The real solution to the economic crisis

[Requia ☣]

are you owed money, such that you would lose out were a widespread debt forgiveness declared?

My total debt is 36 dollars (currently in dispute). And the bank lends out my money to other people.  Mind you, the humor value alone would be worth losing my savings (which are damned small anyway, thanks to living off em for 6 months).

[Elder Iptuous]

i don't believe that debt forgiveness would include the wiping of savings from accounts...

[tyrannosaurus vex]

i don't believe that debt forgiveness would include the wiping of savings from accounts...

It would when the banks crash.

[Requia ☣]

Aha! I knew I heard about something like this from ancient times:

http://en.wikipedia.org/wiki/Jubilee_(Biblical)

[Requia ☣]

I'd love to see some teabaggers try to wrap their head around *that* part of Leviticus.

[Elder Iptuous]

i don't believe that debt forgiveness would include the wiping of savings from accounts...

It would when the banks crash.

but, but, but.....
it's all insured by fdic!

[Cain]

The debt the banks owed would also be wiped out, so the crashes should be minimal, as I understand it.  It would be an entirely clean slate, for everyone.  Banks, corporations, governments and citizens.

Net, there is some mainstream support for this, yes.  A prominent Australian economist whose name escapes me caused waves about a year back by proposing this as the only viable solution to the economic crisis, and he got some support in academic circles.  I know this is very vague, but it was a long time ago sorry, and I didn't save the article in question.

[Elder Iptuous]

hmm...
honestly, with fractional reserves, wouldn't the only money that is left in the system be the high powered money (M0)?  i would think a massively deflationary act like this would crash the game PDQ...

of course, i still support the notion, just saying i don't think it would be anywhere near painless....

[Cain]

It's possible, it depends on exactly how much the bank is owed compared to how much it is owing and it's real estate/currency/company investments.

However it is also worth considering that with everyone's debt forgiven, the need for banks would reduce dramatically, at least in the short term.  And others would likely step into that space in the meantime, being newly enriched as they are.

It's hard to say though without an accurate look at bank account records which, of course, isn't going to happen.

[Adios]

This could have long term negative impacts on future lending by banks. They are going to refuse long term (mortgage, business, etc) in favor of the much shorter loans.

That could really hurt the economy.

[Elder Iptuous]

CB, i would think that it would definitely cap the loan terms to 7 years if we actually implemented a regular 7 year jubilee, for obvious reasons.  Even if we just did it once, it would have a hell of a dampening effect for fear of it happening again, with a trail off that i don't think could be predicted.
a lack of lending, in the current setup, is certainly puts the kibosh on an economy.  but if this were actually implemented, i think it would be a whole new world economically, and trying to predict the outcome would be impossible.

i guess that's my take on it, in the end.  the current system is so complex, monstrous, and calcified at the core, that any large disruption would crash it like a house of cards.

we need this bill in congress stat. 

[Adios]

I am going to think on this for a while. The destruction of the housing market and small business would have long reaching effects.

[tyrannosaurus vex]

The fact that money is owed is not the problem. It's the fact that debt is used as collateral on more debt, and then that debt is used as collateral on still more debt. A bank lends one dollar, and uses the value of that dollar plus interest as collateral against a loan it takes out in order to loan more money and repeat the process, even though that first dollar hasn't been paid back yet.

Even if that first dollar is payed back with interest, it's not enough to cover the cost of the other loans; if even a single loan fails to be paid back, the entire system collapses (in theory). Banks value themselves based on the amount of debt they control; and they trade this debt back and forth between each other in order to generate more loans. The only people who ever end up owing actual money are the poor schmucks who took out loans to actually use the money, a.k.a. the Middle Class. When you receive the check for a loan you take out, that is the first time that money ever actually existed as money. Before that check was printed, those dollars were basically just a nebulous idea based on calculations and expectations. It didn't really exist.

The Middle Class is then stuck with the bill for an out-of-control lending system. They are the ones who do the work that generates actual wealth; and all the wealth they generate is already owed to banks who created loans out of thin air.

Canceling debt is the logical thing to do because it dismisses the banks as the parasites they are and frees people who are generating wealth to use it directly, rather than forcing them to push it through the Gigantic Bullshit Machine known as the banking system, and get literally less than nothing in return. It'll never happen, though, at least not until there's nothing left to suck out of the Middle Class anyway.

[Juana]

Between you, Cain, and Vex just now, I think you have have won me about six rounds of debate. Holy fuck, this is going to be useful. Really interesting, too. I hadn't know much of what you talked about and I'm not sure I would have put it together.

Do you have any links handy? I want to get to know this information as thoroughly as possible and whatever you might have will at least get me started.

[Adios]

I will respond when my head is clear tomorrow.