The “debt jubilee” nonsense

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Published : June 06th, 2017
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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.

 

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Interesting. Your claim that "biblical times" had no economic improvement from one generation to the next speaks directly to our times. In America, my generation is worse off than my parents and my kids are going to be worse off than me. Also, your claim that it would an "ethical disaster" for debt jubilee makes me wonder what you think is happening now? Furthermore, the most productive members of society are not the people who lend money. They do the vary least. The most productive members in society are the construction workers, teachers, firefighters, etc. Those are the borrows constantly trying to keep up with inflation created by, guess who... the lenders. Your position in this matter speaks volumes as to what your loss would be if a debt jubilee ever occurred. Thank you for the dialogue.
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Nice entertaining piece of writing. Thanks. I do personally not agree about the concept that a free society wouldn't use gold standard, but that is quite irrelevant since the State government is here to stay for a long time still I m afraid. I personnally find Gold Standard the most civilized thing men has invented yet. The State pledging to respect some form of gold Standard is just a way of saying "we are publicly going to take the same standard for everyone to measure debt and credit". It s just a standard and thus any free society could well agree to it for the sake of good practice, don't you think .... I truly wish for it, or for bitcoin Standard whatever. Cheers. HB, FRANCE.
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Interesting. Your claim that "biblical times" had no economic improvement from one generation to the next speaks directly to our times. In America, my generation is worse off than my parents and my kids are going to be worse off than me. Also, your claim  Read more
elawson522@comcast.net - 6/8/2017 at 2:29 PM GMT
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