Debt forgiveness or a debt Jubilee is an idea that is becoming more familiar to many people through the West. The idea of debts being forgiven by decree is being discussed especially in light of the COVID pandemic. Extraordinarily, we have recently witnessed the forgiveness or the writing down of very large debts during the financial crisis.
Technically debt was not forgiven but instead the burden of the debt was passed to tax payers. The Western governments simply took the tax payer revenues and used it to pay off bank debts. Bad assets were bought and the liabilities transferred tax payer.
The kings of Israel proclaimed debt Jubilees for the citizens. There modern day equivalents however proclaimed debt forgiveness not for the citizenry but for the banks. Not for the poor but for the wealthy. What happened after the financial crisis is pretty extraordinary by any measure.
The majority of Americans now support student debt forgiveness and if it passes it will almost certainly be the beginning of a whole series of debt forgiveness measures. The post COVID world will almost certainly need debt forgiveness in order to get things rolling again.
Perhaps this will be demonstrate the efficacy of debt forgiveness and its benefits to society. The question of who takes the losses will need to be addressed. This seemed to be less of an issue when the banking system needed bailing out. The tax payer took the losses, so perhaps the tax payer will once again take the losses.
Ultimately, it may require a revaluation of the currency. This would allow the respective governments to honor the debt while not affecting other spending. These kinds inflationary measures have been in place for a long time in an effort to pump money into the banking system so why not for student debt relief.
What ever the technicalities of how these debts are written off, it seems almost difficult to imagine that the Western economies are going to emerge into a post COVID would without some major restructuring of the global economy.