The problems associated with abolition of debt are not new. Its not just the day after but also the day before since no one in their right mind will loan to anyone in the time before a known abolition of debt. See also the Prosbul of Hillel the Elder.
The eventual effect is the same with it happening involuntarily in stages with bankruptcy writing off debt instead.
Why we can’t just share is the eternal question, how can we shop for an airplane, or a pool, or a car, or a refrigerator, a bicycle, or a wristwatch, etc while there are people starving elsewhere; but we all somehow do.
There is still plenty of capital to counteract debt.
Major assumption that is wrong.
In the UK, the debts are 9,000 bn GBP when you include all the off balance sheet items such as the state’s pensions.
Total UK wealth is 7,300 bn GBP. They are bust
Increase in the debts, 734 bn a year, against total takes of 600 bn a year. They are bust
Increase taxes to stand still and you need to increase taxation from 600 bn to 1,334 bn a year, or 85% plus taxation with no drop in production. That’s not going to happen.
Median wage is 26.5K. Per tax payer, there is 300K of debt. It’s not going to be paid.
So what’s missing? Abolition of debt is going to happen. Defaults. It’s already started in the UK.
But look at the debts? Primarily pensions. That means defaulting on pensions to people. That means making lots of them destitute.
But that’s what happens when you run Ponzi pension schemes.
There are a few assumptions here that I just don’t get. First is that the public debt is somehow evenly distributed among the people. Right-wingers like to say that a baby born today “owes” $30,000. But that’s balderdash. That public debt is paid by public revenues, which do not come from all people equally. If they could find a way to tax the homeless the same dollar amount as the richest few, then it would be true. There’s no doubt some on the right would do just that. But for now, we have progressive taxation and also taxation of corporations. So that public debt is mainly serviced by the rich; no wonder the right is for austerity.
Also Graeber seems to think it would be a good thing if the public debt was zero. If that was so, the nation would have no ability to adjust the money supply to deal with inflation or recession. You think 2008 was bad? If the government had no power to accrue debt, it would have been ten times worse. Not only is this a bad idea, but more to the point, the powers will never allow it.
US debt obligations are still counted as the safest investments in the world - although brinksmanship in Washington recently imperiled that rating. There is a need for those safe investments. If there was no public debt, the only investment vehicles would be far more risky ones. As @nickle points out, a lot of that investment is done by pension funds - not most, but a lot. Simply destroying the entire investment mechanism of the economy is unlikely to benefit anybody - and it would hit seniors and the disabled hardest of all.
The problem is that if the average person cannot service the average debt, you cannot service the debt. Period.
You can get more off the rich, but on average you won’t be able to pay. If you think differently, Bush’s half of people are below average and something must be done, applies. If you don’t understand that, you won’t understand why the debt won’t be paid.
If that was so, the nation would have no ability to adjust the money supply to deal with inflation or recession.
Inflation is irrelevant. You cannot cause inflation and get out of inflation linked debt. [You can for fixed rate]
If the government had no power to accrue debt, it would have been ten times worse.
No it wouldn’t for other reasons. If they had no debts, then there would not have been the problem.
US debt obligations are still counted as the safest investments in the world by governments and banking regulators. Ever thought why?
Simply destroying the entire investment mechanism of the economy is unlikely to benefit anybody - and it would hit seniors and the disabled hardest of all.
So in the UK, no state pensions screw them. In the USA no social security. How does that sound?
Quantify the debts, and you will see that is the inevitable consequence of running ponzi pensions on the scale that governments do.
This begs for a neologism.
Debt like currency is imaginary and based on group belief and law.
Inflation is as made up as fractional reserve banking.
National banks can only add units of currency by wand-waving this imaginary money into the economy where it is spent for actual goods and services, it can adjust interest rates for payback of this imaginary but enforceable debt backed by the armed police and forfeiture at gunpoint of real estate and goods in bankruptcy to civil courts.
Metallic standards are a way to peg the currency to the cost of mining, discovering, stealing, or otherwise acquiring that metal mostly gold or silver. Other countries peg their currency to the dollar or euro again blocking them by law from exercising control over their currency.
Inflation protected debts such pensions are effectively pegged to the level of poverty that the nation both voters and executive is willing to place upon the middle and lower classes who have no other option (except those able to falling back on the one or two children which has become acceptable since pensions became a normal part of life in developed nations). Hyperinflation is mostly a problem when there is a country external to the printer of the currency demanding repayment as seen in post-WW-I Germany or across the third world, in Japan’s case they cant get inflation to even catch, the Yen siphoning off into the world of finance much as happened with US dollars once the discount window was opened.
With globalism there is no longer the economic firewalls seen previously to compartmentalize crashes. Since 2008 instead of unwinding, complicated debt instruments have become even more snarled.
I suggest that debt falls back to the ancient practice of guaranteeing a debt by enslaving the borrower with financial companies, the police, and courts standing in the middle for a civilizing veneer.
Just as debt, bankruptcy, currency, interest rates, and even personal property are ultimately ideas enforced by whatever passes for leadership, that leadership enforces the will of the sovereign with their reserved right to use violence to enforce the laws.
If finance is ultimately made up recorded debt-points enforced by law it only takes the power of the law to change the status of who is the slave, who is the master, who swings the whip, and who is beaten.
“All political power comes from the barrel of a gun.” - Mao Tse Tung
Interesting. Taxing “inherited” wealth rather than all wealth raises some issues.
Why inherited wealth only? By that definition, Henry Ford’s wealth in 1940 would be untaxable. Lots of money made by Goldman Sachs paper pushers is not inherited either. If I were more cynical than I am, I might suspect that this is designed to keep Hollywood money, Silicon Valley money, and (a lot of) Wall Street money happy with a taxing program that will in practice soak the upper middle class - the top 1 - 5% - while leaving the top 0.2% largely unaffected.
How do you define what’s inherited? Suppose I inherit at age 30 a business with a net worth of $4m, and manage, through a mix of personal acumen, family connections, and good fortune, run that worth up to $35m on my 45th birthday, which happens to be the day the wealth tax takes effect. Am I taxed on (a) only the $4m I inherited, (b) the whole $35m, on the grounds that I would have none of it without the inheritance, or © some pro-rated amount between the two?
Of course the real answer will be (d) the smallest amount I can realize via adroit lawyering and lobbying. Which is why we should tax all wealth, or none of it.
Well, of course, if you want to eliminate (or seriously reduce) the public debt through taxation alone, you have to reach way, way down into the middle class with tax increases. The one percent doesn’t have enough to do it, even if you take 90% of everything they earn.
Most estate tax proposals include a higher exemption for a family business. This is a good thing; if the family store or farm represents most of your wealth, you shouldn’t have to sell it to pay the taxes.
And like any other law, you can’t tax an asset retroactively. If the tax wasn’t there at the time of inheritance, you don’t owe it. If it was there, then your parents’ estate owes tax on the value at the time of inheritance (or death? unclear to me). Anything after is capital gains - which you pay tax on at the time you sell the asset.
Taxing inherited wealth specifically deals with the issue of it being unearned, to an even greater degree than wealth from owning financial instruments. Makes it a much easier sell politically and morally.
Ok, here’s my question, As a civilization we are, in fact producing a certain quantity of goods and services. That amount is growing over time, faster than population. Therefore, we are in fact capable of continuing to produce at that level or higher, barring an uncompensatable drop in the supply of one of the major resource inputs.
Where are the resources (money is not a resource, it is a means of exchange that we use to value resources against one another) coming from? Lots of places. One of the ways we’re acquiring them now is by promising even more resources in return later to the people that control the resources now. You can tax or seize assets instead, but we can’t really tax or seize human capital, which at this point is one of the most important resources. Abolishing debt means finding an alternate way of arranging all this. I have no idea what it might be, except that it isn’t a reversion to slavery, since you can’t reliably have slaves perform high value mental work.Although I guess in a way non-dischargable student debt is a tax on human capital… but not really we I was aiming for.
The USA already has an estate tax. ~40% of amounts over ~5 million. Its presence has not notably slowed the growth of government debt.
I think it would be clearer to distinguish between labor power, which is the potential to create new wealth, and capital, which is wealth accumulated in a form allowing it to be deployed in multiplying the effect of labor to create new wealth. Capital is, by nature, alienable, and thus can be taxed or seized – i.e., expropriated.
I think people are getting off on a tangent about “national debt”, which is only part of the sort of debt under question.
As I understand it, money is essentially an expression of a social relation, and one which by some economic models, including Graeber’s, is best modelled as a debt relationship. In his book, Graeber laid out an argument that this is the historic origin of money and of modern class relations.
The problem I had with Graeber’s book is that it ends with a call for a debt jubilee, on the model of an ancient and sometimes medieval practice of wiping away the accounts of debts; but, in the economic systems in which debt jubilees occurred, money and debt were auxillary economic structures, rather than the primary structures. In the modern context, declaring a debt jubilee is a roundabout way of calling for the expropriation of capital and the elimination of class distinctions, but making it sound much simpler and more trivial than it actually is.
It was 70% from 1935-1980, which you’ll note had substantially lower inequality than we have today. The estate tax is not just about government debt, it is about middle and lower class private debt - a small group owning so much of the wealth that everyone else has to be in debt to them, and the government having to borrow more in part to finance public assistance programs that are more heavily needed because of that.
Is it “wrong” to have wealth or even “nice things” when others don’t? Some would say yes and others would say no. The system I personally adhere to sees charity (1) to the needy as a religious/legal obligation. So what then is the “best” kind of charity or at least how to do charity? One would think the obvious answer is some kind of direct payment or payment in kind or maybe even subsidies/price controls to those in need. Turns out the Jewish answer is different in that the “best” charity is to enable the needy to provide for themselves thus preserving their dignity, etc.
- I find it interesting that the Hebrew word tzedakah which is commonly translated as “charity” has a more strict translation of “justice” as in it is in fact just that one is obliged to care for the needy out of one’s personal gains whether one is rich or poor.
I have no problem with being well off, I have even experienced it, the taste of being a baal tzedaka was sweet. I still wonder how much justice there is when some have jets and pools and some don’t eat even as I consider how to finance a business startup including two light aircraft. I believe the Shauchun aruch prescribes percentages to be distributed and even maximums up to a rich unlimited giving class for money beyond basic mieser for different classes of people but when there are people who can buy nations benefiting from the ribbit(interest) from people who have trouble getting food or healthcare. There is nothing wrong with enabling someone to earn a living by educating them or helping them acquire the tools of a trade while that is still an option. But we are already in the transition to a world where literally posessing the money to have financed(past tense) the continually more automated means of production is the only way to stay ahead as more skilled workers are either moved to sub-living wage minimum wage split shift service work or just replaced, even in third world sweatshops.
In the end I see two outcomes as explained in the short story Manna, universal community wealth or hyper-concentrated wealth and not-even-slave prisoners hidden from view.
I guess I’m the eternal optimist in that I see it as still not only the best option but still an option. Even a half empty glass can be refilled but sometimes you just have to look a little harder to find more wine.
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