In this post, I want to discuss the massive Debt jubilee that I believe will come, how it will occur and who will be the winners and losers. And why this leads more credence to stacking silver and gold is so important.
Debt Jubilee Basics
To begin, what is a debt jubilee? A Debt jubilee is simply debt forgiveness. We’ve seen this for thousands of years, and historically typically something like this occurs when a king or ruler realizes that if they don’t forgive debts, which aren’t going to be repaid anyway, they might get overthrown.
Now, it’s important to understand a debt jubilee is really about the transfer of wealth, not really a debt being wiped cleaned. Someone is going to have to pay, in some way.
Also, it is a true statement to say this has already started somewhat with the Biden admin forgiving hundreds of billions in student loans with no congressional approval. But I want to discuss the big one I believe is coming.
Why is a debt jubilee going to happen?
The reason I believe this is going to happen is pretty simple: both consumer and government debt is spiraling out of control and eventually it’s going to become very evident these debts will never be paid back. When things get bad enough, we’ll see calls for a Debt jubilee. In March of 2020, when Covid hit, there were some calls for a debt jubilee by many in the press, and I’m sure it was on the table in the government. They decided to go a different route and to send stimulus money instead to prevent a collapse.
How will the debt jubilee happen?
I tend to believe that there is only one way that this can happen. This is going to be for the government to indirectly inflate away the debt. Some types of debt will be forgiven altogether. Others though, won’t.
It’s looks on the surface that the banks would get crushed by this as their loans would be paid back in dollars’ worth much less. This would normally cripple the banks although I’m sure the government would back them somehow.
In general, though, people with much debt would be the winners in a Debt jubilee. For example, I have a twenty-thousand-dollar credit card bill. A debt jubilee could wipe this away. The person though who saved and paid off their bill, won’t get 20,000 in cash. In the scenario above, the government will simply increase taxes on both the saver and spender and redistribute the wealth.
As we see, this is both troubling and, in my opinion, a strong possibility if things get bad. If it looks like we are going to see another depression, politicians might just push a debt jubilee.
For example, imagine the following scenario. Something sparks an economic crisis. Many lose their jobs. This hurts consumer spending, lowers tax revenue and as a result more layoffs occur leading to a vicious spiral of unemployment and bankruptcies.
The government might come in and say we are going to forgive auto loans and credit card loans or something else. In this situation with much unrest already, the general public is not going to be upset by this. Many will be ecstatic and will only think short term of the benefits.
However, this is very dangerous. In order to pay off all those loans, the government would have to create a massive spending package to buy the loans. And who would pay for it? The American taxpayer. Also, with no one upset about their debt being forgiven, politicians would have no issue passing this.
In the coming months, the effects of the package will be felt though. Taxes will increase and inflation will shoot up with more money in the economy. This is why owning precious metals is so critical in my opinion.
Why won’t they send direct payments like 2020?
This could occur alongside with the debt jubilee. It could be the case that a debt jubilee was on the table in 2020, but once they realized the pandemic wasn’t going to be so bad they scrapped the plan. Also, maybe a debt jubilee wasn’t pushed because there wasn’t time to decide who would get what.
