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Comment by jdlyga | Hacker News Reader

Time to call an old fashioned debt jubilee like they did in the early Roman Empire days. It worked really well for situations like this.

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We're getting there - we just call it inflation, so that instead of cancelling debt all at once we basically just cancel it slowly over an extended period of time.

Everyone would take huge loans and bet on the stock market knowing they never needed to pay them off. It would need to be announced and executed at the same time.

The U.S. defaulted twice on their obligations in real terms in the 20th century: once in 1934, and another in 1971. That was basically a "debt jubilee" - for the country. Not sure the average person could have profited off of either one though (at least not legally).

In 1970s you could have taken out fixed-interest rate debt (if you had the foresight), which would have been devalued as part of the 1970s inflation due to the 1971 Nixon Shock, so perhaps if you knew that you could come out ahead at the time.

Usually debt jubilees work by transferring private debts onto public sector and then having the public sector default in real terms (by devaluing the currency).

Even if they were announced and executed at the same time, as soon as you knew it was a possibility you'd start behaving dramatically differently assuming this was plausible again within your lifetime or your child's lifetime.

Here's a bunch of mortgages, which are turned into a CDO and sold to a pension fund. Now you declare a debt jubilee. Great! Those mortgages are gone. Unfortunately, so are the pensions.

It could still be a net win. But it's going to come down rather badly on some people, and they aren't all rich rentiers...

Why would anyone ever pay their debts, and why would anyone ever lend money out, if they knew debt jubilees were possible?

I mean, arguably this is the issue with corporate bailouts— executives can take giant risks knowing that they'll reap the upside but be rescued on the public dime if it goes south and they can convince us all that they're too big to fail and "no one saw it coming." (Even the one bank that was allowed to fail—Bear Stearns—seem to have had the execs do pretty all right by themselves: https://www.businessinsider.com/bear-stearns-where-are-they-...)

I think in general I'm +0 on debt forgiveness for individuals. But it's not fair to speculate about the behaviours it would induce when we can observe already what related behaviours very much already induce.

IMO the real losers in a debt-forgiveness scenario are the "responsible" ones who avoided doing something beneficial in order to not be overstretched— or maybe were even prevented from taking on debt by structural/classist barriers around credit-worthiness, job status, etc.

For example, someone who now makes less money because they went to the cheaper state college, and has lived a simpler life afterward because they diligently paid it off every month. This person could be understood for feeling a bit crummy if they look over and a former peer who traveled far away for school, lived extravagantly, and rolled the debt forward for years now enjoys having it disappear in a poof.

"the market can stay irrational longer than you can stay solvent"

you would pay your debts because even if debt jubilees were possible you don't know when it will happen and can't predict it with any degree of accuracy and it's not worth the trouble that would be caused by being wrong

Sure, but you'd be encouraged to make sure you had long-standing, slow-paying debts at all times or you'd be missing out on free money. I'd be taking out a few 30 year mortgages if this were a thing and probably borrowing against equity in my home to dump back into the market on some lower risk items.

If you can service reasonably cheap debt and still live decently you may as well take it because a "debt jubilee" is like a lottery win if you happen to hit one in your lifetime, and I'm assuming you'd have them more frequently than that?

My best guess: debt would be dramatically more expensive as lenders would have to factor it into the price, and home affordability for young people would drop even lower than it is today if this were a thing. Debt jubilees would seem to actually entrench the current upper and middle classes.

and you'd be absolutely screwed if the jubilee only came around every 50-75 years

Depends how leveraged you are - personally with that level I'd be able to pass that on to my kids if needed. One of us is printing free money at least.

You don't have to pay your debts now, but the downside is your credit rating takes a dive yet loans are still made everyday.

You can't just stop paying and take the credit score hit. If you're solvent then creditors can get a court order to seize your assets, and if you have a job then they can levy a portion of your pay. For small debts creditors might just write it off but if you owe a lot then they'll absolutely come after you.

Unless we're talking about collateralized debt, most of the time my understanding is they'll send debt collectors after you and little else - those debt collectors are often willing to negotiate on the amount because they bought it for less than face value, especially if you put it off for a while.

I considered doing this because I got scammed by a water heater rental company that was asking for a ridiculous sum when I bought a new home, but eventually decided to avoid the credit hit. If I were closer to retirement it would have been a no-brainer.

None of that is legal in the state I live in. Based on my personal experience in other states, I think you're exaggerating the likelihood that collectors will do anything except leave voicemail. But I don't know your definition of "a lot." Is $15k a lot?

Debt lawsuits for amounts under $15k are common in most states.

https://www.pewtrusts.org/research-and-analysis/reports/2020...

I reckon they would for the same reason people do those things even though bankruptcy exists.

Not paying your debts has consequences, even if the _may_ be forgiven.

Likewise lending for interest is still profitable, even if it carries risk.

You know they're possible, because we're discussing them. Do you pay your debts?

Flying pigs are possible. You know because we're discussing them.

When was the last debt jubilee in America(which is where all of my debts are)?

1970s) High inflation = *fixed-interest rate debt jubilee over time (as long as wages are inflation-indexed).

Also that's the last time the US defaulted on its debt in real terms (i.e. 1971 and the Nixon gold shock)

Might help to clarify if you mean for people or corporations.

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