> Or do nothing and ignore it
What happens when you ignore your mortgage or car payment? You lose the asset, because the lender has recourse against non-payment.
Now what happens if we make it illegal for lenders to do anything about missed payments? Suddenly, the lenders are in a much riskier position. They can’t give out cheap loans if the recipients know they can simply ignore the interest payments and keep the house or car. As a result, interest rates much be way, way higher to make up for all of the people who choose to ignore their loans. Loans become much harder to get for anyone who doesn’t have a long credit history of repaying loans, meaning starter homes aren’t affordable until people are in their 30s or 40s, if ever.
Same thing happens at government scale. If we simply stop paying the debt, trust disappears and the cost of borrowing goes up. We can’t finance our infrastructure and public services because no one has any desire to lend money to an institution that has demonstrated a refusal to pay it back. Does your city need to replace a bridge? I guess they need to save up the taxes for the next 10 years and then replace it, rather than issuing 10-year bonds at cheap rates.
Or from another perspective: Imagine your friend needs $1000 to start a business. You loan him $1000 and he writes up a contract to repay you $1050 later. However, we declares a debt jubilee and now he refuses to pay you back. You’re now out $1000, have no recourse, and your friend has a business with no debt. Would you ever consider loaning anyone money again? If you did, you’d probably want a $1300 repayment on your $1000 loan to offset the risk of another debt jubilee destroying your investment again.
Debt is just a contract to finance projects at a certain rate. A debt jubilee voids the contract. If you destroy the contract, you destroy the system that finances things.