As things now stand, the current debt of the West shall never be repaid. It is too big, and it is every day compounding: we are already borrowing to pay interest on the outstanding US Federal Debt, and as taxes rise to pay interest on that Debt, productivity growth cannot but slow, so that the growth of the tax base – i.e., the economy – compounds at a lower rate than the Debt. As things now stand, the Debt is bound to swallow the entire economy of America, and so of the rest of the world. The very poorest countries are perhaps spared the oncoming sequelae; for, they have already suffered them.
The same problem is replicated in the governments of states and cities, and in many of their pension plans. Likewise also, of course, in the personal debts of almost all individuals (only a lucky few have managed to climb out of net debt on their balance sheets). And, of course, this all holds equally true for all sovereigns whatever – not just among the governments of the West, but in all governments, everywhere.
The real economy simply cannot catch up with the financial economy limned in the credit markets. The former owes too much to the latter ever to make good … unless of course there be some wholly new increase in productivity due to technology as yet unlooked for maybe perhaps O dear God please let’s hope so out on the horizon beyond where anyone can see.
The world changing singularity that rescues the financial system could happen, albeit not without massive dislocations in the lives of millions (for, that is just the way that such economic adjustments of societies have always been (because they must be) mediated: via the bodies of their constituents). The thing is, singularities can’t be counted upon. Because, hello, they are singularities. So, unlike sunrise and Easter, they can’t be bases of social order. We may not therefore prudently bet on them. So, let’s not. In that case …
Debts will at some point in the not too distant future revalue to $0. All of them, including debts owed to and by sovereigns. It is going to happen, one way or another, and no matter how it is hidden or disguised.
If in no other way, all the debts now on the books will be eliminated by inflation.
If we do nothing to avert it, then whether slow by inflation or fast by catastrophic economic collapse, this will be Jubilee as disordered, chaotic, and destructive.
Most likely, it will happen in a chaotic, black swan event, in which governments, nations and states fall asunder, there is war both within and between nations, and millions die of starvation, exposure, or disease. Or blunt force trauma, torture, bullets, or shrapnel.
Mostly, though, in the nature of things, it would be starvation.
So, better we do our best to avert all that, in favor of something better, anything better.
Then think of it, I beg you, as fantastic as this notion now seems – the discharge of the mass of debt hanging over our civilization could happen in an orderly, gradual way, as institutionalized in law, and so understood by all the parties thereto; by, i.e., all of us. So, without lots of death.
Jubilee, explicit and on purpose, enshrined in law.
Jubilee was normal throughout the Ancient Near East; i.e., it was a normal business risk, and thus accounted for in the privately negotiated cost of capital.
At Jubilee, the sovereign cancelled all debts (except, usually, those owed to himself, such as taxes). The overhang of debt, compounding inexorably and so threatening to usurp all other social motions, thus ruining society per se, would be by his sovereign ukase eliminated. Everyone would then be returned to his natural state, and able thence to proceed upon such projects as seemed to him wise and fruitful. What this meant practically was that all bondsmen and bondswomen pledged to the service of others as indentured servants in satisfaction of debts owed by their patriarchs would be freed, and allowed to return to their natural households; and that all lands likewise thus pledged would revert to their natural owners.
So then would society as a whole be returned to its natural state of … well, of economic sanity; of ordination, not to the abstract balance sheets of bankers, but to those of the land.
Jubilee was fallow and Sabbath rest for society.
Now, in the ancient world, such Jubilees were usually proclaimed somewhat adventitiously. A new king, e.g., might proclaim that upon his naturally irregular and thus unexpectable accession to the throne, all debts of his people amongst themselves (albeit, not to the royal fisc) were cancelled. Merchants and bankers all understood back then that Jubilee might happen at any time, in just the same way as storms at sea or raids upon caravans by brigands might happen. The risk of Jubilee was accounted for in their pricing calculations, along with all other risks. That raised the cost of capital, but this was no impediment to projects worth doing.
Nevertheless at the margin, the adventitious risk of Jubilee slowed the capital development of ancient civilizations (in particularly pertinent part, slowing the vivacity of their resistance to the incursions of exogenous challengers …).
While it was widespread in the Ancient Near East, Jubilee reached its highest pitch of development among the ancient Hebrews. In Israel, Jubilee was scheduled ahead of time, and everyone expected it to happen, every 50 years.
OK, cool. What can we learn from all this? What would happen if we declared that Jubilee would happen in and through 2050, and then also, making the thing regular, in and during every 50th year thereafter? What would happen if, every 50 years, all debts whatsoever – including those owed to and by the sovereign – had to go to zero? If everyone was expecting it, what would be the effects of such a move?
- Lenders wouldn’t get screwed by a Jubilee they had expected, because they wouldn’t have written notes that matured after Jubilee. A week before Jubilee, you’d only be able to borrow for 7 days.
- Futures markets in commodities, currencies, and so forth, would more and more vanish as the Jubilee approached: all contracts entailing future payments would mature before Jubilee. Nobody would be surprised or perturbed about this. Forward contracts would disappear as Jubilee approached. Options contracts likewise would disappear. Essentially all derivative instruments that are keyed to the calendar would disappear as Jubilee approached. Because derivatives of all sorts can yank the markets inordinately, market volatility would decrease as Jubilee approached.
- There would be expansion & contraction of the money supply in orderly, gradual, well understood fashion, that was ordered to the actual economic resources of society already installed and ready. As Jubilee approached, the money supply would gradually contract, in orderly, well understood and indeed expected fashion. Nobody would be alarmed. The reduction in the money supply would be like respiration; like leaving fields fallow, like the Sabbath rest, vacation, holiday. It would be an expected normal pause.
- As Jubilee approached, loans would get shorter, and the money supply would tighten, so that the cost of capital would rise. Only the most worthwhile projects – the ones that can be expected to repay loans before they mature at Jubilee – would get debt financing. All other, less likely projects, would be able to secure financing only from equity investors.
- So, as Jubilee approached, the only source of funding would be equity. Investors would not be able to lever their equity stakes via derivative moves. They would be all in. This would reduce volatility in both credit and equity markets.
- Debt would be cleared out of all balance sheets. All balance sheets. All that would be left at each Jubilee would be equity and accounts payable. Credit card debt would disappear. Auto loans and mortgages would all end. People would buy and invest only with the wealth they already owned. There would then be fewer transactions, to be sure; but the remnant buying and selling would be more economically sane, thus prudent and productive.
- Savings rates would soar, starting now. Everyone would start now to be ready for the Jubilee.
- Supply of real capital would then soar.
- Usury – the servitude of bondsmen, as formalized in full recourse contracts – would end at each Jubilee. Vale, Zippy!
- Financing sources at the pinch point of Jubilee being reduced only to equity, there would be no inflationary pressures due to excessive investment in too many projects that are not quite economical unless money is super cheap; no companies whose market capitalization is based on conjecture, rather than achieved profits, stored value, plant and equipment: economic power at the basic level. We’d invest and spend only what we actually had on hand to invest and spend. So, we’d be forced to be more prudent.
- This prudence would spread from the economic, business and financial realms into every other department of life. Including home life, which is the fundamental basis of society.
- Sovereign debt would disappear. The Treasury wouldn’t be able to borrow; neither would the banks.
- Tax debts would disappear. Nobody would owe taxes during the year of Jubilee. Under the terms of the expected Jubilee, they would all have been paid to zero at its inception. Thus in view of the inevitable approaching Jubilee, governments would have needed to accumulate a surplus over the preceding 49 years.
- If the first Jubilee were to set to happen in 2050, the present Federal debt would be forced to $0 by then. This would have massive beneficent effects on equity markets. Taxes would go down year by year. Spending would go down, massively. Adaptation of government policy to reality would be forced to increase.
- Social Security would have to be converted entirely to equity financing by the time of the Jubilee; for, after all, debts of the Social Security Administration to citizens would all disappear at 2050. The only way to make recipients of Social Security benefits whole at that time would be to replace their effectual CPI indexed fixed annuities with variable annuities.
- As the money supply tightened, real and equity assets would increase in value relative to other goods (albeit that the prices of real assets that are most usually purchased using debt of some sort would tend to fall: when interest rates are high, home prices fall; so, when loans are simply not available, home prices fall to the equilibrium price when only those who can pay 100% cash constitute the entire buy side of the market). So would tools, plant and equipment, and human resources. Purchasing power of wages would rise.
- Prices would drop, without deflating the currency. Deflation might happen for other reasons, of course.
- As money got more and more expensive, so that only sure things could get funding, social valuation in general would get more and more conservative, more and more traditional. The real and true would increase in value; the false and fantastic would more and more be found too expensive to tolerate.
- There would be therefore be massive elimination of economic and financial noise, in favor of true information that is important. This would require more and more truth, less and less falsehood, hypocrisy, empty signalling of virtue; would require more and more real, true virtue.
- As Jubilee approached, society would get more and more based, realistic, pragmatic; there would be less and less tolerance for foolishness. Society would be less fantastic, and more honest, throughout. That would tend to perdure from one Jubilee to the next; and, so to compound.
- At the Jubilee, all mundane obligations would be paid off. Everyone would feel more free. Everyone would be more free. There would be a massive, deep, thoroughgoing return to the real. True religion could not then but flourish. We could not then but be happier, wealthier (as wealth is rightly construed under Heaven), and – what is most important – wiser, ergo holier.
Not that Jubilee would solve all our problems, of course. That is not going to happen under the orbit of the Moon or before the eschaton, and anyone who suggests that it might is probably in the service of our Enemy. There is no end of our problems, until this world is wound up for good and ever. For, problems are the tools of the Enemy. He has no others.
Update: Another important consequence of a declared Jubilee circa 2050: the declaration would all by itself greatly calm financial markets, both of equity and of debt. Much of the risk – which is to say, the volatility – in the equity markets these days is due to the risk that equity investors apprehend in the credit markets. A general default, such as would transpire if Jubilee were to happen suddenly, without forewarning, and so without possibility of prior planning, would devastate equity markets. If it were broadly understood that Jubilee is going happen circa 2050 *as a matter of law,* and that all outstanding debt instruments would at that time go to zero, equity markets would be reassured that the credit markets were no longer on a path to utterly devour all profits from all enterprises. On the contrary, they would reckon that, given the incipience of Jubilee, credit markets would more and more closely track true risk of default, and so would more and more be prudent. Equity markets would therefore rise, ceteris paribus; and would stabilize at volatility levels lower than any living man has ever seen.
Debts don’t have to revalue to zero. Compare, for instance, the Soviet example, where the old financial system was wiped out, not by liberating the old slave classes, but instead through liquidation and then bureaucratic enslavement of all human capital.
For less catastrophic examples, centralized rebasement (whether debasement or not) of the dominant currency is de facto wiping out and restructuring societal debt.
However, the larger point is I’m pretty sure this isn’t something that’s going to happen in the future; this is something that is currently happening and the logic of dialectic has already taken over, despite the fact that most people haven’t noticed yet.
Points of interest:
China has brokered tentative but potentially durable peace – and not just peace but the building of cordial relations – between Saudia Arabia and Iran, with a side plate of Israel. Too, they’ve taken on the position of diplomatic broker of ultimate resort in the current pan-Eurasian-plus war and even the United States recognizes this as evidenced by bitter complaints against this fact.
USG is actively, publicly mulling the prospect of direct participation in a kinetic war to prop up its preferred system of trade direction and currency development.
Bretton Woods is dead. It just hasn’t stopped thrashing yet. What the world looks like after the dust settles, nobody knows.
All that well understood, and agreeable. But, notwithstanding all that, it comes down at last only to this, so far as our ruling elites and (therefore) hoi polloi are concerned: what is the cost of a loaf of true bread? Bread for hoi polloi, or exhibitions in the Colosseum; which shall it be?
More and more of our contemporaries, alas, opt for the vain exhibitions, rather than the Bread.
Oh, absolutely agreed, and also agreed that a wise sovereign looking to get there from here would certainly contemplate a more benign debt restructure than the one we’ll get, probably much in line with your proposal.
I caution against a vice of reactionary intellectualism: the idea that the proper realm of history is either the past or the future, and never the present.
One of the attractions of an absolute Jubilee on all debt public and private at 2050 is that only a few debt instruments now outstanding might suffer. But few would: since almost all 30 year instruments are refinanced long before they mature, most mortgages issued since 2020 will not survive to 2050 in any case. That makes a declaration of Jubilee politically feasible, right now.
It’s politically feasible assuming you have a political class interested, however misguidedly, in the commonweal. However, what we have is a political class interested in political vampirism on the body politic (for the relatively harmless ones) or actively shooting the body politic in the head to suit either their ideological framework or their demonic masters (often both).
These are people who have formed a fragmented but worldwide network of consciously Satanic ritual child abuse. They are not interested in the positive effects of a debt Jubilee.
To be sure. The battle lines are drawn; this is as much as to say that the battle is doomed to happen. At which point, it will be Jubilee, albeit chaotic. But once that’s underway, all bets are off, and almost anything becomes possible: monarchy, integrality, Jubilee, the subsidiaritan feudal stack of sovereign corporations, the familiar society – ergo, a ruling class interested in the commonweal – you name it. Cool!
I think this only ends in one way, the front lawn dump.