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Monday, June 11, 2018

Interesting Readings 11 June 2018 = Is Debt Jubilee lurking?

I came across an article titled Some ways to introduce a modern debt Jubilee at Vox. The article is in line with the recent discussion about debt. John Mauldin has highlighted this problem generally and more specifically in the last Thoughts from Frontlines. A few months back Christopher DeMaria had written about debt jubilee on Seeking Alpha article titled The American (Debt) Jubilee, And The Current Correction.

Debt Jubilee may be lurking in our future. It is not as bad as it sounds. For some kinds of debt, when prevalent in excess, needs to be written down. I have highlighted the difference between good debt and bad debt earlier - i.e. productive debt and unproductive debt.
Productive debt creates an asset of higher value than the debt itself.
A large part debt currently outstanding is unproductive debt. All consumer credit is unproductive, except educational loans or student loans. It does not create a means to pay the debt back. Thus, debt jubilee may be a proper solution to problem of unproductive debt. Productive debt in trouble can be repaid by extending more productive debt.

The alternative could be to extend and inflate it away. But will there by appetite for that?