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Everything Accomplished During the Great Depression to Make Capitalism Workable Has Been Taken Away Resulting in Economic Crisis That Only Debt Forgiveness Can Mitigate
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Below are an interview I gave to the Herland Report prior to the coronavirus explaining our precarious economic situation and Michael Hudson’s article today explaining that the way out of the economic crisis is a debt jubilee. As the debts cannot be paid, it makes far more sense to forgive them than for all of us to sink with them. Debt cancellation is not an expression of idealistic egalitarianism. It is a practical alternative to prolonged depression and worse economic polarization with all of its social and political implications.

The central point of my interview is that deregulation and concentration of the economy and its financialization has made another severe depression unavoidable—unless possibly there is a debt jubilee as Michael Hudson recommends. See: https://www.nakedcapitalism.com/2020/03/michael-hudson-a-debt-jubilee-is-the-only-way-to-avoid-a-depression.html

The question we face is whether our leadership can understand that more debt is not the answer. So far “solutions” seem to be to make more loans, thereby continuing to build up debt. As existing debts—mortgage, student, car, credit card—are so overwhelming that they cannot be paid, adding more loans is like throwing fuel on a fire.

Debts have to be cancelled as they are smothering individuals, businesses, and the economy. Our economic culture is accustomed to thinking that debt must be paid. The belief is that to reward those who did not live frugally and avoid debt subsidizes and encourages bad behavior. But in this case, unless debts are forgiven the frugal and responsible go down with everyone else. As I have emphasized for 20 or more years, globalism stopped real family income growth by offshoring high-value added jobs. Under Alan Greenspan, the Federal Reserve used debt expansion to take the place of income growth in order to continue to fuel aggregate consumer demand.

Debt forgiveness has a long history of success. The ancients used it repeatedly, and in 1948 in Germany, the replacement of the Reichsmark with the Deutsche mark wiped out 90 percent of government and private debt, resulting in “the German miracle.”

Government debt is not the problem that private debt is. Government can pay off its debt by printing money, but individuals and businesses cannot. As Hudson says, “if the U.S. government can finance $4.5 trillion in quantitative easing for the banks, it can absorb the cost of forgoing student and other debt. And for private lenders, only bad loans need be wiped out. Much of what would be written off are accruals, late charges and penalties on loans gone bad.”

Debt forgiveness for banks and large corporations implies some nationalization so that the public sees some fairness in the bailouts of debt. Essentially, quantitative easing was debt forgiveness for too-big-to-fail financial institutions. The Federal Reserve purchased the banks’ bad loans and put them on the Federal Reserve’s balance sheet. Unlike a bank, the Federal Reserve cannot go broke. Our economic culture also sees nationalization as socialism and an awful terrible thing. I addressed that issue on March 14: https://www.paulcraigroberts.org/2020/03/14/economic-effect-of-coronavirus-could-be-revolutionary/

Our ingrained ways of thinking can easily prevent a solution to the current crisis, which is building as I write.

Here is Hudson’s article:

Michael Hudson: A Debt Jubilee is the Only Way to Avoid a Depression

Posted on March 22, 2020 by Jerri-Lynn Scofield

Originally published by the Washington Post, reproduced with permission of the author. https://www.nakedcapitalism.com/2020/03/michael-hudson-a-debt-jubilee-is-the-only-way-to-avoid-a-depression.html

(Republished from PaulCraigRoberts.org by permission of author or representative)
 
• Category: Economics • Tags: Debt, Debt Jubilee 
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  1. TG says:

    But we ARE planning on having a “debt jubilee”:

    But… it’s only going to be for the rich! All those unpayable debts racked up by Wall Street and Boeing and the Cruise ship industry etc.etc. will indeed be forgiven. It’s already underway.

    It’s only debts owed by little people that somehow always ‘need’ to be repaid…

    • Replies: @Franz
  2. Franz says:
    @TG

    Somehow, we have to convince the Inner Party that regular humans are “persons” under the 14th Amendment, just like corporations.

    Maybe somebody will put it that way to the Donald. Tucker?

    • Replies: @Realist
  3. Ya, let’s not change anything structurally. Just let the plunderers have a re-set. Invitation to civil war.

  4. Below are an interview I gave to the Herland Report prior to the coronavirus

    I’m not seeing the interview or any link to it. Where is it?

  5. Thomasina says:

    I don’t know about you, but a good old-fashioned depression is probably exactly what the patient needs.

    It forces you to look in the mirror.

    And see how ugly you have become.

    But I’ll sleep on my thoughts. I’m far too disgusted to speak at the moment.

    • Replies: @pogohere
  6. Debt has been used successfully by the 1% since the 1970s to turn Americans into wage slaves. The unsecured credit card first really bloomed in the 1970s as a tool to jump start sagging consumer demand. In the 1990s, bankruptcy laws were changed to make it harder to escape credit card debt through bankruptcy. College loans replaced college grants so that the 1% could capture through interest payments the surplus income college gave its graduates. The 24 month car loan (tied the the life span of the 1960s American car) was replaced by the 60 and 72 month car loan, or the lease. Life became a series of payments. That set of payments, what you owe each month, creates a trap because it forces you to accept stable employment (to make those payments). Absent debt, a person can walk away from a job knowing that they have several months to do something else. In a world of debt one becomes a wage slave knowing that a month of non-employment means default–and economic non-personhood.

    • Agree: nickels, animalogic
    • Replies: @Realist
    , @Hibernian
  7. teotoon says:

    Debts have to be cancelled as they are smothering individuals, businesses, and the economy.

    (((They))) will never let the Goyim get out of their grasp.

  8. Realist says:
    @Franz

    Somehow, we have to convince the Inner Party that regular humans are “persons” under the 14th Amendment, just like corporations.

    Maybe somebody will put it that way to the Donald. Tucker?

    Don’t bother either one…they are both doing the Deep States business…demonizing China.

  9. Realist says:
    @Harry Huntington

    Debt has been used successfully by the 1% since the 1970s to turn Americans into wage slaves.

    Debt has been used by the 1%, to control the 99%… forever.

    • Replies: @FB
  10. FB says: • Website
    @Realist

    Debt has been used by the 1%, to control the 99%… forever.

    That’s a generalization that is completely meaningless…and also draws attention away from true history…

    The fact is that the financialization we have now did NOT always exist…it came into being quite slowly over the last half century or so…like the slowly boiling frog…

    That’s how the top 0.1 percent’s share of total wealth looks over the last 100 years…we can see quite clearly that things were very good for people in what we now call the golden age of the 1950s and ’60s…

    Back then we had progressive taxation where the billionaires and very wealthy had to pay over 70 percent tax…at the same time the banking sector was less than 10 percent of the economy, while industry was over 30 percent…

    Today, we have billionaires paying zero taxes…industry is less than 10 percent, while banking is 30 percent…

    What changed was that the oligarchs took over the government and began implementing a greedy agenda of beggaring the people…while at the same time brainwashing people to believe that a good economy required the wealthiest to not pay any taxes…

    Incredibly, this is the biggest problem right now…we have incredibly dumb people who still can’t see what’s going on…

    • Agree: animalogic
    • Replies: @Realist
  11. Realist says:
    @FB

    That’s a generalization that is completely meaningless…and also draws attention away from true history…

    Jews have used usury to control populations they invaded…for centuries.

    The fact is that the financialization we have now did NOT always exist…it came into being quite slowly over the last half century or so…like the slowly boiling frog…

    You are talking about degree, I do agree it is more prevalent now.

  12. pogohere says:
    @Thomasina

    Reminds me of the 2016 presidential election and the derangement syndrome that followed.

  13. “Under Alan Greenspan, the Federal Reserve used debt expansion to take the place of income growth in order to continue to fuel aggregate consumer demand.”
    This may seem obvious but its worth remembering.
    The outrageous debt of today was PLANNED. Planned as a way for financial oligarches to exploit the need for Demand from the real economy without anything as ridiculous as real wages keeping up with productivity increases.
    Dont EVER feel sorry or excuse the parasites of the 1%. They ARE as cunning-evil as they appear.

  14. Hibernian says:
    @Harry Huntington

    Some responsibility on the pat of the borrowers might have been in order.

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