Doug Casey on How Debt Jubilees Could Reshape Our Economy and Politics

Reward the profligate, punish the thrifty; that’s the foundation of a strong economy. From Doug Casey at internationalman.com:

International Man: Four thousand years ago, the rulers of ancient Babylon discovered a technique to stave off violent revolts.

Their solution was to enact widespread debt cancellation—a debt jubilee. Debt jubilees acted as a societal pressure release valve when there were no other options.

What’s your take on this concept and its relevance today?

Doug Casey: I’m opposed to debt jubilees. The reason is simple. One man’s liability is another man’s asset. If somebody owes money and defaults on the debt, it becomes a problem for the next person. A debt jubilee legitimizes the idea of defaulting on obligations that you voluntarily took on.

The idea of a debt jubilee is corrosive because it causes people to lose the idea of cause and effect, right and wrong. The word “jubilee” implies a celebration. But a celebration of what? The default of obligations, breaking one’s word, and using the State to defraud those who loaned you capital.

Most of us understand that current levels of debt in the US can’t be repaid. So I understand why some say we should have a jubilee. But if there’s to be a default, it shouldn’t affect private debt that has voluntarily contracted. I suggest it should only affect those who owe or are owed by that great predator, the US Government.

Perhaps the US government should overtly default on its debt rather than defaulting on it slowly through inflation. The debt can’t be paid off. It’s just a question of how it should be defaulted on. The honest way is to admit that it can’t pay. This would affect everyone, especially those who are enabling the State or dealing with it. You can also default on it surreptitiously, fraudulently, through inflation, which affects absolutely everyone but shields the real miscreants.

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