This (Part 7) is the final article in this series. Here we specifically emphasize two specific aspects of the second petition to reform the monetary system. Both of the petitions were described in Part 3 of this series. The second petition calls for a reduction of debt in a systematic, rational, purposeful way, rather than through a catastrophic financial collapse of the monetary system. This petition calls for the introduction of the Mosaic Jubilee Solution into the modern world. This is an extension of Part 6.
A Bit on the Rationale
Debt that enriches both creditor and debtor is a blessing. This practice has perhaps been engaged in ever since the dawn of civilization, and it is not going to be extirpated from society any time soon. Nor ought it to be so extirpated. Why? Why should it be? As soon as debt crushes the productive ability of the debtor, that debt changes its nature from a beneficent to a maleficent reality—and rational people ought to be able to identify that difference and take appropriate action to ameliorate the ensuing harmful conditions from which nobody gains and everyone suffers in one degree or another.
This proposal attempts to adjust the ingenious Mosaic invention of the Jubilee Solution to the complexities of the modern world. The proposal calls for the systematic reduction of zeros in seven years: Start with a 30% reduction the first year, and reduce all debt by 10% per year every year for seven years. The petition goes on to suggest that wealthy people will remain wealthy, as at the beginning of the escalating creation of zeros in their accounts—because wealth is a relative thing. If you and the Joneses have one million dollars each, you are equally rich. Your neighbor’s estate grows to 10 million dollars; they are ten times as rich as you are. Yet, once you have increased your wealth to 10 million dollars, you are again just as rich as your neighbor.
The petition recommends further to be alert and find ways to isolate the smart ones, who might not join you at the outset.
A much longer discussion can be had on the analysis of the economic worthiness of the content of financial estates. For instance, if billions of dollars are evaluated, the difference will be found mainly to reside in bank accounts with more zeros. There was no addition of one chair or one table or one service in the real economy. There was only an addition of zeros in financial accounts wherever they were held. In a regimen of low interest rates as at present, there is no economic value to those zeros. Even with high interest rates, once the reduction of zeros is systematic, the relative value of any two accounts remains the same.
The Seven Year Solution
Ancient Israel created the institution of the Mosaic Seven Year Jubilee. At the coming of the seventh year, all debt among the Israelites, but not debt involving foreigners, was extinguished. The slate was clean, and business relationships came alive again. It might be wise to use the same structure today, at least until better structures are designed and proven effective. There is nothing to prevent a study of eventual effects that might suggest an improved structure.
A Bit on the Mechanics
It is assumed here that there are many ways to reduce the debt, and if more ideas are proposed and implemented, that would be splendid. I will concentrate on two possibilities, one at the international level, the other at the national level.
Technically, this petition proposes for the International Monetary Fund (IMF), or a new institution created specifically for this purpose, to create an international facility to account for the Systematic Reduction of Debt (SRD) between nations.
Local central banks are invited to replicate this facility within national borders to take care of the systematic reduction of debt within each nation. Whenever the central bank might refuse to perform such function, a new institution—or institutions— could be created specifically for this purpose.
Some Cultural Conditions
Among the cultural conditions necessary to make the present proposal ready for practical application, we need to be concerned with at least two sets of values. The most important is knowledge of all that distinguishes consumer credit from capital credit: In the most stringent expression possible, consumer credit enslaves us, while capital credit has the potential of making us economically and financially free and independent human beings. Hence the recommendations included in the first petition to channel new money onto Main Street.
But there is another no less important set of values implicit in these petitions: To ask for a loan is to make a commitment to repay it; to default is to renege on that commitment.
The converse is less commonly brought forward: To make a loan, to obtain as much return as possible while knowing that the debtor will eventually default because he or she cannot possibly meet that commitment, is fraudulent.
To enter into a creditor/debtor relationship is a two-way responsibility.
Who Are the Potential Supporters of This Proposal?
Many people and many institutions come to mind. Potential supporters are expected to come from Jewish organizations, whether they are public or private, secular or religious. Pride of place is not a silly or boastful position to occupy. The expression “Why didn’t I think of it” is a glorious recognition of the exceptionality and necessity of any breakthrough like the design of the Jubilee Solution that offers much to be celebrated. To fully understand the reasons for the development of this idea by the ancient Israelites, rather than Egyptians, or Greeks or Romans, requires an in-depth knowledge of the religious, social, political, and especially international constraints/opportunities of ancient Israel. In addition to the idea of one God, ancient Israelites were the first to come up with the idea of the Jubilee Solution. To this institution, in no small part is due the survival of the Jewish people as a nation, an outward manifestation of a coherent set of shared values, no matter how distant in time or place people happen to be.
The Jewish community may be expected to support this proposal to reduce national and international debt in a systematic, rational way. Yet, Christians of all denominations should not fall that far behind. They are also expected to endorse this proposal for many reasons. Is it not enough for them to do so as reverence for the first public act of Jesus, the expulsion of the money changers from the Temple; his Parable of the Talents, in which hoarding is punished in no uncertain terms; his request of alms for the poor as gifts to himself? Then, even though the unremitting struggle against the ravages of usury was eventually given up as recently as 1971 in the Unites States, this Christian tradition is something to be proud of; it is something that a spark of spirit will revivify in enlightening splendor.
Muslims, of course, are the only religious people who keep the faith against usury alive and well. It is to be noted that they keep such faith, no matter the practical difficulties and the demeaning snickers from those who know-not. It is equally to be noted that their faith is being rewarded in their creativity in financial affairs. Professor Muhammad Yunus, the creator of modern microfinancing and eventually a Nobel Peace laureate, is by faith a Muslim.
Those analysts who are fond of pointing out the minimalist aspects of microfinancing, whether they are Christian or not, ought to remember Jesus singling out the poor woman who gave only two cents to the temple/community—yet, those two cents were all she possessed. The few pennies involved in microfinancing often keep a family alive, productive, and living a dignified life. Is there need to contrast the results of billions of dollars spent in corrupting people and creating too often unnecessary and inefficient public structures?
There is much that needs to be investigated. There is much to refine before these proposals can be implemented. Ideas that fail practical tests are not worth implementing. They sap the energies of people. So, onward with stern criticism; onward with practical or theoretical suggestions to make these germinal ideas come live and bear fruits in the world for many years to come. But enough of analysis/paralysis. Onward with implementation (Part 3).
Part 1 of this series: The World of Economics Since 2008
Part 6: Fear of Scarcity
Part 7: Toward a Systematic Reduction of Debt (This article)
This article was developed from an article posted at Mother Pelican, October 2015.