In ancient Babylon, a newly enthroned king would declare a jubilee, wiping out the population’s debts. In modern America, a faint echo of that idea -- call it jubilee-lite -- is catching on.
Support for write-offs has been driven by Democratic presidential candidates. Elizabeth Warren says she’d cancel most of the $1.6 trillion in U.S. student loans. Bernie Sanders would go further -– erasing the whole lot, as well as $81 billion in medical debt.
But it’s coming from other directions too. In October, one of the Trump administration’s senior student-loan officials resigned, calling for wholesale write-offs and describing the American way of paying for higher education as “nuts.’’
Real-estate firm Zillow cites medical and college liabilities as major hurdles for would-be renters and home buyers. Moody’s Investors Service listed the headwinds from student debt -– less consumption and investment, more inequality -- and said forgiveness would boost the economy like a tax cut.
While the current debate centers on college costs, long-run numbers show how debt has spread through the economy. The U.S. relies on consumer spending for growth -– but it hasn’t been delivering significantly higher wages. Household borrowing has filled the gap, with low interest rates making it affordable.
And that’s not unique to America. Steadily growing debts of one kind or another are weighing on economies all over the world.
The idea that debt can grow faster than the ability to repay, until it unbalances a society, was well understood thousands of years ago, according to Michael Hudson, an economist and historian.
Last year Hudson published “And Forgive Them Their Debts,’’ a study of the ancient Near East where the tradition known as a “jubilee” -- wiping the debt-slate clean -- has its roots. He describes how the practice spread through civilizations including Sumer and Babylon, and came to play an important role in the Bible and Jewish law.
Rulers weren’t motivated by charity, Hudson says. They were being pragmatic -- trying to make sure that citizens could meet their own needs and contribute to public projects, instead of just laboring to pay creditors. And it worked, he says. “Societies that canceled the debts enjoyed stable growth for thousands of years.’’
But it’s coming from other directions too. In October, one of the Trump administration’s senior student-loan officials resigned, calling for wholesale write-offs and describing the American way of paying for higher education as “nuts.’’
Real-estate firm Zillow cites medical and college liabilities as major hurdles for would-be renters and home buyers. Moody’s Investors Service listed the headwinds from student debt -– less consumption and investment, more inequality -- and said forgiveness would boost the economy like a tax cut.While the current debate centers on college costs, long-run numbers show how debt has spread through the economy. The U.S. relies on consumer spending for growth -– but it hasn’t been delivering significantly higher wages. Household borrowing has filled the gap, with low interest rates making it affordable.
And that’s not unique to America. Steadily growing debts of one kind or another are weighing on economies all over the world.
The idea that debt can grow faster than the ability to repay, until it unbalances a society, was well understood thousands of years ago, according to Michael Hudson, an economist and historian.
Last year Hudson published “And Forgive Them Their Debts,’’ a study of the ancient Near East where the tradition known as a “jubilee” -- wiping the debt-slate clean -- has its roots. He describes how the practice spread through civilizations including Sumer and Babylon, and came to play an important role in the Bible and Jewish law.
Rulers weren’t motivated by charity, Hudson says. They were being pragmatic -- trying to make sure that citizens could meet their own needs and contribute to public projects, instead of just laboring to pay creditors. And it worked, he says. “Societies that canceled the debts enjoyed stable growth for thousands of years.’’
by Ben Holland, Bloomberg | Read more:
Image: NY Fed Consumer Credit Panel / Equifax
[ed. Instead of government continuing to pass tax cuts for corporations and wealthy shareholders (in hopes of encouraging trickle-down benefits, which never materialize), money that's now being used to service debt payments and bankruptcies could be used instead to stimulate consumer spending (which corporations and shareholders would benefit from as well). Basically, trickle-up economics. See also: The historical case for abolishing billionaires (The Guardian).]
