Debts that can’t be paid won’t be

A debt jubilee is the only way to avoid a depression.

By Michael Hudson

March 22, 2020 “Information Clearing House” –   Even before the novel coronavirus appeared, many American families were falling behind on student loans, auto loans, credit cards and other payments. America’s debt overhead was pricing its labor and industry out of world markets. A debt crisis was inevitable eventually, but covid-19 has made it immediate.

Massive social distancing, with its accompanying job lossesstock dives and huge bailouts to corporations, raises the threat of a depression. But it doesn’t have to be this way. History offers us another alternative in such situations: a debt jubilee. This slate-cleaning, balance-restoring step recognizes the fundamental truth that when debts grow too large to be paid without reducing debtors to poverty, the way to hold society together and restore balance is simply to cancel the bad debts.

The word “Jubilee” comes from the Hebrew word for “trumpet” — yobel. In Mosaic Law, it was blown every 50 years to signal the Year of the Lord, in which personal debts were to be canceled. The alternative, the prophet Isaiah warned, was for smallholders to forfeit their lands to creditors: “Woe to you who add house to house and join field to field till no space is left and you live alone in the land.” When Jesus delivered his first sermon, the Gospel of Luke describes him as unrolling the scroll of Isaiah and announcing that he had come to proclaim the Year of the Lord, the Jubilee Year.

Until recently, historians doubted that a debt jubilee would have been possible in practice, or that such proclamations could have been enforced. But Assyriologists have found that from the beginning of recorded history in the Near East, it was normal for new rulers to proclaim a debt amnesty upon taking the throne. Instead of blowing a trumpet, the ruler “raised the sacred torch” to signal the amnesty.

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It is now understood that these rulers were not being utopian or idealistic in forgiving debts. The alternative would have been for debtors to fall into bondage. Kingdoms would have lost their labor force, since so many would be working off debts to their creditors. Many debtors would have run away (much as Greeks emigrated en masse after their recent debt crisis), and communities would have been prone to attack from without.

The parallels to the current moment are notable. The U.S. economy has polarized sharply since the 2008 crash. For far too many, their debts leave little income available for consumer spending or spending in the national interest. In a crashing economy, any demand that newly massive debts be paid to a financial class that has already absorbed most of the wealth gained since 2008 will only split our society further.

This has happened before in recent history — after World War I, the burden of war debts and reparations bankrupted Germany, contributing to the global financial collapse of 1929-1931. Most of Germany was insolvent, and its politics polarized between the Nazis and communists. We all know how that ended.

America’s 2008 bank crash offered a great opportunity to write down the often fraudulent junk mortgages that burdened many lower-income families, especially minorities. But this was not done, and millions of American families were evicted. The way to restore normalcy today is a debt write-down. The debts in deepest arrears and most likely to default are student debts, medical debts, general consumer debts and purely speculative debts. They block spending on goods and services, shrinking the “real” economy. A write-down would be pragmatic, not merely moral sympathy with the less affluent.

In fact, it could create what the Germans called an “Economic Miracle” — their own modern debt jubilee in 1948, the currency reform administered by the Allied Powers. When the Deutsche Mark was introduced, replacing the Reichsmark, 90 percent of government and private debt was wiped out. Germany emerged as an almost debt-free country, with low costs of production that jump-started its modern economy.

Critics warn of a creditor collapse and ruinous costs to government. But if the U.S. government can finance $4.5 trillion in quantitative easing, 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. It actually subsidizes bad lending to leave them in place.

In the past, the politically powerful financial sector has blocked a write-down. Until now, the basic ethic of most of us has been that debts must be repaid. But it is time to recognize that most debts now cannot be paid — through no real fault of the debtors in the face of today’s economic disaster.

The coronavirus outbreak is serving as a mind-expansion exercise, making hitherto unthinkable solutions thinkable. Debts that can’t be paid won’t be. A debt jubilee may be the best way out.

Michael Hudson, author of “… and forgive them their debts” and “Killing the Host,” is president of the Institute for the Study of Long-Term Economic Trends and is distinguished research professor of economics at the University of Missouri at Kansas City. – Source

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Covid-19 has taken away bread and circuses, laying bare the true American empire

By Michael McCaffrey

March 23, 2020 “Information Clearing House” –  Regular Americans can no longer numb themselves with sports and gluttony, freeing them to clearly see the malignantly craven ruling class that exploits and despises them. If only they would open their eyes to reality.

Anyone who has eyes to see can clearly make out that America is an addled empire in steep decline that is firmly entrenched in its bread-and-circuses stage. This has been brought into clear focus due to Covid-19. Since there is now a shortage of bread, as supermarket shelves are bare, and the distraction of the circus of sports has been indefinitely removed from the culture, Americans are left with little to distract them from cold, hard reality.

With no brawls or ballgames to watch, and the fear of potential hunger gnawing at their bloated bellies and brains, and with social distancing leaving them isolated with little but their thoughts as company, Americans will now find it harder and harder to ignore the truth about their country and its deplorably corrupt media, financial, government, education and health care systems, that is staring them in the face.

As the old adage goes, crisis reveals character, and the coronavirus contagion is a crisis of epic proportions that is revealing America to be utterly devoid of any redeeming character whatsoever.

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If America were a sane, healthy, and rational country this would be a great opportunity for change to occur…alas, it is not. America is an insane, unhealthy and irrational nation, and so any genuine change is inconceivable.

For example, this crisis has once again revealed the house of cards that is the smoke and mirrors American economy. The American economy has long been rigged through financialization, where stock buybacks and accounting shenanigans inflate the stock market but create nothing of substance for the masses except the illusion of prosperity. Here in America the economy long ago stopped working for regular folks, as evidenced by the fact that despite productivity soaring, for the last forty years wages have remained stagnant, while the cost of living has escalated.

The American Way has devolved into a bizarre reverse-Robin Hood world, where the rich steal from the poor and keep it for themselves. Proof of this is that this Covid-19 crisis will undoubtedly be used, just as the 2008 collapse, as a way for the malicious narcissists in Washington, Wall Street and in corporate boardrooms to come together to assure that all their losses are socialized and their profits privatized. Casinos, cruise lines, airlines, hotels and others are already lining up — including of course the scoundrels on Wall Street — for their taxpayer-funded handout.

Bailing out working- and middle-class Americans, though, is an absolute non-starter for the ruling elite. The upper crust will throw around vacuous catch phrases, like the deliciously ironic “moral hazard,” to make their argument, which is pretty rich considering the vermin on Wall Street and their cronies on Capitol Hill are so morally bereft, it is a hazard to all humanity.

Coronavirus is not nearly as deadly as the cancerous corruption that is endemic in our oligarchic corporatocracy. For proof of that look no further than Nancy Pelosi’s emergency “sick pay” bill, that exempts companies of over 500 employees from paying sick pay — and has a boatload of special exemptions for businesses below that threshold — which leaves all but 20% of workers eligible for benefits. The holes in Pelosi’s bill are bigger than the gaping void where her brain and soul should be.

This corruption of the elites is bipartisan, as evidenced by two Republican Senators, Richard Burr and Kelly Loeffler (who is married to Jeffrey Sprechter, chairman of the New York Stock Exchange), who allegedly took advantage of classified briefings on the impending severity of coronavirus in late January and early February to pull off some slick insider trading maneuvers so they could cash in before the public had any clue what was coming. Both, of course, deny any impropriety.

The egregious economic divide in America is further highlighted by the Covid-19 debate over whether to close schools amidst the crisis. The reason this debate raged on well past the rational time to act is that our education system is not a system of learning but rather a glorified daycare and food delivery service.

Proletarian parents are unable to stay home and raise their kids anymore because it now takes two parents — usually working multiple jobs — to make less equivalently than what one working parent did forty years ago.

In the Los Angeles Unified School District, 70% of all students are below the poverty line and rely on the school system for the majority of their meals. In the wealthiest country on the planet, that is absolutely disgraceful. The virus of structural economic inequality isa much more long-term and deadly problem than coronavirus, and the ruling class and their shameless lackeys in the press, have no interest in ever honestly addressing or acknowledging it.

The corporate whores in Congress and the White House (of both parties) also gleefully inform Americans that universal, single-payer health care, which every other industrialized nation in the world already has, is a pipe dream and impossibility.

They tell us they could never ever pay for something so decadent and luxurious as health care, but then they magically pull $1.5 trillion out of their gold-plated assholes in order to stave off a collapse of their own making. It is amazing how the Lords of Finance can make money miraculously appear in order to get things done when it is their exorbitant wealth on the line, and not ordinary Americans’ health and wellbeing.

Coronavirus is a crisis that is revealing the ugly truth about America and the malignant character of its ruling class. The crisis is going to get worse before it gets better, but it eventually will get better. America, on the other hand, will only get much worse, with no hope that it is ever going to get better.

Michael McCaffrey lives in Los Angeles where he works as an acting coach, screenwriter and consultant. He is also a freelance film and cultural critic whose work can be read at RT, Counterpunch and at his website mpmacting.com/blog. – Source

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