I discuss a Modern Debt Jubilee On Macro’n’Cheese today, and this is a quick explanation of how it could be done.
Jubilees were common in antiquity. The Lord’s Prayer did not originally say “And forgive us our sins, as we have forgiven those who sin against us”, but “And forgive us our debts, as we also have forgiven our debtors”. But an old-fashioned Jubilee would reward those who gambled with borrowed money, and thus effectively penalise those who did not. It would also effectively bankrupt the banks, since their assets—our debts—would fall, while their liabilities—our deposits—would remain constant.
I am wondering if you have ever seriously considered issuance of Gisellian currency for countries facing unplayable debt (all of them, as far as I know).
The scheme I am imagining would have these govts paying off bonds due with G‑currency. Bondholders would then, ASAP, spend it on real items in the economy, where it would eventually end up as wages, where workers would spend it, ASAP, on taxes and consumer goods.
The demurrage, say 12%/year (= 12 x 1% stamps) would give this currency an annual velocity of at least 12 since any holder of the currency would want to spend it before each month-end tax stamp would be due.
I recently watched the federal treasurer, Scott Morrison, proudly proclaim that Australia was in “surprisingly good shape”. Indeed, Australia has just snatched the world record from the Netherlands, achieving its 104th quarter of growth without a recession, making this achievement the longest streak for any OECD country since 1970.
Australian GDP growth has been trending down for over forty years
Source: Trading Economics, ABS
I was pretty shocked at the complacency, because after twenty six years of economic expansion, the country has very little to show for it.
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I’m taking part in a debate on one of the major topics in this year’s election, Brexit, on May 31st at 7.30pm at Canham, 40 Sheen Lane, London SW148LW. The other speakers are Frances Coppola, and Angus Armstrong.
Frances Coppola is an economic commentator in print and frequently on the BBC.
Angus Armstrong is director of macro-economics at one of the top research institutions, the National Institute of Economic and Social Research founded in 1938.
In 2008, conventional economics led us blindfolded into the greatest economic crisis since the Great Depression. Almost a decade later, with the global economy wallowing in low growth that they can’t explain, mainstream economists are reluctantly coming to realise that their models are useless for understanding the real world.
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