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  1. #1
    ^He pronks, too! Magic Poriferan's Avatar
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    Default All debt forgotten.

    Here's a hypothetical scenario which I doubt has any plausibility, but let us considerate.

    What would happen if every country in the world made a gentleman's agreement to forget all the debt every country has? Start it over, hit the reset button, make a clean slate. All that money everyone owes everybody else now, you don't owe it anymore.

    What impact would this have? How would the global economy respond? Who would be winners and who would be losers and just how big would those wins and losses be?
    Go to sleep, iguana.


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  2. #2
    failure to thrive AphroditeGoneAwry's Avatar
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    OOhhh, now you are sounding like an NF, Magic. Wonders never cease.


    I don't know about the short term and how it would look regarding laws, tariffs, exchange rates, etc. Some NT can mentally masturbate about that.


    But it would be the same as some schmuck who overspends, then files bankruptcy, then ends up in debt again within several years. Except now he's lost the respect of many of his friends and colleagues, and him/herself if she's care to admit it. Apply that to the global scale and there would be even more animosity between countries who could manage to keep their finances close to balanced and those who sunk back into debt.


    In other words, I only see it making things worse. There is no easy way out of this one; but hard work and higher taxes and living more minimally.
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  3. #3
    Cheeseburgers freeeekyyy's Avatar
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    There would be worldwide depression followed by very slow recovery, and eventually a return to normal.
    You lose.

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  4. #4
    Whisky Old & Women Young Speed Gavroche's Avatar
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    Quote Originally Posted by Magic Poriferan View Post

    What would happen if every country in the world made a gentleman's agreement to forget all the debt every country has?
    Global bank crash and global recession. The period of recovering is only if the forgetting of all debt is followed by a completely free-market regime, with no welfare state or a very modest one. If it is followed y socialism, we would basically have what happened in USSR.
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    Senior Member Kephalos's Avatar
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    I think that, for many decades, no one would lend any money to the government of many countries, and perhaps to its companies and individuals. That would mean that many countries would have to do without debt, which would mean more taxes (which means lower consumption, more hours worked, less capital and less output) , less government spending, and countries would have to make up for the lack of foreign capital by having higher interest rates, less consumption, more saving, and I would say still less investment spending. The banking and securities business would have to start from scratch: things that have been around for centuries, like commercial paper used to finance trade, would have to be reinvented. In other words, a disaster. Default on debt here and there is no problem, but a general default would be a disaster.

  6. #6
    Freaking Ratchet Rail Tracer's Avatar
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    Winners? Those with huge amounts of debt.
    Losers? Those who have little to no debt.

    In all cases, money is used as a "replacement" for materials. Having a clean slate means countries like the U.S. would be seen as an unreliable country to put money on when the clean slate happens. In all cases, it is exactly like a bailout.

  7. #7
    FRACTALICIOUS phobik's Avatar
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    If you want a real reset, have the < 10% that control the world's wealth to give it to the lacking and leverage. Then you can start over. Good luck with that.
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    Everyone's bank account would also vanish.

  9. #9
    Senior Member wildcat's Avatar
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    Quote Originally Posted by Magic Poriferan View Post
    Here's a hypothetical scenario which I doubt has any plausibility, but let us considerate.

    What would happen if every country in the world made a gentleman's agreement to forget all the debt every country has? Start it over, hit the reset button, make a clean slate. All that money everyone owes everybody else now, you don't owe it anymore.

    What impact would this have? How would the global economy respond? Who would be winners and who would be losers and just how big would those wins and losses be?
    They did it in Solon's time, in Athens.
    The economy responded well, of course.

    A Tribune tried to do it in Republican Rome.
    The rich landowners had him murdered.

    It is necessary to outlaw the Stock Market as well.
    Otherwise it would be a half measure.

    If we do it well, economy will recover in no time.
    Work would be respected again.

  10. #10

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    I wonder about this scenario too, the only big problem I can see with it is that the reckless behaviour which lead to the crisis will quickly repeat itself in the hope/expectation that it'll be forgiven again.

    There's so much in capitalism which has been the product of accident and chance that it could be interesting to see it operate intentionaly or with more of a planned framework, although I suspect that problems would repeat themselves and market failures organically emerge all the same.

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