Debt Jubilee

[Lepista]

Don't think it's really been talked about on here for a little while, but I've been thinking about a debt jubilee, and how it might work.

People like me (or "savers") might rightly be a little upset and revolution might be in the air, if all debts were just wiped out.

However, is there a case for having a personal debt jubilee that is more like a bankruptcy? My proposal is as follows:

- Increase the base rate of interest up to something realistic - say 7% / 8%;

- There woudn't be an automatic "all debts are cancelled" sceanrio. Whoever feels that they are not able to pay the revised interest levels are allowed to go "bankrupt". Lets call these people "Jubilants".

- The jubilants can walk away from their debt. The downside for them is that they have to give up everything they have. House, Car, belongings, savings, everything. From the sale of their belongings, they are given a capped amount of money to rpovide the necessities for housing - furniture, clothing, bedding, etc. It might even be possible to allow a basic amount of retention to occur.

The jubilants would obviously not have the same monetary priveledges that the non-jubilants have, i.e. they would not be allowed to get into further debt, for a period of time.

This would obviously cause a huge rash of houses to be repossessed. A large house price crash ensues, and people with money / access to credit (at 7%+) are able to buy the houses. The jubilants are able to move into the rented accommodation and "start over".

How would the jubilants get to work / live? With the number of cars repossessed, again this forms a glut of stock. Each employer can decide, on their merits, whether it is worth buying a car and providing it for the jubilants purposes, or employing a non-jubilant. This has the advantage of allowing the "dead wood" within companies to be weeded out.

Massive debts are cleared, and with much lower housing costs, improved employee efficiency, huge amounts of second hand goods being available and hugely reduced living costs, the UK would quickly turn around and prosper.

The losers, of course, would be the banks, and the elite. Which is why, of course, it won't happen.

[EmmaRoid]

I was thinking about something different today, Mortgage interest tax relief.

Hike the base rate up to a more reasonable level but give people tax relief on this increase and hope the "cost" of this just disappears into the funky accounting that is the black hole of the nationalised banks.

Just reading the reports of people snapping up mortgages because of base rate hike fears. We need another rabbit to be pulled out of the hat to keep us on track.

[Bloo Loo]

sounds like an ordinary bankruptcy...except bankrupts give up nothing at the mo...not even their house if they have an income...although future equity gains could be clawed back by creditors....

[leicestersq]

Well if there is a jubilee on debt, let me know and I will go out and wrack up some debt.

If the jubilee is only on personal debt, then I will just incur some of that.

Oh, and in case you didnt know, your savings in the bank are just a form of debt that the bank has. The quid pro quo for them giving everyone a jubilee on the money that they have lent is that they should get a jubilee on the money that they have borrowed, from you.

A debt jubilee is just deflation, on steroids.

[fluffy666]

Don't think it's really been talked about on here for a little while, but I've been thinking about a debt jubilee, and how it might work.

People like me (or "savers") might rightly be a little upset and revolution might be in the air, if all debts were just wiped out.

However, is there a case for having a personal debt jubilee that is more like a bankruptcy? My proposal is as follows:

- Increase the base rate of interest up to something realistic - say 7% / 8%;

- There woudn't be an automatic "all debts are cancelled" sceanrio. Whoever feels that they are not able to pay the revised interest levels are allowed to go "bankrupt". Lets call these people "Jubilants".

- The jubilants can walk away from their debt. The downside for them is that they have to give up everything they have. House, Car, belongings, savings, everything. From the sale of their belongings, they are given a capped amount of money to rpovide the necessities for housing - furniture, clothing, bedding, etc. It might even be possible to allow a basic amount of retention to occur.

The jubilants would obviously not have the same monetary priveledges that the non-jubilants have, i.e. they would not be allowed to get into further debt, for a period of time.

This would obviously cause a huge rash of houses to be repossessed. A large house price crash ensues, and people with money / access to credit (at 7%+) are able to buy the houses. The jubilants are able to move into the rented accommodation and "start over".

How would the jubilants get to work / live? With the number of cars repossessed, again this forms a glut of stock. Each employer can decide, on their merits, whether it is worth buying a car and providing it for the jubilants purposes, or employing a non-jubilant. This has the advantage of allowing the "dead wood" within companies to be weeded out.

Massive debts are cleared, and with much lower housing costs, improved employee efficiency, huge amounts of second hand goods being available and hugely reduced living costs, the UK would quickly turn around and prosper.

The losers, of course, would be the banks, and the elite. Which is why, of course, it won't happen.

Similar idea: Credit everyone with £20k net of debt, hike interest rates and impose strict income based mortgage and unsecured debt limits on the same day.

The hopelessly over-mortgaged would still get reposessed, and savers would have some compensation for the inevitable inflation spike. Those with mortgages would probably find their houses going down in price by more than the decrease in mortgage balance, but personally I'd be happier with a £90k mortgage on a £110k house than a £130k mortgage on a £220k house. (Clearly that must make me insane)

[Bloo Loo]

Similar idea: Credit everyone with £20k net of debt, hike interest rates and impose strict income based mortgage and unsecured debt limits on the same day.

The hopelessly over-mortgaged would still get reposessed, and savers would have some compensation for the inevitable inflation spike. Those with mortgages would probably find their houses going down in price by more than the decrease in mortgage balance, but personally I'd be happier with a £90k mortgage on a £110k house than a £130k mortgage on a £220k house. (Clearly that must make me insane)

what, cut a banks balance sheet by 20K PER CUSTOMER?

[Lepista]

sounds like an ordinary bankruptcy...except bankrupts give up nothing at the mo...not even their house if they have an income...although future equity gains could be clawed back by creditors....

well, precicely. It's like a bankruptcy, but not.

[SomethingHasToGive]

Similar idea: Credit everyone with £20k net of debt, hike interest rates and impose strict income based mortgage and unsecured debt limits on the same day.

The hopelessly over-mortgaged would still get reposessed, and savers would have some compensation for the inevitable inflation spike. Those with mortgages would probably find their houses going down in price by more than the decrease in mortgage balance, but personally I'd be happier with a £90k mortgage on a £110k house than a £130k mortgage on a £220k house. (Clearly that must make me insane)

I like this idea... except...

What is to stop the financially illiterate ( most of the population ) from just spending the money rather than paying it into the mortgage? Thus not helping the banks balances sheets and not really acheiving anything.

It would also mean all those with housing aspirations would effectively have £20k more deposit, wouldn't that help keep house prices up?

Also am I right that it would also break the Maastrict Treaty as it is printy printy in a more direct way than QE?

[GBdamo]

Don't think it's really been talked about on here for a little while, but I've been thinking about a debt jubilee, and how it might work.

People like me (or "savers") might rightly be a little upset and revolution might be in the air, if all debts were just wiped out.

However, is there a case for having a personal debt jubilee that is more like a bankruptcy? My proposal is as follows:

- Increase the base rate of interest up to something realistic - say 7% / 8%;

- There woudn't be an automatic "all debts are cancelled" sceanrio. Whoever feels that they are not able to pay the revised interest levels are allowed to go "bankrupt". Lets call these people "Jubilants".

- The jubilants can walk away from their debt. The downside for them is that they have to give up everything they have. House, Car, belongings, savings, everything. From the sale of their belongings, they are given a capped amount of money to rpovide the necessities for housing - furniture, clothing, bedding, etc. It might even be possible to allow a basic amount of retention to occur.

The jubilants would obviously not have the same monetary priveledges that the non-jubilants have, i.e. they would not be allowed to get into further debt, for a period of time.

This would obviously cause a huge rash of houses to be repossessed. A large house price crash ensues, and people with money / access to credit (at 7%+) are able to buy the houses. The jubilants are able to move into the rented accommodation and "start over".

How would the jubilants get to work / live? With the number of cars repossessed, again this forms a glut of stock. Each employer can decide, on their merits, whether it is worth buying a car and providing it for the jubilants purposes, or employing a non-jubilant. This has the advantage of allowing the "dead wood" within companies to be weeded out.

Massive debts are cleared, and with much lower housing costs, improved employee efficiency, huge amounts of second hand goods being available and hugely reduced living costs, the UK would quickly turn around and prosper.

The losers, of course, would be the banks, and the elite. Which is why, of course, it won't happen.

Wasn't this a Biblical thing?

If i recall correctly these worked but only as they were every fifty years or so. They acted to restrict lending to reasonable ammounts over a reasonable term.

This has also been discussed in the MSM

Telegraph FOR

Telegraph AGAINST

[Stay Beautiful]

Debt jubilee seems like a new version of QE.

[crouch]

Well if there is a jubilee on debt, let me know and I will go out and wrack up some debt.

If the jubilee is only on personal debt, then I will just incur some of that.

Oh, and in case you didnt know, your savings in the bank are just a form of debt that the bank has. The quid pro quo for them giving everyone a jubilee on the money that they have lent is that they should get a jubilee on the money that they have borrowed, from you.

A debt jubilee is just deflation, on steroids.

Exactly and if we're going to have one please wake me up six months before so I can go out and spend, spend, spend!

[Lepista]

Exactly and if we're going to have one please wake me up six months before so I can go out and spend, spend, spend!

We have (similar) now, except you get to keep your stuff and your house.

Why aren't you going out and spend, spend, spending now?

[leicestersq]

We have (similar) now, except you get to keep your stuff and your house.

Why aren't you going out and spend, spend, spending now?

You lose your house in bankruptcy.

Of course you can keep your house if you are not bankrupt, even if you cannot pay for it, thanks to SMI.

So there is one bad thing to say for bankruptcy in the UK.

[munro]

So you will destroy young families, people who've bought in the last few years, anybody who has worked their butt off and is just getting by. To create a glut of houses and personal possessions that will be bought up for peanuts by people who have savings.

Then there'll be foreign buyers descending with shipping containers to fill up with cheap stuff they can export and flog for a profit.

BTL will explode as it'll be people with access to credit who will buy up the housing stock that they will then rent out to the impoverished Jubilants, filling those houses with the consumer goods that used to belong to them. All bought for pennies on the pound. Since this will leave wages untouched the rents will be set by today's housing prices, not the post-crash housing prices. Why should landlords compete to push rents down? Or perhaps the housing will be bought up by investment trusts, thus ensuring that the next generation of would-be FTBs never get a look in. There might be a temporary dip in rents but they'll push them back up soon enough.

Those with STR funds and savings will find that the banks will be in such poor shape that they will refuse them loans, as they will want to hang onto their savings to prop up their capital ratios. So it will only be a vanishingly small number of people who have enough cash to buy outright who will profit. They will lend to landlords because they know they can repo them if necessary without any of the hassle of dealing with owner-occupiers. It's just business when its LLs. Cash-rich companies will move into residential big-time as the yields will be fantastic.

Base rates at 7% would lead to a glut of hot money which would push sterling through the roof and wipe out what remaining export industry/business we have.

This is apocalyptic fantasy stuff, as exciting as p*ss*ng down your leg. It sure feels hot and warm for a while but it doesn't last and it doesn't do anything for anybody else.

[Fishman]

A debt jubilee would only work if an opposite form (eg taking money from savers) was imposed.

Every bank account in the UK in credit could be halved in value and then that value credited against a random

account that had a debit balance. Business, personal, trust - every account in credit gets hit.

The banks could then match the savers with the borrowers in a certain locality and exchange addresses, etc so that

a saver could adopt a 'debt buddy'. The money can be repaid in kind via housework, gardening or more likely sexual

favours.

Or you could just give them a good beating with a stick.

[Lepista]

So you will destroy young families, people who've bought in the last few years, anybody who has worked their butt off and is just getting by. To create a glut of houses and personal possessions that will be bought up for peanuts by people who have savings.

I'm not destroying anybody.

I'm sure anybody who has taken out a loan or mortgage in the last few years has priced into their financial plan the possibilty of rising interest rates for a sustained period, andf the drying up of alternative loans.

Nobody needs to apply to become a jubilant - just keep paying the mortgage and your debts.

I'm not suggesting an armageddon - 7% is only the historical average, after all.

[leicestersq]

A debt jubilee would only work if an opposite form (eg taking money from savers) was imposed.

Every bank account in the UK in credit could be halved in value and then that value credited against a random

account that had a debit balance. Business, personal, trust - every account in credit gets hit.

The banks could then match the savers with the borrowers in a certain locality and exchange addresses, etc so that

a saver could adopt a 'debt buddy'. The money can be repaid in kind via housework, gardening or more likely sexual

favours.

Or you could just give them a good beating with a stick.

A perfect overnight 50% deflation in other words. Cracking idea.

Dont put my name on the list of supporters for it when you send it to the PM.

[fluffy666]

I like this idea... except...

What is to stop the financially illiterate ( most of the population ) from just spending the money rather than paying it into the mortgage? Thus not helping the banks balances sheets and not really acheiving anything.

It would also mean all those with housing aspirations would effectively have £20k more deposit, wouldn't that help keep house prices up?

Also am I right that it would also break the Maastrict Treaty as it is printy printy in a more direct way than QE?

The problem with spending is the biggest - you would have to allow it only as a credit to a mortgage balance, student loan or then other unsecured credit. If at the same time you put strict lending criteria in place, then those most likely to blow it won't be able to. And, of course, the under-21s only get access to theirs at the age of 21, net of student debt.

Any debt jubilee really does need strict limits on new debt as part of the deal (as well as >5% IRs) to stop it turning into a hyper-inflationary blowout.

[Fishman]

A perfect overnight 50% deflation in other words. Cracking idea.

Dont put my name on the list of supporters for it when you send it to the PM.

This may come a huge surprise but I wasn't being entirely serious with my suggestion.

However, I would like to point out that a debt jubilee cannot be imposed without ramifications for savers.

That was really what I was hinting at.

[R K]

This may come a huge surprise but I wasn't being entirely serious with my suggestion.

However, I would like to point out that a debt jubilee cannot be imposed without ramifications for savers.

That was really what I was hinting at.

Indeed.

So one could, for instance write off all bank savings > an arbitrary limit, say £85,000 to offset the debt forgiveness.

Give Richard Branson, Philip Green and Her Maj a call and see how keen they are with the idea.

The problem is the rich refuse to relinquish their grip on assets.

Meanwhile the banksters are writing off as much debt as they can as fast as they can whilst charging it back to their customers (both sides) and roughly 100,000 individuals are going insolvent every 12 months. Eventually it'll work its way through...........(unless you're Greece, Ireland, Portugal etc etc)

Edited January 6, 2011 by Red Karma