This post is a rehash of something I wrote at TSI last September in
response to the article titled “The Gold Standard and Debt Jubilee“. The article is a
confused jumble of Marxist, biblical and capitalist ideas/assertions, but its
gist is that we need both a debt jubilee and a gold standard. My views are
that a gold standard is not a worthwhile objective and that a debt jubilee
would be both an economic and an ethical disaster.
If the market for money were free then gold would probably be money.
However, there would NOT be a gold standard. A gold standard is, by
definition, a monetary system imposed by government, whereas in a truly free
market the government would have no role in determining what is/isn’t money.
Under a gold standard the government sets the rate at which
money-substitutes such as dollar notes are convertible into gold. A gold
standard is therefore a type of government price-fixing scheme.
It can certainly be argued that a gold standard would be a better monetary
system than the one we have today, but there’s no reason to expect that it
wouldn’t eventually transmogrify into what we have today. After all, the
current system evolved from a gold standard.
That’s why I say that a gold standard is not a worthwhile objective. A
worthwhile objective is to get the government out of the money business and
allow people to use whatever money they want.
I’ll now turn to the “debt jubilee”, which entails wiping the slate clean
of ALL existing debts. Here’s how it is described in the article linked
above:
“A “jubilee” is the complete renunciation of all debts. Any/all debt
instruments become null-and-void. Debt Slavery is abolished. The Workers are
allowed to retain the fruits of their labours, and use their productive
efforts to build and improve their societies — rather than simply fattening
financial Criminals.“*
And who would provide “the Workers” with all the capital equipment and
education they need to be productive? And who would lend the money needed to
fund new businesses, invent new products and conduct life-improving medical
research? The financial criminals, perhaps?
Details, details.
There are all sorts of economic and ethical problems with the “debt
jubilee” concept, but the biggest problem is that it amounts to the
government stealing wealth from all lenders and giving it to all borrowers.
The more profligate you were prior to the “jubilee” the more that you would
‘make out like a bandit’ as a result of the “jubilee”.
It would result in economic devastation, because many of the most
productive members of society would be financially crushed and the ones who
weren’t financially crushed would never lend their money again.
The dire economic consequences of a “debt jubilee” and the terrible
injustice of it is why it has probably never happened in world history and
probably never will happen.
As an aside, if a “jubilee” event ever occurred in the past it was during
“biblical times”, but that’s hardly a selling point. These were times when
there was no economic progress (there was no general improvement in living
standards from one generation to the next), most people died before the age
of one, the best the average person could reasonably hope for was basic
subsistence, and slavery was both widespread and generally accepted.
The only type of debt for which a good-faith repayment effort is not
justified is government debt. This is because government debt is repaid via
theft. As the great Murray Rothbard eloquently put it: “The purchase of a
government bond is simply making an investment in the future loot from the
robbery of taxation.” The appropriate punishment for lending money to
the government is a 100% loss on investment, so wiping the government’s
debt-slate clean would be a good thing.
Fortunately, discussions about a “debt jubilee” are purely academic as it
is not something that has a chance of happening. Moreover, nobody with
respect for property rights and a reasonable understanding of economics would
advocate it.
*Note that the “jubilee” definition used by the author of “The Gold Standard and Debt Jubilee” and that has become
popular is not consistent with the way “jubilee” is described in the Old
Testament. In particular, the original biblical description does NOT imply
that debts are forgiven. Refer to “Five
Myths about Jubilee” for more information.
