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Ben Davies - Financial Oppression
Ben Davies has an excellent new report out titled, “Debt There is No Jubilee.” Ben’s new piece covers global debt, austerity, debt reduction, pensions, when the game ends and much more. Below is a portion of Ben’s report with a link at the bottom to the entire piece.
November 15, 2010
Debt: There is No Jubilee
The world has too much debt.
In the book of Leviticus (Old Testament), a Jubilee year is mentioned to occur every fifty years, in which slaves and prisoners would be freed, debts would be forgiven. Today there is no Jubilee.
Deleveraging: Growth, Austerity,
Devaluation or Default
“Capitalism without failure is like religion without sin.”
Charles Kindleberger, Manias, Panics and Crashes
How do you get rid of debt without Jubilee?
Deleveraging:
1. Grow your way out: US post WW2, Japan post 1989
2. “Belt-tightening”: Scandinavia 1990s, S Korea, Malaysia post 1997
3. Currency devaluation: US 1934 Gold Reserve Act, UK 1949, 1967, (2008?)
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4.Explicit default: Russia 1998, Argentina 2002 - 08
Global Debt Reduction:
What You Should Do?
1. Slash expenditure on entitlements
2. Reduce marginal tax rates on income and corporate profits to stimulate growth
3. Raise taxes on consumption to reduce deficits
4. Deliver by writing down liabilities in line with fall in asset prices
5. Structural reform – law and taxation changes
Global Debt Reduction:
What Actually Happens
Financial Oppression:
1. Oblige (enforce) commercial banks to hold government debt and condemn bond investors
to negative real interest rates
2. Central banks cut interest rates beyond “market” rate
3. Explicit default on debt commitments to politically weak groups or foreign creditors
4. Implicit default – inflate vis a vis quantitative easing and currency devaluation
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5.Revalue risk assets higher vis a vis qualitative easing eg UK Asset Purchase Program
To read the rest of Debt There Is No Jubilee CLICK HERE.
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