What would happen IF....ALL DEBT WERE ELIMINATED.

[Straight Shooter]

Allow me to preface this question: I DO NOT advocate this, I am merely wanting ANSWERS & OPINIONS, especially from those here involved in financial work, on the following HYPOTHETCAL QUESTION. DO NOT..DO NOT come into this thread with a bunch of useless rhetoric and crap.

So- What would be the good/bad...advantages & dis-advantages if the world economy got so bad, that "they" declared all entities...from every government, corporation, ect. right down to you & I to be, from some starting point..DEBT FREE.
Would a do-over be a valid way to re-start from an economic collapse?
Ive heard this espoused as an answer to our & the rest of the worlds debt problems. So, if this happened, and America had no "National debt"..how would that change things here?
Very curious to hear what you gents have to say.

[Sensei]

It would be a disaster for the developed world. Much of our lifestyle is made possible by the fact that our government and private institutions can borrow in good faith. Creditors will suddenly lose their interest in lending as soon as a debt forgiveness package is seriously debated, much less passed.

Finally, there is the nasty question of what happens after all that debt is forgiven? Do people and institutions suddenly end deficit spending? My suspicion is that 20 years later they will be broke again looking for another bailout.

[Firefly]

There would just be new debt.

Some may be smart this time around. Most wouldn't.
There was a skit on Chappelles Show about black reparations.
Every black had a lot of money over night.

Then it got pissed away on stupid stuff.

The same opportunists would opportune. The same gullible people would get taken advantage of. But maybe a fair amount of folks would be more careful next time.

Tl;dr the king is dead, long live the king.

Worth still has worth even if just a promise or a guarantee.

[Straight Shooter]

It would be a disaster for the developed world. Much of our lifestyle is made possible by the fact that our government and private institutions can borrow in good faith. Creditors will suddenly lose their interest in lending as soon as a debt forgiveness package is seriously debated, much less passed.

Finally, there is the nasty question of what happens after all that debt is forgiven? Do people and institutions suddenly end deficit spending? My suspicion is that 20 years later they will be broke again looking for another bailout.

Great point, Sensei...So let me add a couple parameters to my original question. One- what would happen if all debt were eliminated... AND NO MORE deficit spending were made absolute law of the land?
Two- If deficit spending continued?

Also, Firefly..I saw that Chappelle skit...Cadillac stock exploded over night! That was funny as hell.
But, what if we learned from our mistakes. Not likely..just what if?
What if rules & laws were put in place to prevent deficit spending, and EVERY SINGLE DOLLARS worth of spending had to be paid for prior to being spent?
Also..Im gonna have to study awhile on your comment "worth has worth, even if it is only a promise or guarantee". That would GREATLY depend on who made the promise or guarantee, I would think.

[Firefly]

I think really if this could happen in any positive way, we'd have to revert to an actual gold standard or barter of labor, service, and materiel for anything else.

There was once a time when doctors were paid in produce, and being voluntarily indentured got you to a new country with more opportunities.

[FromMyColdDeadHand]

Everyone always looks at the people owing the money, but if you forgive all debt, what happens to the people that loaned the money? You instantly wipe out every old persons lifesavings.

Sure, there are a lot of bad debts and zombie loans out there. I'm not saying that loaners shouldn't take a haircut. The Germans bitch about Greece, but the Germans slept with whores and expected virtue. Dumbasses. Like they said in 'Animal House'- "You screwed up; you trusted us."

Debt is a HUGE problem, and any kind of bail out will just make the problem worse the next time. Look at debt rearing its head again as an issue, just eight years after the GFC.

KFC, good. GFC, BAD. Both give you indigestion.

The worse news is that 'capitalism' is going to take the blame- as if we have practiced anything near that in 50 years, and we are all going to feel the 'Bern' from the FSA.

[JulyAZ]

Would the debt/borrowing history still be accessible for review in this scenario?

Even if everyone were debt free but a credit history still following you I can see this being an issue.

The way I see it, it would end up much like the housing market bubble. people/businesses would borrow against they equity they have over night give it a few years (less than 5) and we would find ourselves in a depression like the world has never seen.

A new debt would be created over night.

[FromMyColdDeadHand]

Forgive the debt and make the lenders whole.

Inflation at a scale seen only in 3rd world countries where the primary industry is printing money. That is what really happens.

[Straight Shooter]

In my scenario...all savings and 401k and all that are already gone, Im talking a world wide DEPRESSION..ala 1929.
As for the Credit history of people..yes, you could still find that out. that way maybe these bad loans wouldn't pop up and bite us again.
And I agree with the remark on Capitalism. Done RIGHT..its the best system ever created by man. but, you are right in we haven't done that in MY lifetime at least.

[Honu]

as someone who is responsible carries almost no money owed never over extended for a home etc.. I would be pissed off that some who were bad got let off ! I think there would be a ton of others like me who would also feel that way
what would happen over that ? hard to say but if this so called collapse was that big I think the push to restore records and still make those who owe pay up which would be a mess
if the world got that bad and this was announced how many would go on a rampage when things got better hoping to repeat the cycle again

those that saved hard would loose everything and those that spent out of control would gain everything and with society that collapsed I can also see massive fighting breaking out and those who got in over are head not lifting a finger to help but more than likely do what they did before let others try to work or steal etc..


basically it would destroy the last bit of anything that was rebuildable IMHO and not sure how we would come out the other side but for sure worse than if the powers never forgave everything

[turnburglar]

Where there is no debt, there is no progress. Why even bother going to work?

[Moose-Knuckle]

It would be utter chaos, anarchy, and pandemonium as most slaves don't know what to do without their yoke.

Humanity revolves around control, it is always automatic.

Kind like how we will never see cold fusion or a cure for cancer . . . there is no money in free energy or healthy people.

[SteyrAUG]

There would just be new debt.


Pretty much. It would be a lot like the Reagan amnesty to solve the problem of illegals in unmanageable numbers. Within a decade the problem was as bad as it ever was and the original solution provided no meaningful solution.

[Averageman]

Allow me to preface this question: I DO NOT advocate this, I am merely wanting ANSWERS & OPINIONS, especially from those here involved in financial work, on the following HYPOTHETCAL QUESTION. DO NOT..DO NOT come into this thread with a bunch of useless rhetoric and crap.

So- What would be the good/bad...advantages & dis-advantages if the world economy got so bad, that "they" declared all entities...from every government, corporation, ect. right down to you & I to be, from some starting point..DEBT FREE.
Would a do-over be a valid way to re-start from an economic collapse?
Ive heard this espoused as an answer to our & the rest of the worlds debt problems. So, if this happened, and America had no "National debt"..how would that change things here?
Very curious to hear what you gents have to say.

If time is money and money is time, this sort of thing would steal large segments of peoples lives.
First I believe there would be blood in the Streets. I think there would be people out there who scrimped and saved for decades who felt they had a plan and a path to take care of themselves and suddenly a very precious rug was pulled out from underneath them. Why not go shoot whomever you feel caused this?

Secondly the people who are now in debt, would again be in debt in a year, maybe two and filing for bankruptcy, again. People cannot control their urges to play now and pay later, it just isn't going to happen

[TMS951]

One of our more religious members would have to follow up on this, but does the Bible or Old Testament say debt is meant to be forgiven every year?

Interesting concept, yes there would be more debt again, but all much smaller amounts. Any loan you gave you would give with the expectation if it is not paid back in a year, as the collector you are SOL.

This would certainly curb loans to people who can't pay them.

Obviously home ownership would disappear, or only be a family through generations type of deal.

Not suggesting this, just an interesting twist.

[Outlander Systems]

Already happened.

https://en.wikipedia.org/wiki/Emergency_Economic_Stabilization_Act_of_2008

[MegademiC]

As said, everyone with money in a bank or investment would lose all their money. If they got their money and debt was forgiven, it would be massive overnight inflation.

Everyone with debt would now have free stuff.

[Crow Hunter]

Allow me to preface this question: I DO NOT advocate this, I am merely wanting ANSWERS & OPINIONS, especially from those here involved in financial work, on the following HYPOTHETCAL QUESTION. DO NOT..DO NOT come into this thread with a bunch of useless rhetoric and crap.

So- What would be the good/bad...advantages & dis-advantages if the world economy got so bad, that "they" declared all entities...from every government, corporation, ect. right down to you & I to be, from some starting point..DEBT FREE.
Would a do-over be a valid way to re-start from an economic collapse?
Ive heard this espoused as an answer to our & the rest of the worlds debt problems. So, if this happened, and America had no "National debt"..how would that change things here?
Very curious to hear what you gents have to say.

It would destroy all Western Anglo/Dutch economies and probably the rest of the worlds economies with it.

If you could just absolve/evaporate all collateralized/non-collateralized debt with the wave of a pen/stroke of a key the basic fundamentals that we all work around today would be completely invalidated. What is to keep someone in the future from doing it again? And again?

No one would loan money anymore. Why would you? You may not get paid back. You can't even get the collateral that was promised to get the loan to sell to make back some of your money. Without leverage, economies/innovation would grind to a near halt as the only people who could afford to take a risk would be people who had no need to take risk and because debt could be erased again in the future no one in their right mind would take ANY risk by loaning people money. If I had enough cash that I didn't need to work for the rest of my life, why would I loan you money to develop your start up company if there was a chance that you would just abscond with the cash and I would just be left with nothing? There is always a chance of bankruptcy today, but that is completely different (and highly regulated) than just erasing all debts completely.

The only way to prevent that from happening would be to print enough money to "pay off" that debt. Then you get a Zimbabwean hyperinflation like the world has never seen before. This would be just as bad, if not worse, than just "writing it off". Now you not only ruin the debt holders, you also ruin the people who have no debt at all by completely wiping away the value of their savings.

The fundamental problem is that modern economies NEED deficit spending to make them healthy/work. US Bonds/German Bunds/British Gilts debt is used the world over as the ground floor pyramid base of all financial transactions. If, suddenly, all "Guaranteed" return products no longer became guaranteed, it would all collapse. Sovereign debt isn't the same as you or I using our credit cards to buy something we can't afford. If that process was done away with, a whole new economic system would have to be developed and who knows what that would entail. I don't even have a clue how that would work. Our debt based economic system has developed over nearly 1,000 years of Western civilization, starting from scratch would be like going into the Dark Ages.

Sorry if this is disjointed. I am trying to write this while multitasking with my real job.:D

[Averageman]

As said, everyone with money in a bank or investment would lose all their money. If they got their money and debt was forgiven, it would be massive overnight inflation.

Everyone with debt would now have free stuff.

I was talking to a friend one day. I knew the guy, he was a neighbor, but other than a couple of mutual interests, I didn't really "Know " him.
I don't know how the conversation got in to finances, but he explained to me that he had a business fail a decade or so earlier and he had declared Bankruptcy. Bad decisions, loans that were taken, but even at the time he took them he seemed doubtful that he might make the money required to pay them back.
Long story short, he lost the business, he declared Bankruptcy and moved on with his life and went to work for someone else. Lived by the rules until his time under the Bankruptcy laws had expired.
Now all of that no matter how depressing only got worse when he explained to me, he was likely to have to do so again, his family simply couldn't handle their money and stupid banks and bankers kept loaning them more. My opinion of him immediately changed on the spot to straight up disgust.
He knew the deal the first time, the second time he was just gaming the system to get more "free stuff".

Now imagine that happening for everyone who has debt? Anything you have done to prepare yourself for a good life, being morale and honest and investing would either be taken or wiped out by inflation.
Like I said "Blood in the Streets" the folks who played by the rules would be screwed. You're pretty much going to have to work and work damned hard until they put you in a box and throw dirt on it.

[nova3930]

One mans debt, is another man's investment, is another man's savings

[soulezoo]

This discussion, at least on the Federal level, is where some folks get the idea of minting that "one trillion dollar coin" to help pay off U.S. debt.

I have to agree with Crow Hunter... nothing good would come of it.

However, the FSA still votes and they'd vote for it completely ignorant of consequences.

[Clem]

One of our more religious members would have to follow up on this, but does the Bible or Old Testament say debt is meant to be forgiven every year?

Interesting concept, yes there would be more debt again, but all much smaller amounts. Any loan you gave you would give with the expectation if it is not paid back in a year, as the collector you are SOL.

This would certainly curb loans to people who can't pay them.

Obviously home ownership would disappear, or only be a family through generations type of deal.

Not suggesting this, just an interesting twist.

https://en.wikipedia.org/wiki/Jubilee_(Christianity)

[brickboy240]

Since I am one of a small few, that carries no credit card debt, no loans and a small amount left on my mortgage....I'd be mighty mad if they just wiped everyone's slate clean in one whack.

[wildcard600]

Remember all those people who lost everything in 2008 and stormed the financial centers lynching banksters and wall street executives from the lamp posts ?

Probably would be alot like that.

[soulezoo]

Since I am one of a small few, that carries no credit card debt, no loans and a small amount left on my mortgage....I'd be mighty mad if they just wiped everyone's slate clean in one whack.

I am right there with you.

[Crow Hunter]

Remember all those people who lost everything in 2008 and stormed the financial centers lynching banksters and wall street executives from the lamp posts ?

Probably would be alot like that.

People didn't suddenly lose all the value in their bond funds, Social Security, Savings Bonds, I Bonds, Money Market Funds, Pensions, Annuties and Stable Value funds. During 2008, the value of those assets went up. If all debt instruments are eliminated, that money would just disappear, poof.

That is a lot different than having your stock funds go down in value by X amount per share but you still owned a part of a company that can still make money and can still pay you dividends.

Capital markets (debt instruments) are also twice as big as the "stock market" world wide.

That is completely leaving out the fact that almost all "guaranteed return" products in pensions/annuities/university endowments are composed of large amounts of debt instruments. All these would cease to exist or be in serious financial trouble if all debts were zeroed out because most of their underlying investments would suddenly be worth nothing.

[wildcard600]

People didn't suddenly lose all the value in their bond funds, Social Security, Savings Bonds, I Bonds, Money Market Funds, Pensions, Annuties and Stable Value funds. During 2008, the value of those assets went up. If all debt instruments are eliminated, that money would just disappear, poof.

That is a lot different than having your stock funds go down in value by X amount per share but you still owned a part of a company that can still make money and can still pay you dividends.

Capital markets (debt instruments) are also twice as big as the "stock market" world wide.

That is completely leaving out the fact that almost all "guaranteed return" products in pensions/annuities/university endowments are composed of large amounts of debt instruments. All these would cease to exist or be in serious financial trouble if all debts were zeroed out because most of their underlying investments would suddenly be worth nothing.

47% of the population in this country doesn't have any bonds, pensions, market funds, etc. anyway. Other than social security, many people wouldn't even notice.

Many companies and businesses went under and ceased to exist, leaving the shareholders with nothing.

I really don't know what would happen if all debt were erased, but seeing as how the last "doomsday" financial event didn't result in widespread blood in the streets I think many of the opinions in this thread are being overstated.

[MegademiC]

47% of the population in this country doesn't have any bonds, pensions, market funds, etc. anyway. Other than social security, many people wouldn't even notice.

Many companies and businesses went under and ceased to exist, leaving the shareholders with nothing.

I really don't know what would happen if all debt were erased, but seeing as how the last "doomsday" financial event didn't result in widespread blood in the streets I think many of the opinions in this thread are being overstated.

You are comparing a rough patch to complete wipeout. Anything that's not tangible assets would be gone, for everyone.

Stocks, savings, etc, gone.

[26 Inf]

One of our more religious members would have to follow up on this, but does the Bible or Old Testament say debt is meant to be forgiven every year?

Interesting concept, yes there would be more debt again, but all much smaller amounts. Any loan you gave you would give with the expectation if it is not paid back in a year, as the collector you are SOL.

This would certainly curb loans to people who can't pay them.

Obviously home ownership would disappear, or only be a family through generations type of deal.

Not suggesting this, just an interesting twist.

You are talking about 'the Year of Jubilee' which occurs every 50 years. Here you go:

Leviticus 25:

8 “‘Count off seven sabbath years—seven times seven years—so that the seven sabbath years amount to a period of forty-nine years. 9 Then have the trumpet sounded everywhere on the tenth day of the seventh month; on the Day of Atonement sound the trumpet throughout your land. 10 Consecrate the fiftieth year and proclaim liberty throughout the land to all its inhabitants. It shall be a jubilee for you; each of you is to return to your family property and to your own clan. 11 The fiftieth year shall be a jubilee for you; do not sow and do not reap what grows of itself or harvest the untended vines. 12 For it is a jubilee and is to be holy for you; eat only what is taken directly from the fields.

13 “‘In this Year of Jubilee everyone is to return to their own property.

14 “‘If you sell land to any of your own people or buy land from them, do not take advantage of each other. 15 You are to buy from your own people on the basis of the number of years since the Jubilee. And they are to sell to you on the basis of the number of years left for harvesting crops. 16 When the years are many, you are to increase the price, and when the years are few, you are to decrease the price, because what is really being sold to you is the number of crops. 17 Do not take advantage of each other, but fear your God. I am the Lord your God.

[Averageman]

People didn't suddenly lose all the value in their bond funds, Social Security, Savings Bonds, I Bonds, Money Market Funds, Pensions, Annuties and Stable Value funds. During 2008, the value of those assets went up. If all debt instruments are eliminated, that money would just disappear, poof.

That is a lot different than having your stock funds go down in value by X amount per share but you still owned a part of a company that can still make money and can still pay you dividends.

Capital markets (debt instruments) are also twice as big as the "stock market" world wide.

That is completely leaving out the fact that almost all "guaranteed return" products in pensions/annuities/university endowments are composed of large amounts of debt instruments. All these would cease to exist or be in serious financial trouble if all debts were zeroed out because most of their underlying investments would suddenly be worth nothing.


You are comparing a rough patch to complete wipeout. Anything that's not tangible assets would be gone, for everyone.

Stocks, savings, etc, gone.

All of this above.
Here is the deal, your retirement is someone else's debt.
In a scenario such as was described it would be gone, likely all of it, so would any investments that you have; so would any pension you might have, after all, all of that is a debt someone owes you.
Now imagine it is wiped out?
2008 was a hiccup compared to this.
What would it be like to have every debt you own absolved overnight, well it would depend are you A or are you B?
A) If you are mortgaged up to your eyeballs, have no savings, no retirement and the Wolf is at the door it sounds great.
B) If you have been a prudent saver, a budget driven spender, if you have savings and investments along with perhaps a retirement? Well, you are screwed.

Let me explain, the A people would have thought they have won, but actually it is very likely they will be in the same shape as before withing five years.
The B people who played the long game and saved and invested and had done everything the "Right Way" will recoup some if under 35, if over 35, more than likely folks like you or perhaps your Mom and Dad are done.
Who Wins?
Think about that a minute...

[26 Inf]

47% of the population in this country doesn't have any bonds, pensions, market funds, etc. anyway. Other than social security, many people wouldn't even notice.

Many companies and businesses went under and ceased to exist, leaving the shareholders with nothing.

I really don't know what would happen if all debt were erased, but seeing as how the last "doomsday" financial event didn't result in widespread blood in the streets I think many of the opinions in this thread are being overstated.

Toro Poo Poo. I'd damn sure notice, I've denied myself many things to save for retirement. Nationalize it, make it disappear, or whatever by the action of any Governmental entity and I damn well guarantee you I'll put some blood in the streets. It's bad enough that every time somebody breaks wind I lose 80 to 100,000, someone just flat ass takes it you'll think sovereign citizen.

Just saying.

[Averageman]

Toro Poo Poo. I'd damn sure notice, I've denied myself many things to save for retirement. Nationalize it, make it disappear, or whatever by the action of any Governmental entity and I damn well guarantee you I'll put some blood in the streets. It's bad enough that every time somebody breaks wind I lose 80 to 100,000, someone just flat ass takes it you'll think sovereign citizen.

Just saying.

Just a couple of quick links.
http://www.pensionrights.org/newsroom/releases/house-votes-allow-pension-plan-trustees-reduce-retiree-benefits
“The pension provisions in the spending bill allow trustees of financially-troubled multiemployer pension plans to reduce benefits of retirees by as much as 60 percent if there is a projection that plan assets might be depleted in 10 to 20 years – when many of today’s retirees will no longer be alive.
http://www.marketwatch.com/story/pension-law-proposal-would-hit-some-retirees-2013-04-15
A coalition of unions and employers is proposing changes to the federal law that governs the pension plans of about 10 million people, including reducing benefits paid to retirees, the first time in four decades that such cuts would be allowed.

If these guys can get away with it, I hope you enjoy a diet that is limited to Ritz Crackers and Cat Food while you're sitting on the curb in the rain. The Unions, Big Business, Big Banking and the .gov will all enjoy the fruits of your labor and savings.
Blood in the Streets.

[MegademiC]

Just to explain where I'm coming from.

I'm somewhat fresh out of college (3yrs). I still have student loans, and a house that's not paid off, yet, so this would benefit me now.

However, it's not right at all, and I have my stuff together, and already have some investments. Once I pay off current debt, I'll be diversifying investments. Thats what this country runs on. You gotta look long term.

Do what op describes, people will no longer invest, great ideas never make it off the ground, except a few, and our economy will stay stagnent.

People invested in me, and are getting paid back + some. I would like to have the same opportunity in a few years, it's a win-win when done right. Debt is not bad if it's for the right reasons.

[Moose-Knuckle]

https://www.youtube.com/watch?v=8Y-NqShTj5w

[Averageman]

Just to explain where I'm coming from.

I'm somewhat fresh out of college (3yrs). I still have student loans, and a house that's not paid off, yet, so this would benefit me now.

However, it's not right at all, and I have my stuff together, and already have some investments. Once I pay off current debt, I'll be diversifying investments. Thats what this country runs on. You gotta look long term.

Do what op describes, people will no longer invest, great ideas never make it off the ground, except a few, and our economy will stay stagnent.

People invested in me, and are getting paid back + some. I would like to have the same opportunity in a few years, it's a win-win when done right. Debt is not bad if it's for the right reasons.

Just to explain where I'm coming from;
I'm a divorced guy and I make a decent living, I've retired once (That would be gone), I'm twelve years in to my second career with a small Company retirement (That would be gone). I've been putting in to a 401K for over a decade and currently my contribution rate is 36% (That would be gone). I owe 100K left on a house, but I could pay that off out of my savings (That would be gone) and 10K on a sports car that I have a secured loan on (That money too would be gone). I have a College fund for my Son that pays his way through school (That too would likely be gone).
So I get a house and a car and lose 250K + in cash and investments and two retirements.
That's how that would work for me.
So I get to spend the remaining years of my life in poverty. Lose my house for the tax and insurance payments and wonder where the money for food and healthcare would come from.
I bet the FSA, Corporations, Banks and Investment Firms would be doing just fine.
Blood in the Streets.

[MegademiC]

^exactly.

[FromMyColdDeadHand]

I think the premise is backwards. There is a debt crisis, private debt crisis- not only the public debt crisis, out there looming. The heart of it is underperforming assets that can't make their payments. As soon as you start whracking up the interest rates, more of these assets won't be able to service their debts as their payments go up. Defaults drive risk premiums higher and that drives rates higher and that causes more loans to be defaulted on, which leads to .... get it?

It isn't that loans would pooooof, be forgiven- it is that they won't be able to be repaid. The net effect is the same, except that everyone is poorer. Let's say you bail out the loans- forgive the debt and make the lenders whole- that gets back into a MAJOR expansion of the money supply- which along with the previous synergistic effects drives interest rates higher.

There is no economic island anymore, anywhere, except maybe North Korea. This drags down everyone.

China is the real issue. I've been going there for work for 10 years. You can build out infrastructure with a command-and-control economy- you need roads, airports, ports and apartment buildings as you make almost everything for everyone- but as soon as those people get some money and you shift to a consumer driven economy, that CNC model starts to fall apart. The first sign is the empty cities. It only gets worse from there. You start to get govt directed private investment missalocated and those loans start to underperform. Their debt issue is internal, not external like ours.

Anyway, the OP is shedding light on the real issue- debt. If I were a communist, I'd be saying that if Russia had been able to wish Trillions of rubles out of thin air, the USSR would not have fallen. As long as you have a capitalistic (really that means a tight feedback loop between investment and return) and a market economy (the ability of that feedback loop to operate) with some kind of democratic (rule of law and inclusive power structure), you can make it work. We have broken the capitalistic, market based, rule of law model on all three legs of the stool.

We are going to fall on our asses.

The Progressive/collectivists will blame the very three legs that they destroyed and offer a new model. Hopefully the Chineses model will have failed so clearly that at least we won't go the full commie stupid.

[Straight Shooter]

I think the premise is backwards. There is a debt crisis, private debt crisis- not only the public debt crisis, out there looming. The heart of it is underperforming assets that can't make their payments. As soon as you start whracking up the interest rates, more of these assets won't be able to service their debts as their payments go up. Defaults drive risk premiums higher and that drives rates higher and that causes more loans to be defaulted on, which leads to .... get it?

It isn't that loans would pooooof, be forgiven- it is that they won't be able to be repaid. The net effect is the same, except that everyone is poorer. Let's say you bail out the loans- forgive the debt and make the lenders whole- that gets back into a MAJOR expansion of the money supply- which along with the previous synergistic effects drives interest rates higher.

There is no economic island anymore, anywhere, except maybe North Korea. This drags down everyone.

China is the real issue. I've been going there for work for 10 years. You can build out infrastructure with a command-and-control economy- you need roads, airports, ports and apartment buildings as you make almost everything for everyone- but as soon as those people get some money and you shift to a consumer driven economy, that CNC model starts to fall apart. The first sign is the empty cities. It only gets worse from there. You start to get govt directed private investment missalocated and those loans start to underperform. Their debt issue is internal, not external like ours.

Anyway, the OP is shedding light on the real issue- debt. If I were a communist, I'd be saying that if Russia had been able to wish Trillions of rubles out of thin air, the USSR would not have fallen. As long as you have a capitalistic (really that means a tight feedback loop between investment and return) and a market economy (the ability of that feedback loop to operate) with some kind of democratic (rule of law and inclusive power structure), you can make it work. We have broken the capitalistic, market based, rule of law model on all three legs of the stool.

We are going to fall on our asses.

The Progressive/collectivists will blame the very three legs that they destroyed and offer a new model. Hopefully the Chineses model will have failed so clearly that at least we won't go the full commie stupid.


Excellent response, sir. Again, my original post was a purely, hypothetical, what-if situation. But I wholeheartedly agree that we ARE gonna "fall on our asses" very soon. And, judging from my own vast research for the past many months I don't think we, or anyone, has learned a damned thing from China or anyone elsle.
Capitalism has indeed been broken. And I believe that as things go further and further south, we will see more & more communist based ideas, rules, laws, ect. until we hit bottom and nothing will matter at that point.
Now, Ive had very interesting & informative conversations with some folks on here, who do not think we will go "Mad Max". Comments like "they wont let that happen", and other info given keep me from knowing 100% that things are gonna bottom out, but right now, as one who studies our & the worlds economic data daily, I myself am at 90% + we are in for a shitstorm of un-imagined levels. Any info contrary to this is most certainly welcome.

[FromMyColdDeadHand]

Not Mad Max, more Highly Pissed-Off Max. My model is places like Brazil or Russia. Highly controlled economies, with all kinds of built-in corruption, that leads to a large underclass, little middle class, and a ruling elite. Favellas and gated communities. The Progressives decry all these attributes, but their policies force us all towards that outcome.

[ramairthree]

My wife has an uncle that would love this.

He had a good job. Lost it. Would not take any job not as good.

Was on unemployment forever.

But spent like he had his old job.

Filed bankruptcy.

Got a good job again.

Lost the job.

Repeat unemployment forever.

Knew was going to file for bankruptcy again, maxed out all credit cards before.

And this is a veteran, educated, etc. absolutely not brought up to be FSA.

Like those NYC cops and firemen that twist a knee and get an 80k a year pension.
He knows what he did was wrong but they have had it with the system.
Some 100% disabled vet with no fvckinf limbs gets to look forward to a whooping 36k VA for the year.

As much as I hate the FSA,
Half of them have an IQ of about 80 and probably would not be late for a meeting at NASA even if they had been brought up in a moral family with values, went to school, etc.

You mix in those generational FSA 'tards,
With jokers like her uncle who I guess just say F it,
And recent college grads that never understood sacrifice, delayed gratification, etc.
and wipe all the debt...

Well,
I think you would go from a little over half the people here being productive citizens supporting the other half,
Pissing off enough people to maybe cut the productive citizens in half.

We are heading that way slower without eliminating debt.

I work 150 hours a month since I retired from the military.
Unlike the military I get paid more if I work more, working more than contracted can be refused, and
I get paid really well.
But when I get asked to work more,
I don't. I did not used to have that attitude.

It literally boils down to,
WTF should I go to work for 50-something cents on the dollar?
State and federal income tax for the win.
Not even counting property tax on houses, cars, etc.

How much is the average American productive citizen seeing of their income nowadays once all taxes are taken out and all other sales and property tax and stuff accounted for?
40 percent or so?

And we run on a severe deficit as it is.
And the mouth breathing, lazy, lack luster dead weight are cheering for and about to vote for those that will give them more.
And the boomer cohort is starting to collect SS checks.
After totally breaking and ruining the system and the country how do they think the system can take it?

[Averageman]

Thanks for this post, it's been very enlightening.
I have never considered down to this detail the domino effect of an economic crisis causing this type of an event. I would agree that we are simply out of control for the most part and it's lang past the time to get things in order and right the ship before we have a disaster.
Any links you might be able to guide me to would certainly be of help.
I'm very interested.
Thanks
A/M

[Straight Shooter]

Averageman- ONE of my trusted sources of info is USAWATCHDOG.com with Greg Hunter. He has a youtube channel. He interviews THE TOP people in the world of economics & stocks & the world situation in general. EXCELLENT channel I cannot recommend enough.
Then, DRUDGE REPORT, and Brietbart, then Michael Snyder on FB. That should get you started, especially watching recent interviews on USAWATCHDOG.com.
Let me know what you think , please.

[SteveS]

We are living a financial ponzi scheme run by the banksters .

[Moose-Knuckle]

Thanks for this post, it's been very enlightening.
I have never considered down to this detail the domino effect of an economic crisis causing this type of an event. I would agree that we are simply out of control for the most part and it's lang past the time to get things in order and right the ship before we have a disaster.
Any links you might be able to guide me to would certainly be of help.
I'm very interested.
Thanks
A/M

If you never heard of Aaron Clary, he is a former investment banker and his videos are worth a watch, he authored a book entitled Enjoy the Decline.


https://www.youtube.com/watch?v=-VuxPwf1-4o

[williejc]

The same people would get back in debt.


What would happen if everybody received a $1000,000? The same people would be broke again.

[Averageman]

I really don't concern myself much with what others do, though it would appear that they have an amazing capacity to drag the rest of us down with them.
I'm simply amazed that we've ended up this way as a country.