Born Bankrupt Documentary Broadcasted on New Years Eve 2013 on Foxtel Australia http://www.youtube.com/watch?v=GGRK28WTeqM What a telling way to start the New Year. This is why we stack.
The only solution is a global reset where all debt is forgiven. I've always thought something along the lines of wherever you currently live becomes your only house (regardless if you're renting). Everyone's bank account gets reset, perhaps with a new balance of X, with old people given enough to live out their lives. Then some form of new, honest, monetary system.
A global reset where all debt is forgiven is not possible and would lead to complete anarchy. Selective debt forgiveness could work, universal debt forgiveness is impossible - you cannot force people to forgive each others agreements. Deletion of all financial instruments such as credit default swaps would be a good start.
I really don't think it would lead to anarchy if the money went down, not up. Not to many of the top 10% are they type to cause anarchy. And continuing on the same debt path will either lead to global anarchy or slavery. Not a matter of if, but when. Hopefully not in my lifetime.
AH! I can see it now, komrade steve keens dream of a "debt jubilee" comes to pass. ALL bank accounts, term deposits, Corporate Bonds, OZ Government Bonds, yours and mine all go to a NIL balance. ALL mortgages, mum and dads with 3 months to go, and your new mortgage with 25+ years to run goes to nil also. Would this stop at our 12 mile limit, or extend to all Bonds sold to overseas buyers? To EVERY country and individual on the planet? Would China be happy about the reality of her US Bonds going to zero? I could give 100 other examples but you get the idea. The winners would die laughing, and the losers screaming their heads off. "this CRAZY idea will never fly Orville" OC
OC that is not what Steve Keen is throwing about at all. It's not a complete debt write off. I think the actual modern debt Jubilee as Steve Keen suggests doing it is a plausible (I'm not sold yet) solution. His idea is to pick a figure on what level of debt (private) is considered to be sustainable (I forget what he mentioned he considered was historically sustainable). From there the government prints the amount of money and gives it to individuals as a bail out, not a bank. The printed money will actually be much higher than this figure (probably double) because it will be given out to both savers and debtors. Debtors have to pay down debt with it (and in doing so it reduces the money supply by that figure) and the savers get to keep the cash. Obviously as there are more debtors than savers out there the overall money supply will contract but the sustainable levels of debt will have been gotten back to. In his mind this solves the moral hazard. From there regulations on debt expansion can be reigned in to stop debt growth from exploding again. This is simply his way of getting things back in control without the huge pain the normal capitalist model would use to liquidate the debt. I would love to get Steve Keen and someone like Peter Schiff in a room to discuss it.
I am confused. Who makes all these decisions about who gets what and how much? What about all the credit card holders, some of whom pay it off each month, and others are in debt up to the gills. And who decides on the mortgages? And account balance are left untouched? What about business loans, who gets what? What about all the widows and orphans? So an amount of cash is printed, paid into the banks and balances owing reduced. What happens to the cash that the banks now own? It is THEIR money!! They can then lend it out to new borrowers? Does it not remain with the M1 money supply? I am STILL confused. OC
I don't know all of the specifics. But Ill try to explain as I understand it. If there is anyone on the forum that can correct me, then please do so. When I have time I will try to learn more about the details he is referring to. I think he was referring to both individual and business debt. I am not sure how he would differentiate between business and personal debt. Lets just say that they are treated as one in the same and a business is treated as an individual. They then work out how much debt needs to be written off to bring the private debt to GDP ratio back to the "sustainable level" what ever that is deemed to be. I guess from there they work out the number of debtors (total individuals+businesses) and divide the debt reduction figure by that number. Lets say that works out to be 50k each. Each of them must reduce their debt by that much-no choice. Then those that don't have any debt get also 50k to alleviate the moral hazard of picking debt slaves over savers. Those that have less than 50k in debt get to keep the balance but are now debt free. This whole scenario squashes the moral hazard of bailing out banks. It's QE for the public. Remember that the banks created that money from thin air when they lent it out to the borrowers. So when the borrowers pay down that debt they are in effect shrinking the money supply. This is then partially offset by the extra credit that would now be in savers hands. Once completed, the new regulations to restrict private debt growth can be implemented so that it doesn't explode again. That's how I understand it.
I think I get it now. All those (companies and individuals) who have lived within their income for 50+ years get nothing. Those that are in debt to the eyeballs get a 'gift' from our socialist brothers in Canberra to get their debts under control. BHP will love that, and I get nothing. How much do you get? OC
Steve Keen's debt jubilee sounds OK. In theory only. What Steve never seems to take into account is the actions of people in the economy. He never considered government actions in regard to property for example. So debtors get bailed out and they are thereafter supposed to be paragons of responsibility? It's rewarding bad behaviour, whichever way you look at it. It is short-term thinking with long-term consequences. It has to be painful. Interest rates have to rise to the market level and assets liquidated and people and businesses (and governments) who were not prudent go bankrupt. Any other way is just can-kicking and humans may think they can fool mother nature, but she'll get you in the long-term. We need to all learn the lesson that interest rates are NOT to be meddled with. The long-term consequences are too dire. There is no such thing as a free lunch, no matter how much money you print. Money printing is nit wealth creation, it is wealth re-distribution. And it isn't the prudent who are on the receiving end.
Credit and cash are not equal. One is temporary, the other is permanent. The whole idea that we can replace credit with equivalent cash is quite false when you think about how banking actually works. Because government regulations always work. The market will regulate itself if left to it's own devices. Government regulations never work because there are always vested interests.
Steve Keen is also a Keynesian who believes the problem is not enough aggregate demand (hence austerity is bad and high government indebtedness is the solution to high private indebtedness). Technically a tangent, but Steve Kates makes a very good case against the "problem" of not enough demand in this lecture http://www.youtube.com/watch?v=rIgkbdT5V6w
Up did you read this part? If you have no debt you get your 50k in credit. If you have 30k left to pay off on your house, you now own your house and have 20k in credit. What's BHP got to do with it?
Is this style really redistribution? Who is it to be taken from in the first place if savers are getting an equal amount of credit? The "prudent" in this case are as equally on the receiving end as the out right dangerous and the more prudent with manageable debt levels in the middle. Thanks for the clarification on credit v cash. I wasn't meaning he wants to physically print cash but the current version of QE but for the public not the banks. Actually he is not a Keyensian but an opponent of Keynes. He's technically a Marxist who took most of his influence from Minsky. He puts himself next to the Austrians and Boston school economists as going against Keynesianism (post Keynesians). Minsky was taught directly by Joseph Schumpeter a big player in Austrian Economics. I have never heard him suggest the government should run big defecits to fix these problems but he does sit with the Austrians in identifying that too much debt is the problem and needs to be curbed.
Lovey80, "I think he was referring to both individual and business debt" I was trying to compare a BIG company with an individual. BHP , and most other miners have borrowed zillions to develop its mines and owes this to consortia all over the world. Will they get help to repay it? How can this extend to borrowers and lenders overseas? I have no debt and will get a cheque or cash , from the government. I still cannot see just how this will work, it is far too untidy, too many winners and losers. JMO OC
As I said I didn't hear him explain exactly the details. Maybe when the numbers are done it is needed that huge corporations like BHP that are taking up larger chunks of the debt end up getting a more proportional portion of the bail out. He certainly does contend that lending needs to go more towards the productive parts of an economy (Hedge borrowers) and less towards the speculative and ponzi borrowers, which is entirely consistent with Minsky's financial instability hypothesis (FIH). I would like to know who you would see as the winners and losers in this (other than the banks being big losers) and as Hawkeye points out the economy as a whole will have an unseen negative effect in that those in the economy will not learn a lesson from their poor financial behavior. It is a really complex idea. I certainly grant that and a hell of a load of discussion and thought would have to be done to pull it off. Things like the moral hazard of who gets what etc would have to be well thought out. While I am a massive fan of Austrian economics and even give some of the Boston theories some dues and my first instinct was to dismiss Keen's idea just because he is a Marxist. The fact that he was one of the few warning of the GFC based soley on his use of the Minsky FIH, made me sit up and take notice. When I get the time to read right through it I plan on putting a thread in markets and economies to get a full discussion on it.
