Obviously, I’m going to have to catch up with him. Here’s an interview with the BBC from late November:
Obviously, it is quite courageous for an economics professor anywhere in the world, even Australia, to start talking about debt jubilees. So my hat’s off to him.
On the other hand, he doesn’t seem to want to go all the way, referring to an “intelligent, modern jubilee”. Thus he has very quickly run into the first unavoidable problem that is presented as soon as any kind of partial debt forgiveness is proposed: who gets left out (HT is the BBC interviewer)?
HT: Somebody, under your solution, is coming in and saying that’s a good debt, that’s a bad debt?
SK: No. If we try to do it on an individual basis, we’ll be here forever and we’ll feed lawyers more than ….
HT: Who’s making the decision about the broad sweep?
SK: That’s why it has to be an intelligent modern jubilee. We can’t say: Worthy borrower, unworthy borrower. We have to have a systemic approach because fundamentally households did not make the bad decisions. The bad decisions were made by the banks to lend in the first place.
HT: Accepting what you identify as the problem and trying to understand what the solution is, in this new system that we’re replacing the current bad one with, who’s deciding who gets the debt write-off and who doesn’t?
SK: I wouldn’t say it was a case of making a choice between one individual and another. It has to be a systemic process by which we reduce the level of debt-finance money in the economy and increase the amount of government-created money. Because we have two sources of money in a capitalist economy. The banks can create money by extending loans. The government creates money by running a deficit. Now back in the early 60s the ratio of government created money to the overall money supply was 15%. It’s fallen so far that we’ve got an entirely debt-based system which has driven speculation. We need to create the government money to balance out the credit. So I’d actually have a government creation of money system approach to try to rebalance the system and reduce the private debt.
HT: The government, the central bank, prints money to pay off people’s debts? What I’m wondering is, you say, “Write off debts.” And it’s basically private debt that you want written off. Mortgages, companies’ debt. How is that working?
I like how “feeding lawyers” is assumed to be a bad thing.
In any case, it’s apparent that Steve doesn’t really have a good answer as yet.
He needs a lawyer. Even if he has to feed him.