Cancel ALL debt . . . or we will be slaves to banks

Boris gets a stark warning on crisis from his old Oxford pal...

AS EVER when millions suffer, parasites grow on the back of their discomfort. Commendably, Boris Johnson warned he would impose ‘war-time’ penalties on ‘profiteers’ lining their own pockets. But I fear he has not thought this through.

The people who always benefit from an economic depression – whether caused by conflict, financial collapse or pestilence – are banks and creditors.

It is an axiomatic truth that the only thing that keeps growing during times of economic contraction is debt.

Debt enjoys immunity from acts of God as nothing else. And that immunity is now being given the blessing of the State, with politicians encouraging banks to grant repayment holidays on various forms of borrowings.

Don’t be fooled. At best, this is a palliative but people’s obligations will still accumulate. Missed mortgage repayments will simply be added to their final bill. The same with credit cards, car finance and so on.

Mr Johnson and his Ministers know all this and therefore must get smart and do something about it. But what?

Their first answer will be that old canard: a resumption of economic ‘ growth’ once the disease has abated. But this is a non-starter because the days of huge continents opening up are gone. We cannot grow our way out of the hole. Regardless of coronavirus, the party was over long ago.

When world stock markets collapsed at the outset of the pandemic, they were responding to a trigger that would have occurred sooner or later – a correction to an artificial boom brought about after the financial crash of 2008 by very low interest rates and quantitative easing (printing extra money).

If the Prime Minister is being truthful when he argues that we are all in this together, he must devise a new system to tackle the most urgent problem of our times and one that won’t go away when the pandemic recedes: how to sustain a healthy economy during a period of contraction.

But I know these politicians: they are best friends of the bankers.

The answer, I believe, which was practised by Roman emperors should appeal to Classics scholars such as Mr Johnson.

Not deferral, but massive debt write-offs, as advocated by the Australian economist Steve Keen, among others. We must be forgiven our debts as we forgive our debtors.

Of course, this would have social consequences but not as damaging as politicians fear. The fact is that only the top ten per cent of the population of advanced nations benefit from the charging of interest, while the bottom 90 per cent through loans are funding them. This explains why t he middle classes have been so badly hit in recent years and would gain by debt write-offs.

But if politicians refuse to take this course, there is another solution: carry on defaulting on debts.

The banks would have no choice but to accept this. What else could they do? Repossess every house in the land with an outstanding loan? Seize every hire-purchased car? Call for every student who refuses to service their loan to be jailed?

As t he s aying goes: owe t he bank £100 and the bank owns you, but owe it £1 million and you own the bank.

Debts to the tune of trillions would be wiped clean. And from that base, the genuine ‘reset’ which we are beginning to hear discussed could be brought about.

Although I hear some say, ‘Aren’t such measures incompatible with free market economics?’, I’d argue that this Tory Government’s policies – at least when it concerns this crisis – already have a distinctly Jeremy Corbyn and Socialist feel.

In any case, for years, the world of business has had a very civilised mechanism to deal with debt write-offs. It’s called bankruptcy or Chapter 11.

Ask the world’s greatest expert, Donald Trump.

If debt write-offs can happen for corporations thousands of times a day, they can happen for the wider population.

Such a policy would be in tune with genuine conservatism, whose values are community, family, tradition, industry, agriculture, the nation – not pampering bankers.

Brexit and the autonomy it is supposed to bring will mean nothing if we remain the slaves of the banks.

If people can escape the grip of banks, perhaps some good can come of Covid-19.