine is not, I am not harmed.  Not in any way at all.

  • Anonymous

    If the method of debt forgiveness is inflationary, then of course you’re harmed.  If it’s not inflationary, then that money has to come from somewhere.

    And obviously a lot of the concern is of the sort chris the cynic describes.  Yes, you are technically not harmed in that you still have about as much wealth as you had before (ignoring inflation), but you have less than you would have had you taken on more debt and less than you would have had if other people hadn’t taken on as much debt.  You’ve been being harmed all along, and, while it doesn’t harm you any more to let bygones be bygones, that’s hard to swallow.

    “but it’s not fair to people who paid off their debts responsibly” is a huge straw man.  Much of the concern is for people, who came from very similar backgrounds as other people who are now in a lot of debt, who didn’t take on much debt to begin with and have relatively less stuff now because of it.  Obviously a lot of luck is involved when we’re talking about people who were able to pay back their student loans for law school vs those who weren’t (although there are potentially issues about people who used student loans for one type of education as opposed to another).

    Also, really?  You’re going to write off justice as fairness just like that?

  • Anonymous

    No, none of what I said is a straw man.  You just don’t realize what you’re saying.  People who have less stuff now because they didn’t take on debt who complain about their neighbors’ debt being forgiven are a) miserly jerks and b) stupid, because if a move improves the economy in general then it rebounds to their benefit in the end.

  • hapax

    Umm.

    I’m very much in favor of the idea of Jubilee (if a more carefully thought out and applied one than “Wheeee!  Everybody’s debts are cancelled!”) even though I personally will not directly benefit, nor will anyone in my family. 

    And yes, I know darn well how incredibly lucky we are to be in that situation.

    BUT.

    If my concerns for “Okay, let’s think this out to make it as effective as possible”, and the other concerns of “How can we do this without crashing the economic system”, LET ALONE the instinctive hardwired* reactions of “Huh?  How is that fair?”  are going to be answered with  “Nyah, nyah, you’re just STUPID MISERLY JERK POOPYHEADS”, I can guarantee this proposal will go nowhere.

  • hapax

    whoops, forgot the footnote.

    I was going to point out that an understanding of “fairness” — in the sense that “the same amount of effort deserves the same reward” — has been experimentally observed in practically all primates, dogs, and parrots, and possibly other animals.

    Yes, humans have the intellectual capacity (we hope) to understand that “it’s more complicated than that”;  but very few policies are going to gain much traction by cavalierly dismissing such a basic fundamental concern.

  • Anonymous

    Humans have inherited lots of instincts from billions of years of evolution.  Some are good, some are worthless, and some are less than worthless.  I don’t like the concept of “deserve” and I would like to see ethical issues framed differently.  I would like to see ethical issues formulated around what people should *do*, rather than what people should *have done to them.*

    “Don’t reward corporate executives in a way that totally sabotages any incentive for good performance.”  I like that so much better than “Corporate executives don’t deserve gigantic severance pay,” even though I admit that from a certain perspective they are the same thing and the second resonates with most people more than the first.

  • hapax

    Okay, Morilore, let me put this another way.

    I think we both agree that some sort of Jubilee would be a good economic policy.

    Now, is your primary concern:

    a) persuading enough people to agree with it that it has a reasonable chance of passing?

    or

    b) demonstrating how superior your moral reasoning is to everybody else’s?

    Because from what I’ve been seeing, you’ve got some jim-dandy arguments for (b).  In terms of (a), you’re working hard on alienating someone [me] who was already predisposed to support the policy.

    How effective do you think your arguments would be on someone who was inclined to resist this policy?

  • Morilore

    OK, I see your point. This isn’t the place to argue about the philosophy of ethics and I’ve been overly contemptuous and hostile here. My digression is a poor response to the resultant conflict.

  • hapax

    However, in all fairness [g] you do make some good points about the basis of ethics. 

    The nature of Fred’s posts, we’re sure to get into a meaty discussion of ethical reasoning soon. 

    I would really like to see a more formal outline of your argument then!

  • Anonymous

    I was going to point out that an understanding of “fairness” — in the
    sense that “the same amount of effort deserves the same reward” — has
    been experimentally observed in practically all primates, dogs, and
    parrots, and possibly other animals.

    But we clearly don’t believe that fair means the same reward for the same effort.  Nobody thinks that Bill Gates puts in 10,000 times more effort than a McDonald’s janitor, yet he gets a much higher reward.  Even for those that who believe he puts in more effort, nobody thinks he puts in that much more effort.  We don’t think that fairness means reward should be directly proportional to effort.

  • Anonymous

    “Let’s make this as effective as possible” is a reasonable concern which doesn’t involve holding other people back because one thinks one deserves better than them.

    Let’s put it this way.  If it works at improving the economy, then it helps you in the end, almost regardless of who “you” are.  That’s good.  If it doesn’t, then it’s bad, and this is how we should frame the discussion.  Does that sound reasonable?

  • http://stealingcommas.blogspot.com/ chris the cynic

    Because fairness is what we use to say that the rich should pay higher taxes or that CEO compensation should in some way be tied to doing good work or, sticking with CEOs, that a CEO shouldn’t be paid 300 times what the average worker makes.

    Fairness is what we use to argue that banks shouldn’t be able to bundle together loans that they know are crap, call them gold, and then sell them to unsuspecting buyer’s whose only mistake was in trusting the banks.

    Fairness is what we use to argue that everyone -regardless of the class, family, or race that they happened to be born into- should be entitled to a good education and shouldn’t have to go hungry.

    Fairness is what we use to argue that people with special needs should get special treatment for those needs.

    Fairness is what we use to argue that there should be a social safety net.

    Fairness is what we use to argue that same sex marriage should be legal.

    Fairness is what we use to argue that it’s wrong that women get paid less than men.

    Fairness is what we use to argue that racism and sexism and homophobia and transphobia and so forth should die in fire.

    Fairness is what we use to argue that no religion should be given preferential treatment, nor should religion in general be given preferential treatment.  Or to put it another way, fairness is what we used to argue that discrimination on the grounds of religion or lack there of is wrong, wrong, wrong.

    Fairness is the foundation on which just about every argument for equality is based.

    Fairness is what we use to argue that the 99% are getting shafted.

  • Daughter

    The other side argues fairness, too.

    It’s not fair that those in the highest tax brackets pay far more in income taxes, as a percentage of total tax dollars collected, than the rest of us.

    It’s not fair that someone might get a extra edge in hiring or college admissions due to their race, bumping out someone else who had nothing to do with the discrimination of previous eras.

    It’s not fair that their tax dollars are spent on public schools that their children don’t attend.

    And so on.

    And it seems to me, that our side generally argues (rightly so, IMO), that

    1) the fairness question is more nuanced than they present.  E.g., those in the highest tax brackets pay more, but they make much, much more than the rest of us, and when you compare what they pay in taxes as a percentage of their total income, it’s often less.  Or, to give another example, many young white people are still benefitting from previous discrimination against people of color, even if they don’t realize it.

    2) Fairness isn’t the only issue here; societal good also is.  For example, it’s better for us as a society if all children are educated, even if doing so means supporting schools your own children don’t attend.

    Same is true with this issue. The fairness issue is nuanced, and societal good must also be considered.

  • http://twitter.com/jennifersussex Jennifer Sussex

    But, if you make the argument that the situation is about fairness in relation to your taxes, then I would argue that it’s not fair that any of my money contributes to an educational system that regulates the class system. 

  • http://stealingcommas.blogspot.com/ chris the cynic

    The other side argues fairness, too.

    Of course they do.  Even taking the present dismissal of fairness into account I’m pretty sure that most arguments do not have one side arguing, “A is fair where B is unfair, we should do A,” while the other side says, “B is unfair where A is fair, we should do B.”

    Given that fairness plays such an important role in arguments of the nature, of course both sides are going to want to claim it as their own.  The same can probably be equally applied to good, right, true, correct, and best.

    That doesn’t mean that we dismiss the idea that we should make decisions based on what the best course of action is, or we say that toddler ideas like truth shouldn’t be brought into the discussion.  It means that we argue that our position really is fair/good/right/true/correct/best.

    There’s a big difference between making the argument that we are correct to say something is fair instead of unfair and treating fairness as something that shouldn’t be brought up.

  • Anonymous

    Fairness and the word “deserve” are usually, in my opinion the least-powerful way of framing all of those things.  It centers the demand on the person doing the demanding, rather than where it belongs: the person of whom things are demanded.  It allows the comfortable and the powerful to pretend that the suffering of the weak is the problem of the weak, rather than the result of a problem in their ethics.

    It’s wrong to hurt people or to let people get hurt.  All of the things you listed, in one way or another, fall under that rubric.

    Or maybe I went too far. I do tend to get carried away right when I enter a thread.

  • carovee

    Thanks Morilore.  It’s not a question of fairness right now.  It’s a question of keeping our economy from tanking to the point we never recover.  Sure it sucks that some people get something for nothing but isn’t that better than all of us standing in a soup line?

  • http://thatbeerguy.blogspot.com Chris Doggett

    I’m not sure I have the mental capacity or balanced brain chemistry to fully explain why the debt Jubilee is going to be such an uphill fight, but I’ll give it a whirl.

    Two words for one concept: debt commodification.

    Growing up (not quite old enough for GenX), I saw late night infomercials for ‘get-rich-quick’ schemes. They usually featured men lounging on boats with bikini models standing around in between pitches of “how instead of you working for money, making your money work for you!” and so on. One common pitch (in the late 80’s) was the idea that you could get rich (quick!) by buying uncollected debt from big companies for pennies on the dollar, contacting the debtor and settling the debt for a fraction of the “listed” value. On it’s face, it sounded like a win-win: the debtor could pay off his debt for less than face value, and you could turn a quick-and-tidy-profit! Naturally, since it was advertised on late night infomercials, you know it’s not that simple.

    The problem is the late-night informercials morphed into a major international business of buying, selling, and valuing debts. The U.S. consumer was, for a long time, considered the best debtor, likely to pay back his debts and seemingly always eager to borrow more.

    The commodification of individual debt is what makes Jubilee so unlikely. You really think MasterCard is still holding your debt? Sure, they loaned you $1000 a year ago to pay for your car repairs, but they sold that debt ten months ago to someone in Bandar who liked the idea of a $1,000 bond that paid 12% interest.

    You thought there was trouble with “toxic assets” from the mortgage market? Jubilee turns a whole lot more of the market into a “toxic asset”. For those not up on the jargon, bankers took individual mortgages, cut them up into smaller bonds, and sold the bonds; the interest payments on the bond were paid by the homeowner’s mortgage payments, passed through the bank. If the homeowner stopped paying the mortgage, then those bonds were no longer able to pay interest. If the house was foreclosed and sold for less than the full value of the mortgage, the bonds wouldn’t be worth face value either. They were considered “toxic assets” because the real value of the asset was much, much lower than it’s face value, they no longer paid a return, and there was no real way to sell them to anyone else.

    The big hurdle for Jubilee is that every debt we forgive is someone else’s asset. Sometimes it’s a bank asset, but surprisingly often, the owners turn out to be 401K or public pension funds, or even civic governments. Remember, some of the folks who buy debt are trying to find anything to invest in that pays a real return. My “savings” account pays less than 1% interest before taxes; that’s not an investment or a savings. CDs? Money-market accounts? Equally terrible. The folks who are buying debt are doing so because low-risk investments pay no return at all to speak of, and there’s an entire category of investors that only want low-risk investments.

  • Albanaeon

    Fairness?  Is it fair that the value of my house has plummeted the last few years because our neighborhood is half vacant?  I made my payments.  I paid my previous loans and went to the military so I could go back to school.  Nothing about this helps me. 

    Except of course having a weak economy keeps those houses vacant and my future job prospects a bit leary and having millions unemployed or so riddled with debt that they can’t contribute meaningfully to the economy and instead are the ends of the vacume that the rich have been using to suck money to their pockets hurts me far more in real terms than a selfish sense of pride on my part.

    We can go on and on about “fairness” but it won’t mean much because someone, somewhere, is probably not going to get the full benefit, however much they deserve it.  But the reality is that as the system stands now, 99% of us are being treated unfairly by a wide margin.  We can either continue to fight over the scraps and protecting the current system so we can say how much better we are than THAT person, or we can band together and work towards getting a fairer deal for ALL of us, even if its not the best short term deal for us.  Long term, we come out head and shoulders better with a stable economy and low unemployment and a populace not over-burdened with debt they can’t pay anyway.

  • http://stealingcommas.blogspot.com/ chris the cynic

    For whatever it’s worth, I think that responding to claims of fairness in this way (pointing out that, while some things might be unfair especially in the short term, it works out being more fair for everyone) makes a lot more sense than dismissing the entire concept of fairness.

  • Anonymous

    The best part of this interesting  blog post is your fresh perspective on the economic argument of moral hazard.  It’s always the first or second argument raised by people indignant over the idea of forgiving student loans to stimulate the economy (variations on  goddammit, I paid my loans back and so should everybody else or else they’re a deadbeat sucking off the taxpayer) But turn the tables on to Wall Street and the banks and brokerages that have “securitized” and commodified American education, and the schools themselves with their excessive tuitions. Look at the moral hazard that they have created. 

    Look more closely at those student loan interest rates (mine is 8.25%, with fees penalties and interest added in , capitalized and compounded daily), read the financial pages about how much frantic buying,selling  and underwriting is going on in the dubious for-profit on line education industry,  and check the salaries of university administrators in this time of an alarmingly fragile world wide economy and then ask: Who among us is not taking the full economic responsibility and  consequences of their actions? 

    The next best thing about the blog post are fun illustrations of Jubilee to lighten the dismal subject of student loan debt and this terrible global economy.  Superheroes are welcome!

  • http://apocalypsereview.wordpress.com/ Invisible Neutrino

    The way forward may be in the way Canadian health insurance continues to be very popular:

    Universalize.

    Everybody in Canada, even the Bronfmans, gets a health insurance card issued by their province of residence. Everybody, on presentation of said card, can be treated by a doctor, emergency ward of a hospital, or any other medical professional who provides an insured service.

    Even if the Bronfmans likely use their own American doctor who they pay great oodles of sums to, the fact remains that the law says every Canadian citizen who has satisfied provincial residency requirements can get a health insurance card.

    In the same vein, the debt forgiveness law as discussed before on here, HR 365, is a good starting point. Yes, everybody has a starting point that’s different. Some people did pay all their bills on time, paid cash for their car, avoided credit cards, and so on.

    http://thomas.loc.gov/cgi-bin/query/z?c112:H.RES.365:

    All this is not mysterious, but just as it’s not mysterious to avoid emails that say HI I AM FROM NIGERIA I HAVE $20 MILLION I NEED TO STASH AWAY, people still fall into the trap of making decisions that seem reasonable at the time, but which turn out to not be so good in retrospect (e.g. getting a credit card, and then putting something on it and then getting snarled up in debt).

    One aspect that would be very palatable to me, actually, is that if the law were written so that any cancelled credit card debt also meant that the credit card itself became invalid, I’d be fine with that.

    There are ways to build in “penalties” that appeal to the “HEY YOU CRAB UP ABOVE ME I WILL PULL YOU DOWN” mentality that will not unduly harm those whose debts have been erased; it’s just a matter of having open, frank, honest debate about what form the law should take and being able to put ourselves in other peoples’ shoes.

  • Bethany

    First time poster…

    Dunno.  I would want to see a detailed analysis by an economist who has a
    good track record with predictions about the current economic crisis before I
    was willing to consider the idea.  On the face of it, it sounds more
    likely to collapse the economy further than to improve anything to me.

    First, as others have pointed out, one person’s debt is another person’s
    asset.  Massive debt forgiveness is either going to involve printing equally massive amounts
    of money (with the accompanying risk of inflation) or causing huge financial
    losses for someone… and I agree with Chris Doggett, I
    bet we’d be surprised how many of those “someone’s” turn out to be pension
    plans, town governments, and 401ks. 
    Certainly I’d expect anyone with any amount of money in the stock market
    to lose their shirts, and that’s a lot of people.

    Which leads to my second point. Let’s not pretend that this
    wouldn’t hurt people who have savings instead of debt.  Of course it would.  I’d expect that either their savings would be
    damaged by inflation or by the widescale financial losses.  Perhaps the argument is that it’s “selfish”
    for someone to object to losing their retirement savings for the sake of paying
    off someone else’s mortgage.  I happen to
    disagree.  But either way, we’re not
    talking about hurting the 1% for the sake of helping the 99%, we’re talking
    about hurting lots of members the 99% for benefit of other members.

    It’s easy to say, “Let’s stick it to the Bank of America!”
    but, Citizens United to the contrary, Bank of America isn’t a person.  It can’t suffer.  It’s people who suffer.  And do you think the people who suffer are
    going to be the CEOs and other people who got us into this mess in the first
    place?  I think there’s not a chance in
    you-know-where.  In the end it’s not going to be the ultra-rich who end up paying for the debt forgiveness, it’s going to everyone else.

    I agree that we shouldn’t have banks “too big to fail” but I
    don’t think letting them fail anyway is the best way to fix the problem.  Taking something too big to fail without
    crashing the economy and then making it fail seems problematic to me.

    I agree that “moral hazard’ is used in a lot of bad
    arguments, but nevertheless it is a genuine issue.  I agree that we’ve created a moral hazard problem
    with the large banks, who now know that we’re not going to allow them to fail.   But it’s not clear to me that creating equivalent moral hazards for consumers is the way to fix that problem (as opposed to trying to get rid
    of the moral hazard for large banks).  This
    may set a precedent that provides an incentive to acquire consumer debt, and high
    levels of consumer debt are one of the reasons we got here in the first
    place. 

    However, it may not be an issue, as it may discourage
    lending instead.  In that case, no
    problems with people racking up debts figuring they’ll be forgiven, because
    there’s no one willing to lend!  However,
    my understanding is that unwillingness to lend is part of the problem that’s
    keeping us in a recession.  So I’m not
    sure discouraging lending further is going to solve the problem. 

    I don’t know.  I agree
    that debt forgiveness is going to need to play a part in the economic recovery.   However, without further and detailed analysis, I’m not convinced that a full-scale
    Jubilee — forgive EVERYONE’S debt — would fix the broken economy, as opposed to burning it to the ground.

  • http://mistformsquirrel.deviantart.com/ JJohnson

    Welcome to the comments Please do not kill us with sheep!

  • Bethany

    Interesting formatting there.  Not sure what happened.  Sorry ’bout that.

  • http://apocalypsereview.wordpress.com/ Invisible Neutrino

    Certainly I’d expect anyone with any amount of money in the stock market
    to lose their shirts, and that’s a lot of people.

    A lot of people seem to forget that the stock market isn’t close to being any kind of guaranteed investment, and your statement implicitly treats it as being the same as a money market fund.

    Also, these days, the distribution of stock ownership in a way that’s meaningful to the people involved is likely smaller than you think.

    In Canada close to 50% of the population still has nothing in the market. Of the remaining 50%, most of it is locked up in pension funds which may not be vested for all employees, and which could conceivably disappear if the market were to seriously go haywire.

    In short, the direct, personal, connection between one and one’s stocks in a way that is meaningful and directly capturable by oneself, is limited to a small percentage. The greatest scam they’ve pulled is in making a lot of people believe that “people’s capitalism” really exists.

    On the issue of someone’s debt = someone’s assets

    I brought this up before, myself, but I also noted that in many cases the assets have fallen in value and remain so in the USA. If your house is worth less to the bank, your 401(k) is also worth less to you.

    But the “haircut” the bank will get will be proportionally greater than your own haircut.

    And really, the very idea of securitizing debt to the point of being unable to trace its true origin or even its true risk factor needs to die a very messy, public and painful death and the best way is really just to extinguish it all.

    How many you here have found they got a foreclosure notice from a bank which had no clue as to the real nature of your mortgage, or the fact that your house is already paid off? I rent, but if the situation were such that I lived in a house instead of an apartment, and I was in the USA, I might find myself evicted because the homeowner’s note with the bank was sucked into this whirlwind clusterfuck of the chain of ownership being broken.

    Hernando de Soto made it sound like magic when he pointed out that a very simple, and basic, prop that has made Western capitalist economies succeed where others have not, is the unbroken, well-documented, chain of property ownership that keeps the gears of commerce moving.

    I think, in retrospect, he was probably overexaggerating, but I think also that he made a very good point in one way: how many post-Communist countries had major issues with who owned what in the transition to capitalism? How much did this slow down their ability to integrate with countries with more established practices?

    Well, in the USA, it’s starting to become clear that nobody seems to really know who owns what, and the consequences of that are written all over the last three years of economic troubles.

    The Gordian knot of excessive debt and unclear ownership of assets must be cut, and the way out is debt cancellation. It can happen in an orderly way, or it can happen through the fire of hyperinflation or the ice of a generation of economic depression.

    Read you some John Ralston Saul sometime. The nature of debt and how it is occasionally wiped out on a grand scale is one of his hobby horses.

  • Ronald Brak

    A jubilee would be fraught with winners and losers.  In Australia when the Global Financial Crisis occurred the government simply gave money to almost everybody.  As a result Australia avoided having a recession and was the only developed country to do so.  I’d recommend the US government do the same, except on a larger scale.  A considerable portion of the money given to Australians was spent on reducing debt and I’m certain the same would occur in the US.

  • http://mistformsquirrel.deviantart.com/ JJohnson

    I am entirely OK with this plan as well.  A very literal bailout for the 99%.

    The only problem is, i think that’d be even harder to sell politically than debt forgiveness, which this thread already shows is a tough sell

  • Albanaeon

    One of the issues with “stock market will implode and everyone will lose” is that we are honestly not sure how much of the value of the market is inflated anyway.  Take the recent crisis.  While you’ll still hear things about the housing market being the issue, it was honestly only a small part of the problem.  The chopping up and selling in packages was another problem, but when those assets were leveraged up to 600 to one is where the real problems started happening.  When those bets were looking bad, who knew if ANYONE had the ability to cover such leverage.  Add in the junk mortgages and any firms assets were giant question marks.  We had the opportunity to address some of these, but our lawmakers punted more or less and we have again rising stocks with no known value behind them.  Part of me is convinced that student debt is the heart of the current bubble and that is why there is so much pressure to keep them from being defaulted on and the like. 

    In any case, the heart of the matter is that if we forgive a bunch of debt, we probably will cause major headaches on Wall Street.  BUT, with a less indebted citizenry, the effects won’t hit Main Street as badly as consumers will have greater access to cash and be able to buoy spending and demand in the economy as a whole.  And maybe this time, get a real recovery instead of whatever we got last time.

    We really need to stop looking at stock numbers as an indicator of the health of our economy.  They’ve been shown to be often manipulated and not reflecting any real value.

  • Consumer Unit 5012

    One of the issues with “stock market will implode and everyone will lose” is that we are honestly not sure how much of the value of the market is inflated anyway.  

    In my opinion?  ALL OF IT.  

    Once a non-dividend-bearing stock is issued, it has exactly as much value as a Yu-Gi-Oh card, and you can’t even play a good game with it.  But for some bizarre reason, everyone insists on treating it like it has some inherent worth, so they keep getting sold and resold, sometimes making profit under what economists call with unusual clarity the “Greater Fool Theory”.

    I hope that people will have a Cow Moment eventually.

  • http://apocalypsereview.wordpress.com/ Invisible Neutrino

    Any econ 101 student will also tell you that the stock market’s money flows aren’t even calculated in GDP because 99.5% of its movements are asset swaps and result in no net production of goods or services.

  • http://www.facebook.com/people/Jeff-Lipton/100001171828568 Jeff Lipton

    I’m conflicted here.  I have a good sized mortgage (about $80K) and more credit card debt than I’d like (about $15K).  On the other hand, I’m paying 8% on the debt and 6% on the mortgage).  I’m doing hella lot better than many Slacktivists.

    I made the decision to buy a condo (and I still think it was a good one) and to pay for a wedding on credit (and I don’t regret that either).  Those were my choices and I knew the risks when I took them.

    Would I like both to be erased? Sure!  I could possibly retire on the extra $1600 a month I wouldn’t be paying.  I don’t think I deserve it, though.  I think paying down the exorbitant student loans would be a better place to start, even though I wouldn’t benefit.

    If a general debt Jubilee were to be called, I sure wouldn’t fight it!

  • Bethany

    Apparently according to Gallup, about 54% of Americans have some stocks (down from 65% in 2007).

    That’s a LOT of people who are going to lose their savings if the stock market tanks permanently.

    I think if the last few years have taught us anything, it’s that headaches on Wall Street ARE headaches on Main Street… and worse, headaches on Wall Street are much BIGGER headaches on Main Street than they actually were on Wall Street.

    I have no problem with the idea that any solution to our current problems is going to involve some debt forgiveness.

    My main points are:
    (1) Debt doesn’t just go :poof: — that’s money that *someone* is going to lose, and if the last few years have taught us anything else, if someone’s going to lose money, it’s a lot more likely to be the lower 99.9% than it is the top 0.1%. 

    (2) Debt is actually quite important to the system. Look what happened when large numbers of people found themselves unable to pay their mortgages in 2008!  But exotic financial instruments aside, credit is important: if we want people want to start or run businesses, plant crops, buy houses, build schools or other projects in their communities, or go to college… then we need to be able take out loans with reasonable interest rates.  That means we need a climate where lenders can lend money with reasonable confidence that they might be repaid, which I think means we need to be careful with handing out debt forgiveness.  I’m not saying we shouldn’t do it, but I think we should do it judiciously, without a “stick it to the lenders” mindset.

    I also think that without large-scale financial reform, we’re just going to end up right back where we started.

    Personally, I suggest campaign finance as a good place to start.  IMO that’s a big reason we’ve ended up with so much corporate control of the government and so many financial regulations stripped away.

  • http://apocalypsereview.wordpress.com/ Invisible Neutrino

    My main points are:
    (1) Debt doesn’t just go :poof: — that’s money
    that *someone* is going to lose, and if the last few years have taught
    us anything else, if someone’s going to lose money, it’s a lot more
    likely to be the lower 99.9% than it is the top 0.1%.

    Which… is why we in the 99% want the laws written in ways which expose the fraud of “people’s capitalism” and concentrate the ZOMG PAIIIIIIIIIN on the rentiers in the 1%.

    Really, is it so “painful” to only live on a million dollars a year instead of hundreds of millions?

    The cultural expectations that Canada, and the USA in particular, have around money are completely out of whack. The ridiculous idea that the hundredmillionaires should continue to be coddled and protected and that this coddling and protecting somehow will make them benevolent enough to “give” us jobs (The very idea should be distasteful – the idea that jobs should be granted like some kind of kingly boon for enough grovelling and bowing and scraping!) so that we can continue to subsist one paycheck away from poverty —

    Enough!

    Enough of this.

    Sometimes I wonder if our house pets have a better understanding of their self-actualization than we do, considering that they have no desire to do more than eat, sleep, play with their owners, and in general live well-adjusted lives that are not centered around the endless acquisition of more and better stuff.

  • Bethany

    As far as the stock market not being a guaranteed investment, no, of course it’s not.  Hence the widespead advice that you should never have money you’re expecting to need in the next 5 years or so in the stock market.

    But it’s a common place — and a commonly recommended place — to put retirement savings. If you want your retirement savings to keep up with inflation there are no risk-free options, and historically the stock market has been a good investment in the long run.

    I agree that you can’t judge the entire economy by the stock market — as the current situation demonstrates — but that doesn’t mean it’s health is irrelevant to the system.

  • http://apocalypsereview.wordpress.com/ Invisible Neutrino

    But it’s a common place — and a commonly recommended place — to put
    retirement savings. If you want your retirement savings to keep up with
    inflation there are no risk-free options, and historically the stock
    market has been a good investment in the long run.

    Money market funds, CDs, government bonds (and government bonds have historically had an interest rate which exceeds the inflation rate, especially now with TIPS being invented – the 1970s were atypical in that regard). These all are far more stable than the market, which people love to quote as an ‘average’ of 10% per year but that ignores the substantial troughs it can get into. The hucksters who run things always like to babble “buy the dip”, “buy and hold” and whatever else it takes to keep your money in with the brokers, but the reality is that you can end up with a retirement less attractive than what you hoped for. Consider the fact that if you bought in at any time during the 1920s, to recover those values you had to on average wait until the 1950s. Or if you bought in in, say, 1969-1972, your stocks basically treaded water from 1973 to 1982.

    There’s a reason why there were only 18 million stockholders in the USA in about 1955 in a country of about 150 millions. People knew the market wasn’t a “safe investment”, no matter how you might spin the fact that it’s supposed to average out on long timescales at a positive percentage growth rate per year.

    The era from 1980 – 2000 in terms of the smooth parabolic curve the Dow and NASDAQ took is an aberration brought on by Reaganite policies in the 1980s and relatively cheap energy during the 1990s.

  • http://apocalypsereview.wordpress.com/ Invisible Neutrino

    Apparently according to Gallup, about 54% of Americans have some stocks (down from 65% in 2007).

    The distribution of the ownership is important too.

    Who owns how much? Is it 10% holding many many shares and 90% owning a few shares?

    How is the ownership worked out? Is all of it directly held, or is the vast majority indirect through a mutual fund and/or pension fund?

    The composition is just as important as the percentage.

    Also?

    Considering the speed at which pension funds seem to magically disappear into the CEO’s pocket or simply collapse due to unfunded liabilities —

    I would not assume the dire consequences you seem to foretell from a sudden extinguishment of debt. Yes, the stock market might gyrate for a while, but the ultimate source of a company’s health is what it sells to people; people who have more money will buy their stuff.

    That’s the key point to why this deep recession keeps dragging on; people are not spending money on anything except trying to keep their heads above water – that is, they’re basically paying now for stuff they already got in the past.

    The time value of money is a great thing, but it also creates macroeconomic problems when people don’t realize that it lets you effectively shift spending forward or backward in time and that this spending effectively amounts to savings, not purchases of present goods and services, when you get the product NOW (which counts in GDP NOW) and then pay for it LATER (which counts as savings LATER – and Keynes proved that this does not mean reinvestment of that savings in fixed capital equipment or other forms of corporate spending which would boost economic activity).

    All the houses – educations – goodies on credit cards —

    They’ve already been bought and booked in GDP from 3, 4, 5, 6 years ago.

    We’re now in the paradox of thrift situation and it’s time to lift the problem.

    Keynes even half facetiously said one way to cure unemployment would be to print money, stuff it in canisters, bury them, and then give everybody in the country maps with big X’s on them. The resulting free-for-all as people rented excavators and paid others to help dig the canisters back up would have given the same net result as simply giving them the money directly, but the story as told by Keynes is a little more artful. ;)

  • Bethany

    Like I said, I would want to see detailed analyses by economists with a proven track record for making these kinds of forecasts before I’d buy that it would be a huge help to the economy.  We saw what an increase in mortgage defaults in 2008 did to the economy.  Forgiveness of ALL debt would be that times 1000.  I have a hard time believing that it would have a negligible impact on the economy, let alone a positive one.

    How far down the chain does this debt forgiveness go?  Just to major banks?  Community banks?  Credit unions?  People who loaned a few thousand bucks to their brother-in-law?

    I agree that people need more money, but there are a lot of ways to do that.  What happened to the idea of infrastructure spending?  That puts money into the economy and fixes our falling-down bridges.  How about government investment in education?  Research? 

  • http://apocalypsereview.wordpress.com/ Invisible Neutrino

    I think the cause and effect of the mortgage defaults is reversed here — the defaults occurred because people could not afford the payments, either because of the “balloon” in the contract, or because they lost their jobs.

    They did have a knock-on effect, but the initial cause is not the fault of the defaulters.

  • Anonymous

    I’m glad someone has thought of a way to run a jubilee without causing universal, catastrophic bank failure. Unfortunately, the “print money” solution is going to hit the dollar, hard: not only will the average consumer suddenly have more money to spend, but the banks will be swimming in dollars, desperate to invest to keep their company afloat. The forgiven debts may not be as stimulating as you would expect, once the following wave of inflation hits.

    I like the concept of a Main Street bailout, I’m just not convinced it will work as intended.

  • Anonymous

    I’m confused as to why Jubilee things seem to be an all or nothing affair. Is it feasible to try a percentage Jubilee? Then people are still paying for what they spent (so it’s not like they’re getting a free ride), but they end up closer to climbing out of the hole they’re in?

    Econ was never my strong suit. I was a Poli Sci major.

  • Bethany

    I had sort of been assuming that because that’s the idea of the “Jubilee” in the Old Testament.  (Someone correct me if I’m wrong, my understanding is that it’s very unclear whether this was something that ever actually happened historically, or just something someone thought was a neat idea that didn’t go anywhere.)

    I think debt modification and more limited-scale debt forgiveness has a lot of potential.  Naively, it seems to me that credit card debt would be a good place to start.  The interest rates on those things are so obscene it seems like there’s a lot of room to decrease people’s debt burden substantially without putting the banks who issued the cards under.  Modification of underwater mortgages seems like another place to start.

  • Consumer Unit 5012

    I’m no economist, but I get the distinct impression that our castle-in-the-air of an economy is based on everyone having ever-increasing interest-bearing debt.

    And that doesn’t strike me as a good thing at all.

    Being the cynic I am, I strongly suspect if any sort of big debt forgiveness went through, the banks would BURN THIS COUNTRY TO THE GROUND in retaliation at losing their cash-cow.

  • Bethany

    I think it’s more that our economy is based on an ever-increasing level of consumer spending, which because wages are stagnant, means an ever-increasing level of debt.

    I’m not sure that wiping debt out would solve what I see as the more fundamental problem of basing an economy on people buying more and more stuff they don’t actually need.

  • Laertes

    Of course Morilore is right: We’ve got a powerful hard-wired sense of fairness.  We’ve also got a powerful hard-wired urge to eat any high-energy-density food we come across.  Both of these can do us a lot of harm since we’re now operating in an environment that’s vastly different from the one to which these behaviors were adapted.

    Our hard-wired urge to stock up on energy-rich food made a lot of sense when we were hunter-gatherers.  In the modern world, though, we’re up to our eyeballs in energy-rich food and that urge to hoard isn’t very productive.  Similarly, our primate sense of fairness is spectacularly ill-suited to making decisions about the modern economy.

    In short, I’m not denying that this urge to fairness exists.  I’m simply viewing it as an obstacle to be overcome.  The fact that it exists doesn’t mean that we have to kneel before those who’ve figured out a way to turn it to their advantage.

    I don’t think our gut-level sense of fairness is likely to be a good guide for lots of reasons. For starters, we’ve got lots of cognitive biases that get in the way.  We view ourselves in better than the best possible light, while others get little or less slack, depending on how valuable they are to us.  My success is because of hard work, yours is because of luck.  My failure is someone else’s fault, yours is your own.  When I get something you don’t, it’s because I deserved it.  When you get something I didn’t, I got cheated.

    We see little of what’s out there, and understand little of what we see, and then think that our half-assed gut reactions are laws of nature.  It’s not.  We’re short-sighted, spiteful, selfish, xenophobic, and often outright stupid.  These are all reasons for bad behavior, but none of them are excuses.

    I guess I understand the temptation to tell myself stories about how I achieved my more-or-less comfortable middle-class existence through hard work and virtue, but that’d be bullshit.  I’m not all that hard-working, and not all that virtuous.  Mostly what I am is born white in a stable family that had enough money to send me to school, and any idiot can play that hand without half trying.

    So Jubilee would be unfair to me because I didn’t run up any debts to get canceled?  I’m supposed to resent that?  How about no?  There’s a whole lot of unfairness in this world, and I’d guess that on balance, more of it’s working for me than against me.  There’s people  who know an awful lot more about injustice than I do.  I’ll be damned if I’m gonna complain.

  • Anonymous

    Well said.

  • Bethany

    Well, mortgage forgiveness essentially means giving people hundreds of thousands of dollars of free home equity solely because they had enough money to buy a house.  It basically eliminates their housing expenses.  That will put people who didn’t have enough money to to buy a house prior to the jubilee at a big disadvantage going forward for the rest of their lives.

    If you wouldn’t be the least bit put out at seeing people around be given free housing for years to come, but not getting any yourself because you weren’t well-off enough… congrats.  Personally, I’m not that big a person.

    The more I think about it, that’s what strikes me about the jubilee idea — for something that’s supposed to be “bailing out the 99%” it’s oddly regressive.  The biggest beneficiaries would be landlords and homeowners who hadn’t paid off their homes yet, and the more expensive your home, the bigger the benefit.  People who rent will see far less benefit and will also be at a permanent disadvantage going forward  (both from having to pay ongoing housing expenses and because it would likely be much more difficult and expensive to get home loans going forward).  And by and large people who rent are people who have less money.

    It’s not a “bailout for the 99%” so much as a bailout of some of the members of the 99% — by and large the better-off members — at the expense of other members (such as people who don’t have enough money to buy a house or couldn’t afford to go to college in the first place).

    Except I think even the members of the 99% who would be getting “bailed out” would end up suffering from the aftereffects of suddenly destroying a few trillion dollars of money on the economy (that’s several times larger than the hit that set off the recession in 2008).

  • Laertes

    I wonder if you’re familiar with a more detailed plan than I know about.  I suppose I’d expect that at the extreme it takes the form of writing down the outstanding balance on underwater mortgages to the market value of the homes rather than just forgiving all outstanding mortgages entirely, but …. okay, actually, there’s no “but” here.  I’m not going to pretend that your suggestion is reasonable, and it’s a struggle to imagine that it’s offered in good faith.  Is that really your best, and most honest, understanding of the idea that’s on the table?  I don’t want to call him a straw man, but let’s say that he looks like he’s terrified of fire and is an excellent dancer.

    Addressing your broader point: Yes, I’m perfectly clear that a large-scale write-down of underwater mortgages would disadvantage me with respect to a whole bunch of, for want of a better word, homeowners.  Lots of people will resent it, and as is the way of such things, they’ll want other people to resent what they resent, and most likely invest a lot of energy in spreading their resentment around.  Misery really does love company.

    It’s simply not true that I “wouldn’t be the least bit put out.”  I’m just not persuaded that the chief aim of public policy should be to prevent me from feeling the least bit put out.

    So let me ask simply.  You’re advancing two doubtful claims:

    – That “Jubilee” means to forgive outright every mortgage in America.

    – That we shouldn’t adopt any policy that makes me feel “the least bit put out.”

    Are you sure about those?

  • Bethany

    “So let me ask simply.  You’re advancing two doubtful claims:

    – That “Jubilee” means to forgive outright every mortgage in America.”

    I don’t know that it’s a “claim” — that is in fact precisely what I understood the proposal to be.

    If that’s not what’s being proposed, then I’m not sure what exactly IS being proposed.

    “- That we shouldn’t adopt any policy that makes me feel “the least bit put out.””

    Now who’s arguing with a straw man? :-)  Of course I’m not saying that.  I am saying that the proposal as I understood it would be giving some people hundreds of thousands of dollars for no particular reason except that they happen to own a house which isn’t paid off yet, while giving far less money (if any at all) to people who are in far more financial distress.  I consider this very unfair.  I think that we should avoid policies that are very unfair unless there is demonstrably very large societal benefit.  As I think that what I took to be the plan would collapse the economy, and I don’t think that’s benefical, I see no reason to accept the unfairness in this particular case.

    If someone objects that a policy is unfair, I don’t see “you’re just selfish” or, “are you saying we should never adopt a policy that’s unfair to you?” — or of course the big one, “life’s not fair!” — as being sufficient answers, though they’re certainly popular.  (In fact, some of those are popular responses to objections about income equality.)

    At any rate, I guess we’ll have to agree to disagree… I usually try to avoid getting into political arguments on the Internet, and it’s probably best from a time management standpoint if I get back on the wagon. :-) 

  • Lori

     If someone objects that a policy is unfair, I don’t see “you’re just selfish” or, “are you saying we should never adopt a policy that’s unfair to you?” — or of course the big one, “life’s not fair!” — as being sufficient answers, though they’re certainly popular.  (In fact, some of those are popular responses to objections about income equality.)  

     

    In this case what should be said is less, “You’re just being selfish” than “You’re being very short-sighted and you’re sacrificing something that could go a long way toward redressing the huge imbalances in your economy because you’re taking far too narrow a view of fairness.”

  • Lori

     That will put people who didn’t have enough money to to buy a house prior to the jubilee at a big disadvantage going forward for the rest of their lives.  

    As opposed to the huge advantage now enjoyed by the people who didn’t have enough money to buy a house before the crash?

    Even if mortgages were going to be completely written off (which as Laertes points out is highly unlikely) I’m not seeing how this point isn’t simply a version of crabs in a bucket. 

  • http://apocalypsereview.wordpress.com/ Invisible Neutrino

    One unintended side effect might be to reinstate a housing bubble. To counter that, the capital gains tax rates could be made equal to the income tax rates, and the income tax rates themselves restored to 1960s levels.

  • Lori

     One unintended side effect might be to reinstate a housing bubble. To counter that, the capital gains tax rates could be made equal to the income tax rates, and the income tax rates themselves restored to 1960s levels.  

    If you’re talking about doing a massive cram down (as opposed to total mortgage forgiveness) then the issue should be less of a problem. It would so be tough to inflate another housing bubble if banks weren’t willing to just throw money around again. I would think that a further tightening of the mortgage market would be more likely to be a problem, wouldn’t it? Even if it’s not it seems like it would be fairly straightforward to limit speculation by, for example, tying taxation rates to the amount of aid received. People would be able to sell their home if they needed to, but they wouldn’t be able to just take the money and run.  

  • Anonymous

    That isn’t true. Banks (and corporations in general) love to scream about how any new regulation will drive them completely out of business and force them to trash the economy. Remember seatbelts? Car companies fought hard with bogus science and distraction campaigns against them, and when those started to fail they then argued that that being required to install them would drive them out of business. Yet somehow the world still has dozens (hundreds) of car manufacturers and when was the last time you heard of a car company that didn’t install seatbelts?

    Banks can survive a debt jubilee. I’m not saying it would be fun for them or would work miracles for the economy, because it won’t be and it can’t. Apart from maybe a small, targeted loan-forgiveness program, any such program will require an incredibly massive restructuring of the economy. But sure, they can survive, and return to profitability quite quickly.

    But it’s basically a larger version of something that all businesses — banks included — do every single year. No bank, no merchandiser, no retailer ever expects to collect all of their notes or accounts receivable. All banks, all merchandisers, etc. in the U.S. always have contra-assets built into their books to account for the fact that some debts are bad.

    Once a non-dividend-bearing stock is issued, it has exactly as much
    value as a Yu-Gi-Oh card, and you can’t even play a good game with it.
     But for some bizarre reason, everyone insists on treating it like it
    has some inherent worth, so they keep getting sold and resold, sometimes
    making profit under what economists call with unusual clarity the
    “Greater Fool Theory”.

    How is that different from currency? Honestly, that sounded like something from Ron Paul right now. Something doesn’t have to be made of gold or something inherently valuable to have value. If someone accepts it as an instrument, it has value.

    There are a lot of myths surrounding the stock market as being some kind of perfect guaranteed way to make money. There are also myths that suggest that it’s some kind of perfect indicator of the economic health (there are few things more irritating than some idiot on CNN gasping about the Dow going up to some random amount and trying to link it to a speech by President Obama or some GOP candidate’s poll numbers). That obviously isn’t true. But stocks are not worthless, either (how many people do you really think can live off dividends anyway?)

  • Lori

    Let me make sure that I have this straight. 

    When the rich needed a bail out we had to give it to them, with essentially no questions asked & no strings attached, because if we hadn’t ZOMG! the global economy would have collapsed ya’ll. We can not give a bail out to the poor because if we do ZOMG! the global economy will collapse ya’ll. 

    If the rich receive even a tiny bit less money as a result of lowered salaries or increased taxes, they will Go Galt, refuse to work at all and leave us bereft. If poor people are given even a little bit of money they will refuse to work at all and leech off of their betters until all the worthwhile people are bled dry. 

    If we had a debt jubilee the effect would be to reward the profligate because post-debt forgiveness a person who had racked up huge debts and had them wiped out would be in exactly the same position as a person who had had no debt. Actually, the City Mice would be better off because they’d still have all the stuff they bought on credit while the Country Mice would not. Because, for example, those 2 groups would totally end up with the same credit ratings. Or perhaps debt-forgiveness would in some way propel us into an alternate universe where credit rating no longer matters, I’m not sure which. 

    Wiping out debt that will realistically never be repaid is somehow worse for the average stock holder than continuing to pretend that the debt will someday be paid off. 

  • Anonymous

    When the rich needed a bail out we had to give it to them, with essentially no questions asked & no strings attached, because if we hadn’t ZOMG! the global economy would have collapsed ya’ll. We can not give a bail out to the poor because if we do ZOMG! the global economy will collapse ya’ll.

    Of course. The first sentence involves money flowing towards the rich, and that supports the economy. The second sentence involves money flowing away from the rich, and that undermines the economy.

  • Lori

    Sigh. Sad, but true. 

  • http://blog.trenchcoatsoft.com Ross

    I really wish people would stop just blithely accepting that “fair” means “The rich get richer and the poor get poorer and we treat everyone the same no matter where they started.”  That’s *one* definition of fair, but how about this:

    It’s not “fair” that people who “made bad decisions” on debt “get out of it”? Well how is it “fair” that banks which negligently hand out bad loans and maliciously trick customers into taking on debt they can’t handle “get away with it”?

    It’s not “fair” that the rich pay more in taxes than the poor? How is it “fair” that the people with 98% of the wealth don’t carry 98% of the tax burden?

  • Consumer Unit 5012

    Why don’t we go for a more moderate plan?

    Loan balances stay outstanding, but no interest can be charged. 

  • http://apocalypsereview.wordpress.com/ Invisible Neutrino

    Bethany:

    What makes you so sure such a law would “permanently disadvantage” future home buyers? A salutary secondary effect of such a law might be to depress home prices so that future house purchases don’t require the equivalent of an arm and a leg.

    Another might be to expose the problems with credit cards and to force issuers to lower their rates to more sensible values.

    Besides, a fair number of the people who’ll be carping about not being able ot afford a house because they didn’t borrow at the right time are probably conveniently forgetting about being able to inherit the old man’s house debt-free.

  • P J Evans

     I can’t afford a house and there isn’t one for me to inherit. I guess I’m up the creek without a paddle.

  • http://pulse.yahoo.com/_HZDOAAQAB5LXYL5Z4EAV55QMLY AbdulJ

    It’s not quite a jubilee, but President Obama just unveiled a new plan to reduce student loan burdens:

    http://news.yahoo.com/obamas-student-loan-debt-relief-plan-too-good-234242818.html

    http://www.chicagotribune.com/business/chi-obama-student-loans-20111026,0,4121978.story

    Obama plans to accelerate a plan to cap student loan payments at 10
    percent of income, bringing it forward to start in 2012 instead of 2014.

    and:

    The White House estimates the loan changes could cut monthly payments for 1.6 million graduates.

    Student debt will also be forgiven after 20 years, compared with 25 years under current law.

    […]

    Obama will also make changes to allow 6 million students to bundle
    together certain federal loans to allow a single monthly payment,
    reducing the risk of default caused by juggling multiple debt
    obligations.

    The option will be open from January and those that take it up will also
    get a 0.5 percentage point cut in the interest rate on some of their
    loans, lowering monthly payments and potentially saving them hundreds of
    dollars in interest.

    The best part is that he doesn’t even need any additional appropriations to fund it. He got the funding by transferring federal student loan and their profits from the big banks to the Education Department and he doesn’t even need a Congressional grant of authority.

  • http://apocalypsereview.wordpress.com/ Invisible Neutrino

    Sweet. Now we’re seeing an Obama who’s getting off his ass and getting shit done because screw you, Republicans, that’s why. X-D

  • Matri

    EDIT: I read the news articles and I was chortling at the way the
    Republicans are squalling like stuck pigs over it, and they know they
    can’t do anything about it because the funds were already appropriated
    and it’s purely executive-branch authority. :P

    The best part, and yet, at the same time the worst part is that every single person on the planet just knew that would be their reaction.

  • AbdulJ

    And according to the first article, this is the third executive order in a row he’s used to basically bypass Congress by using resources that belong to executive branch alone. (the others had to do with mortgage relief and helping veterans find employment).

    It’s not a substitute for Congressional action at all, but hopefully it shows voters in 2012 the difference between a President who is actually doing his job and a legislative branch that just lurches from crisis to crisis and never even suggests ideas that might put people back to work and relieve the burden of a bad economy.

  • http://apocalypsereview.wordpress.com/ Invisible Neutrino

    It really does highlight the way they just love anything that sounds like it punishes people instead of helps them.

    Sad thing is, these assholes helped bring it about in the first place by exempting student debt from bankruptcy protection in the first fucking place.

    Furthermore, I know of at least a couple of people who are half seriously considering purposely moving to a country that does not have reciprocal collections agreements with Canada or the USA because they can’t afford to pay off their debt but have the credentials that would let them move to a number of places in the world should they apply and be accepted for a job.

    So, good game, government! Make your citizens end up enriching one of those Commiesocialist Western European nations who don’t believe in burdening people for years on end to get good education.

  • http://guy-who-reads.blogspot.com/ Mike Timonin

    My only problem with the student loan thing (and it may be an instance of poor reading on my part) is this: The best bits, the forgiveness after 20 years and the 10% income cap, seem only to apply to new loans taken out after January 1st. Now, I don’t know if that means that a consolidation loan of older loans counts, but I’m stuck in an interesting situation. I can’t consolidate my existing loans, because I’m registered as a student (I’m a PhD student, I’m ABD [All But Dissertation], I’m not taking classes, but I am paying tuition), but I’m not interested in taking out more loans because I don’t need them right now. So, how can I benefit from this program? Which is not to say that I’m unhappy that the program exists – a 20 year forgiveness is excellent, and recognizes, on some level, that the current student loan situation is completely broken. (Perhaps 20 years is too long a window, though? Dunno.) I’m just not sure that the program will actually aid people who are struggling under student loan debt right now.

  • Anonymous

    Has anyone suggested an interest abatement(?) year?   Basically, for one year, anything paid on a debt will go directly to the principal. 

    Hopefully, that would lessen the debt burden that so many Americans suffer under while keeping the banks from having massive layoffs, since they’d still need to process the same loans, and the interest will be returning (though at a much lower rate or return) the next year.

    Of course, those with little or no common sense may well decide that this would be the year to get that new car or boat or whatever, because “no interest until January 1, 20XX” has a nice ring to it.  I’m not sure if that’s a feature (because it’ll keep bank employees employed) or a bug (because it’ll be increasing consumer debt again).


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