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Debt Forgiveness - A Solution?

Cassandra Syndrome

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Aug 23, 2009
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16,885
Total Global debt is between 200 Trillion and 300 Trillion US Dollars. Most of this Debt is in the western world. Total Financial assets are about 70 Trillion US Dollars. The planet is technically insolvent.

We are in a debt deflationary depressionary spiral for which the only escape is via a hyperinflationary model. We screwed both ways. The possible consequense of all this is massive civil unrest and the breakdown of society.

For Greece, with on and off balance sheet liabilities at over 800%, it's game over. For the Eurozone, with the same ratio at about 500%, it is also game over. For the US, at 500%+, it is, you guessed it (sorry Joseph Stiglitz), game over, but since we have the printers, it will simply take a little longer. Following up on yesterday's popular post on prevailing delusions as captured by Albert Edwards' colleague Dylan Grice, we present Albert's latest outlook. Please don't read this if you want to keep believing there is any hope left for the (developed) world.

But first some aeral photography from Dylan Grice, indicating just how far the US government is willing to go to get the population stoked about owning fixed (shouldn't it be called broken really?) income. With British QE over, and the country still to implement the same criminal annuitizing of 401(k)s that Uncle Sam is contempltating in order to make "Buy Bonds" a "voluntary" option one can't really decline, maybe letters on modern architecture building blocks is all that would works. As Edwards says: "I'm not sure leaving man-sized building blocks around the City of London is really going to make an awful lot of difference, but I suppose when your public sector deficit is around 13% of GDP, every little bit helps!"
Albert Edwards: At 500% Net Liabilities To GDP, It Is Too Late To Prevent The Collapse Of The G-7; Greece Is Irrelevant, We Are All Now Insolvent | zero hedge

Is there a solution to this mess? I was just thinking about a concept called debt forgiveness. This is a process were some or all debts are written off and cancelled. To avoid the impending doom, the cancellation of debt, a reset and a new financial system? Could civil unrest be avoided if people were cleansed of debt?

There are a lot of negatives and problems in this proposition I know. But its just an idea I had 15 minutes ago over a cup of coffee, please appreciate that and it is worth brainstorming at least.

Whether or not this depression is by accident or planned we have to seriously start thinking of radicle ideas and solutions as the clock is ticking.
 


Cassandra Syndrome

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No - people should repay their debts.
I agree with the metaphysical argument of that. I am debt free myself, but collosial global debt is the issue and the shrinking incomes cannot service this even with record low interest rates.
 

sharper

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Why not just cancel all debts on December 31st of every year? Then nobody will ever have to be in debt.
 

eoghanacht

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32,410
No - people should repay their debts.
unless ofcourse they work/worked in irish banking, then you get a golden handshake and a villa in the algarve to golf for the rest of your day's :)
 
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Its time we really did consider this at least from Irelands point of view.

Debt forgiveness would pump fresh life into the economy, people wouldnt need to rely on such levels of welfare, business could invest and take more staff on, in fact the only losers would be people who didnt have any debt and as Toughbutfair always seems to state, TOUGH!

If we really want to get this economy moving again then Debt Forgiveness is the only way forward to start Ireland with a clean slate and get this country moving again.
 
Last edited:

orbit

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No - people should repay their debts.
True. People should repay their debts, but countries, and to a lesser extent businesses don't have to, in the sense they can keep rolling them over, in a way that people can't. The average person might have 40 odd years of productive life, but countries carry on (hopefully) longer than that.

So, it makes little sense (to me) to combine all the different types of debt belonging to a country into a single figure. It really gives no clue as to the ability of a country to repay its debts. It makes for frightening headlines though.
 

mr_anderson

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I'm all for debt forgiveness ... just so long as you give me sufficient notice beforehand, allowing me to jump into the deep end of the debt pool.

Yippeee free money !!! :D:D:D:D
 

roc_

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Dec 5, 2009
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6,191
No - people should repay their debts.
They should indeed. But the fact is that many are unable to. Here we have a primary nub of the financial crisis.

I might add that the money lent out was your savings and pensions and the savings and pensions of the Germans, Chinese etc.

So how come you and others didn't care how the banking intermediaries were lending your money out, and for what - as long as you got your little return? Now, all you have to say is that they must pay you back... when (a) they can't (b) the insistence on it is a very important component of what is crippling the economy.

One thing that strikes me about this crisis is that people should have kept a better, more responsible eye on their money - looked into the eyes and soul of the actual people who was handling their money, and thought about what these people were actually doing with their money.

I know I did a long time ago - I saw clearly that these bankers and pension fund managers etc. were of a low kind, in thrall to an insidious logic that left them as mindless amoral zombies. And I also saw that what they were actually doing with this money was even worse.

So, I said to myself, no way would I put my money into such hands... I could never understand why most people were happy to.
 

Cassandra Syndrome

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Hugh Hendry and Joseph Stiglitz on Greece and DEBT…
Hugh Hendry simply gives a lesson to Joe Stiglitz who proves that he does not understand debt. Hendry suggests that the only way out is through debt default or debt forgiveness. Yes, he is 100% correct, everything else is simply debt shuffling, and yes, that would whack the banks. Just ignore the Spanish Ambassador, he has no clue and a very biased outlook. Stiglitz, however, has no excuse and clearly does not understand debt saturation.

Freedom’s Vision is the right course of action, not only for the United States, but also Greece and most of the world. (ht JB)
http://economicedge.blogspot.com/2010/02/hugh-hendry-and-joseph-stiglitz-on.html
 

Sucker Punch

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Debt forgiveness is nothing new, it is deeply rooted in history and scripture.

In the Hebrew Scriptures we find a vision of life in community that is liberating and just, governed by Sabbath cycles – the Sabbath Day, the Sabbath Year, and the Jubilee Year. These cycles are a powerful reminder of God’s intent that all creatures enjoy fullness of life and partake in the abundance
of God’s world. The Sabbath Year is at the heart of Moses’ final instructions to the Hebrew people before they enter the Promised Land (Deuteronomy 15: 1-18). Sabbath Year observance requires that every seven years debts are canceled and those enslaved because of debts are freed, restoring equal relations among community members and preventing a situation of ongoing exploitation in which the rich accumulate ever more wealth at the expense of the poor.
In the Gospel of Luke, Jesus declares a Jubilee or “year of the Lord’s
favor” (Luke 4:18-19), proclaiming God’s liberation for all oppressed and
impoverished people. This jubilee vision was the cornerstone of Jesus’
ministry and gives us hope that life can be made new and can be redeemed in our own time.
http://www.ucc.org/justice/advocacy_resources/pdfs/jubilee-year-info/jubilee-sabbath-brochure-2007.pdf
 

Tombo

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Total Global debt is between 200 Trillion and 300 Trillion US Dollars. Most of this Debt is in the western world. Total Financial assets are about 70 Trillion US Dollars. The planet is technically insolvent.

We are in a debt deflationary depressionary spiral for which the only escape is via a hyperinflationary model. We screwed both ways. The possible consequense of all this is massive civil unrest and the breakdown of society.



Albert Edwards: At 500% Net Liabilities To GDP, It Is Too Late To Prevent The Collapse Of The G-7; Greece Is Irrelevant, We Are All Now Insolvent | zero hedge

Is there a solution to this mess? I was just thinking about a concept called debt forgiveness. This is a process were some or all debts are written off and cancelled. To avoid the impending doom, the cancellation of debt, a reset and a new financial system? Could civil unrest be avoided if people were cleansed of debt?

There are a lot of negatives and problems in this proposition I know. But its just an idea I had 15 minutes ago over a cup of coffee, please appreciate that and it is worth brainstorming at least.

Whether or not this depression is by accident or planned we have to seriously start thinking of radicle ideas and solutions as the clock is ticking.
Debt is money lent by one person to another.

To "forgive" debt is to tell the lender they won't be getting their money back. Can you see why that might be a bit of a bad idea?

If not, think about what savings are. That is money you have lent to someone else (your bank act as the middle man). Debt forgiveness means resetting all you bank accounts to zero.

Good idea?
 

Cassandra Syndrome

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Debt is money lent by one person to another.

To "forgive" debt is to tell the lender they won't be getting their money back. Can you see why that might be a bit of a bad idea?

If not, think about what savings are. That is money you have lent to someone else (your bank act as the middle man). Debt forgiveness means resetting all you bank accounts to zero.

Good idea?
Nope. And I clearly said that in the OP. However the elephant in the room is that we have at least 500% of our income as debt. The debt increases, the income falls. How is it possible to service that without cutting consumption to the bone and crashing the global economy?
 
Joined
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Debt is money lent by one person to another.

To "forgive" debt is to tell the lender they won't be getting their money back. Can you see why that might be a bit of a bad idea?

If not, think about what savings are. That is money you have lent to someone else (your bank act as the middle man). Debt forgiveness means resetting all you bank accounts to zero.

Good idea?

Yes, because most of the world have nothing in bank accounts.

The only people who have to fear debt forgiveness are the ones who have money and the ones who lend money.
 

Tombo

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Yes, because most of the world have nothing in bank accounts.

The only people who have to fear debt forgiveness are the ones who have money and the ones who lend money.
You don't have money in the bank? Any money? What about a pension?

Funny how this hostility to people who save is not so prevalent when people are looking to borrow.

Debt forgiveness is a self destructive policy whe imposed on others (which is what is being proposed here).

Debt forgiveness is something to be granted by individual lenders not imposed by others.

SO I suggest, if you are genuinely interested in debt forgiveness that you start a movement where people (starting with you), declare their willingness to offer up their savings (i.e. what they are lending to others) for debt forgiveness. When you get enough people your movement can chose whose debt to forgive and surrender your savings.

I suspect though what most people have in mind when proposing debt forgiveness is that someone else does the forgiving, not them.
 

Tombo

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Nope. And I clearly said that in the OP. However the elephant in the room is that we have at least 500% of our income as debt. The debt increases, the income falls. How is it possible to service that without cutting consumption to the bone and crashing the global economy?
I will ignore the inaccuracy of the figures. Not even Ireland is that much in debt.

Wiping out 500% of income in debt wipes out 500% of income in savings on the other side...
 

SideysGhost

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Nov 30, 2009
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17,364
If we really want to get this economy moving again then Debt Forgiveness is the only way forward to start Ireland with a clean slate and get this country moving again.
Yeah, so the moronic herd of pig-people can rush out and rack up loads of fresh debt and spend all their money on houses, plasma TVs, marble kitchens, new cars and cocaine - again - eventually leading to an unsustainable and unrepayable burden of debt which will collapse the banks - again - and then we write it all off, debt forgiveness yeah that's the way forward, that'll get the economy moving again and let everyone take out fresh debt to spend on houses, cars............
 

Cassandra Syndrome

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I will ignore the inaccuracy of the figures. Not even Ireland is that much in debt.

Wiping out 500% of income in debt wipes out 500% of income in savings on the other side...
Ireland Private sector Debt - 450 - 500 Billion Euro
Ireland General Government Debt - 110 Billion Euro
Ireland other External Debt - 1 Trillion Euro Euro

Ireland 2009 GNP 130 Billion Euro.

Do the Maths.

BTW Irish savings is under 100 Billion (less than 100%) and Broad M3 Money supply has shrank to under 190 Billion Euro.

So did you read the Zero Hedge article or are just browsing and cooly refuting without any facts?
 

orbit

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Dec 5, 2008
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Ireland Private sector Debt - 450 - 500 Billion Euro
Ireland General Government Debt - 110 Billion Euro
Ireland other External Debt - 1 Trillion Euro Euro

Ireland 2009 GNP 130 Billion Euro.

Do the Maths.

BTW Irish savings is under 100 Billion (less than 100%) and Broad M3 Money supply has shrank to under 190 Billion Euro.

So did you read the Zero Hedge article or are just browsing and cooly refuting without any facts?
So, according to you, Ireland's debt/GNP ratio is 1200% :rolleyes:

Would you care to explain where that trillion of debt came from and whether or not, we are really on the hook for it?
 


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