The Case for a Debt Jubilee. Richard Vague

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СКАЧАТЬ out of the debt trap. They target relief from the burden of mortgage debt, student debt, and more, along with an innovative and timely proposal for reducing government debt that is not dependent on austerity. These proposals are intended to be provocative but possible, and food for thought, even for those who disagree.

We use the term “debt jubilee” to capture an ensemble of related ideas and terms that deal with broad debt restructuring, including forgiveness, cancellation, modification, or amnesty – terms that we will use somewhat interchangeably in this book. Debt jubilee takes many forms, as we will see.

      To understand the importance of jubilee, we must understand three important realities about economies. This book will discuss these three realities in more detail because, once they are fully understood, the need for forms of jubilee, both big and small, becomes clearer:

       First, debt almost always outgrows GDP, and has reached very high levels in developed economies. It almost never grows at the same rate as (or a lesser rate than) GDP, reaching a sustained equilibrium. This debt growth is no accident, nor is it caused primarily by external circumstances; instead, it is an intrinsic, persistent feature of economic systems that comes from the very nature of growth and debt.

       Second, and as I’ve already begun to describe, high debt to GDP is harmful. It stultifies economic growth, brings financial distress to families, and widens inequality.

       Third, debt doesn’t decline by itself, and it is almost impossible to reduce it without significant, overt initiatives.

      Some assume that debt reduction can easily be achieved, but as we will discuss in Chapter 3, it is very hard to accomplish and resists conventionally invoked solutions such as inflation and growth itself. In fact, none of the mechanisms, including inflation and growth, that are traditionally assumed to improve a county’s debt profile work particularly well, if at all. Thus, the need – and case – for jubilee. To function at its best, our economy needs broad-based and inventive new initiatives for debt restructuring. Without these, debt levels will simply bring further growth challenges and burdens.

      The good news is that jubilee would bring economic renewal. All would benefit: households would be financially stronger, and governments, businesses, and financial institutions would be better off because those households would be stronger.

Jubilee is not a quixotic, impractical dream of the soft hearted, but a key component of a well-functioning economy that should be integrated into that economy. It can improve the functioning of that economy – like the design features of an engine that prevent it from overheating and keep it running smoothly and optimally. Properly designed, jubilee would bring what has never been achieved in contemporary economic history: sustained growth coupled with a mitigation of the unchecked rise in the debt-to-GDP ratio and prevention of the crises that follow.

      This is the future we should be aspiring to attain.

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