Debt Forgiveness

[courtesy Google Images]

If asked why I write and publish articles, most people would probably guess that I want to “teach” whatever it is that I know (or think I know).

They’d be wrong.

I don’t write to teach, I write to learn. 

Something interesting crosses my mind.  I’m drawn (I think by our Father YHWH ha Elohiym) to write about it.  As I do, word-by-word and phrase-by-phrase, I often find new insight(s) that I never imagined before I started writing the article.  Thus, I learn from writing. 

Learning excites me.  Writing is exciting.

This is not to say that everything I “learn” from writing is true.  But much of what I learn is interesting (at least to me) and new (at least to me).

I don’t publish articles in order to teach.  I publish to share what I’ve most recently learned.

The following article is an example of the writing-is-learning process.  I started out to write a 1,200 word article.  I ended with nearly 4,200 words.  The extra 3,200 words were necessary for me to learn some lessons and insights that I found fascinating.

I hope you’ll also find the lessons I learned to be interesting and, to some degree, true.

The Cypriot financial crisis occurred between A.D. 2012 and A.D. 2013.   It was marked by bank closings and the invention of “bail-ins” where bank customer deposits were seized to support the banks. Conspiracy theorists warned that the Cyprus debt crisis could trigger a global financial collapse.  That debt crisis seemed pretty serious at the time.

However, Cyprus failed to cause a global financial meltdown and it’s largely disappeared from the news over the past two years.  Based on this absence of news, you might’ve thought that the Cyprus debt crisis had been solved and forgotten.

But, no—the French news agency (“Agence France-Presse”; AFP) recently published “Bad loans could sink Cyprus recovery”.  According to that article the Cyprus debt crisis is alive and well:

“Cyprus is making progress on its bailout reform commitments but bad bank loans could derail a fledgling recovery, international lenders said on Monday.”

Ohh, goody.  Cyprus is having a “recovery”!—just like we are, here in the US!  But the Cypriot recovery might be derailed by “bad bank loans”—debts that can’t be repaid.

“Following a review of the EU member’s economy by the ‘troika’ of international lenders [the European Commission, European Central Bank and International Monetary Fund], warned that bailed-out Cyprus still had obstacles in its way.

“There is tentative evidence that the slow pace of debt restructuring is picking up . . . .”

Q:  What is “tentative evidence”?

A:  An absence of evidence?  Imaginary evidence?  Prima facie evidence?  Evidence that has not yet been admitted into a court?  No evidence at all?

Q:  What is “debt restructuring”?

A:  It’s an agreement by creditors (that can be reached without an official bankruptcy proceeding) to cancel/forgive some or all of a debtors’ debt.  For example, if Cyprus owed $50 billion, seeing that it’s broke and can’t pay the full amount, its creditors might agree to “restructure” or “forgive” $20 billion and leave a remaining debt due of $30 billion.

Q:  Given the two previous definitions of “tentative evidence” and “debt restructuring,” what is the meaning of the sentence “There is tentative evidence that the slow pace of debt restructuring is picking up”?

A:  It means that so far, there’s virtually no evidence that “debt restructuring” (debt forgiveness) has taken place.  Cyprus is being held liable for the full, possibly unpayable, debt.

Q: Why is “debt restructuring” (cancellation of existing debt) going so slowly?

A: Perhaps, because:

1)  Whenever we “restructure” any existing debt, we cancel some or all of that debt.

2)  In a debt-based monetary system (which is predominant throughout most of the world including Cyprus), to cancel any debt reduces the currency supply.

Q:  Why does cancelling debt also reduce the currency supply?

A:  Because our debt-based monetary system is, by definition, backed by debt.  If you eliminate some of the debt you must also eliminate some of the backing for the fiat currency that’s based on that debt.

If we had no debt, we’d have no debt-based currency.  In order to protect the debt-based, fiat dollar, government must also protect, and even increase, the underlying debts.

•  The implications are bizarre. To grow richer in a debt-based monetary system, we need more debt.  To wipe out debt through bankruptcy, also wipes out part of the currency supply.

The debt-based monetary system relies on debt (debtors’ mere promises to repay) to give the currency its value.  If enough debtors simultaneously filed for bankruptcy (and thereby broke their promises to repay), so much debt and correlative amounts of debt-based currency could be destroyed, that the currency supply would be reduced.

If the currency supply is reduced, the value of each of the dollars left in the remaining fiat currency grows.  That’s deflation.

Deflation is usually a hallmark of economic depression.  Given enough currency destruction by bankruptcy, the nation could enter a deflationary spiral downward into depression, national bankruptcy and economic collapse.

In a debt-based monetary system, bankruptcy is bad and should not be allowed.

This conclusion is consistent with the “Bankruptcy Abuse Prevention and Consumer Protection Act of 2005”.  Prior to A.D. 2005, debtors could freely choose between filing a Chapter 7 and Chapter 13 bankruptcies.  Most chose Chapter 7 because it allowed for the complete elimination of debts without repayment.

However, under the A.D. 2005 law, there’s a new, fairly complex formula for determining if you are financially eligible to file for Chapter 7.  The new law essentially prohibits most Americans with above-median level incomes from filing under Chapter 7 and completely eliminating of their debts.

Today, those who file for Chapter 7 and have any remaining “disposable income” will be obligated to continue making monthly payments or their pre-bankruptcy debts until the debts are repaid in some part of in full.  Thus, Chapter 7 now imposes a kind of post-bankruptcy “austerity” on bankrupts—just as European creditors are insisting on “austerity” for Cypriot and Greek debtors.

Again, in a debt-based monetary system, bankruptcy is bad because it destroys part of the base for the debt-based currency supply.

This argument suggests that the system can’t tolerate too much bankruptcy without destroying so much of the existing debt and correlative debt-based currency, that mass bankruptcies could potentially collapse the economy.

Thus, it appears that, in a debt-based monetary system, the Powers That Be want you and me to go ever deeper into debt (so they can create more and more fiat currency)—and never, never, never get out of debt by means of bankruptcy or frugal living.  In fact, to live an un-indebted life in a debt-based monetary system is at least antisocial.

•  Does those conclusions sound absurd?

Of course they do.

How could it possibly be that people are punished for not going into debt and rewarded for going into debt?

Well, look at your own credit (debt) history.  You borrowed $5,000 when you were just out of high school to buy a cool used car.  You repaid all that you owed on time.  The bank rewarded you by lending you $100,000 to buy a new home a few years later.  You repaid all that you owed on time.  A few years later, the bank loaned you $500,000 as seed capital to build a new business.

At each step, you proved yourself ready to not only go deeper in debt, but to make sure that you repaid your debts exactly as you promised.  The bank rewarded you by allowing you to borrow more and more currency.  Eventually, the bank loaned you enough to build your $2 million dream home and drive an Escalade.

But suppose that after your borrowed that first $5,000 for your first used car, you got drunk, wrecked the car, and lost your job.  You could no longer repay your $5,000 debt in full or on time.

Would the bank still reward you by allowing you to borrow another $100,000 for your first home?  Or would they punish you by refusing to lend the $100,000—or, if they did lend the $100,000, charge you a higher rates of interest?

One way or another, you’d be punished for having failed to keep your earlier promise to pay your debts in full and on time.

This hypothetical credit history is consistent with the argument that “To live an un-indebted life in a debt-based monetary system is at least antisocial and possibly anathema.”  Society rewards those who go deeply into debt (and keep their promises to repay) by allowing them to go ever deeper into debt.  Society punishes those who do not go into debt at an early age and/or repay on time by refusing to grant more loans that entitle them to buy the cars, homes and things that the world sees as essential to “living the good life”.  Good debtors tend to (apparently) prosper.  Bad debtors tend to live in poverty.

•  This conjecture implies that government is only enforcing bankruptcy laws as a kind of puppet show to fool the yokels into thinking that that debts can be easily repudiated.

In fact, so long as the monetary system is debt-based, the government can’t afford to allow too many debtors into bankruptcy and thereby wipe out so much of the money supply that it collapses the economy.

This doesn’t necessarily mean that you must pay your debts.  But you can’t be allowed to easily file for bankruptcy and thereby “completely eliminate” and destroy whatever debt instruments you’ve signed.

The American Bankruptcy Institute recently posted and article under the headline “Bankruptcy Filings Fall 12 Percent for the First Half of 2015.”  Perhaps that fall is due to a stronger economy where people are more prosperous and less likely to file for bankruptcy.

But it’s not inconceivable that the falling bankruptcy rate might also reflect an unpublicized governmental policy to inhibit bankruptcy and the destruction of debt-based currency.  It’s remotely possible that government and banks might prefer to let some debtors live in their homes without repaying their mortgages in order to maintain the fiction that those mortgages (debt-instruments) are still a valid basis for issuing debt-based currency.

•  In in a debt-based monetary system, the government doesn’t need you; it doesn’t need your productive effort; it needs your debts. Government doesn’t need you to buy things with cash and pay for purchases without debt.  In a debt-based monetary system, the government might need you to shop with credit cards to allow you to into debt, if only for a month or two, in order create more debt that can serve as a temporary basis for more debt-based currency.

This conjecture is consistent with bank policy to sometimes impose penalties on borrowers who try to repay their mortgages too soon.  Government doesn’t want you to pay for your house in ten years.  It wants you to sustain your mortgage debt for a full 30 years—or, better yet, 40.  The longer your debt lasts, the better government likes it.  Longer, larger debts are the foundation for more debt-based currency with which government can effectively buy you, your town, your state and the world.

Government doesn’t really care if you ever actually pay the debt, so long as you pay the interest on the debt so that debt-instrument (mortgage, car loan, etc.) remains “performing” and is therefore deemed suitable as collateral for making more debt-based currency.

Look at government, itself.  It’s run up an $18 trillion National Debt.  Is there any chance that debt will ever be repaid?  No.  Does anyone really believe that debt will be repaid? No.  But who cares, so long as government keeps paying the interest on the debt, maintains the illusion that the debt is valid, and is therefore suitable as collateral for maintaining some of our debt-based, fiat dollars?

(That implies that the jig is up if government ever reaches a point where it can’t continue to pay the interest on the debt. The government will be forced into bankruptcy, the debt will be destroyed as will correlative amounts of debt-based currency.)

•  IF the previous conjecture were roughly correct, it should follow that, in a debt-based monetary system, your standing as a perpetual debtor gives you more value than your standing as a life-long worker and producer.

The need for debt could explain the endless government deficits and the ever-growing National Debt.

Q:  Why don’t we ever seem pay down on the National Debt?

A:  Because destroying the “official” $18 trillion National Debt would cause us to also destroy and remove $18 trillion from our currency supply and probably collapse the economy.

In a debt-based monetary system the National Debt becomes our National Treasury.  The more we owe, the richer we become.  The more we owe, the more we have.

The logic of a debt-based monetary system should cause government to eschew gold and silver (payments and assets) and instead favor mere promises to pay (debts and debt-instruments)—which seems to be exactly what government is doing.

This conjecture might also explain the loss of US jobs to foreign countries by shipping US industries to third-world nations.  In an asset-based monetary system, exporting our industries would be crazy.  But, in a debt-based monetary system our principle need is for more debt rather than more productivity.  We don’t need productive workers so we don’t need jobs or industries.  We need liar-loans issued to non-productive people who will merely promise to repay their debts.

If we ship US jobs and industries to foreign countries, then US workers will become less productive, less independent, less able to support themselves.  Without jobs, they’ll be forced to borrow to get by.  With more borrowing, we’ll see more debtors, more debt and a bigger base for a debt-based monetary system.

•  These conclusions sound crazy, even to me.

Still, these conclusions are the result of what I, at least, regard as a logical chain of premises.   My “logic” leads me to believe these conclusions (although they sound untenable) may be true.

My fundamental conclusion strikes me as an important insight:  in a debt-based monetary system, government needs more debt and more debtors.  If the government can’t find more debtors, then government will be forced to protect the existing debtors from bankruptcy in order to protect debt-based currency from being wiped out by bankruptcy procedures.

Back to Cyprus:

•  “The troika agreed that it was ‘essential’ for Nicosia [the capitol of Cyprus] to increase the pace of change. Notably, addressing the excessive level of non-performing loans in the banking system remains the number one priority.”

How do we reduce the “excessive level of non-performing loans”?

Two ways:

1) Bankruptcy to destroy the loans and degrade them from the status of “non-performing loans” (“toxic assets”) that still might be paid someday—to the status of discharged loans that all agree will never be repaid.

2) Revitalize those “non-performing loans” by lending enough currency to the debtor to allow him to at least making interest payments on his debts and thereby elevate those debts from the status of “non-performing” (and possibly worthless) to the status of “performing” and therefore viable, valuable debt-instruments worthy to continue to serve as a basis for the maintenance of fiat currency in our brave, new debt-based monetary system.

Creditors don’t want their loans to be repudiated.  Therefore they don’t want Option #1: filing for bankruptcy.  Doing so destroys debt and some correlative amount of debt-based currency.  Bankruptcy is bad.

Instead, creditors want Option #2.  They want debtors to make some token payment that supports the pretense that the debt is valid and the debtor intends to pay—even if the creditors must lend more money to the debtors (“extend and pretend”) to maintain the illusion of solvency.

We see evidence of this in Greece where creditors may be lending Greece (which already owes €540 billion that it can’t possibly pay) another €86 billion so Greece can “pretend” to pay part of the €540 billion and thereby sustain the pretense that the €540 is still a “performing” debt able to justify the creation of more debt-based euros.

There has to be a reason for creditors to lend more currency to Greece so Greece can “extend and pretend” to pay its debts.  That reason can’t be to help Greece.  The reason has to be to protect the illusion of validity of the existing €540 debt.

•  A non-performing loan may be “tentative evidence” that the debtor is technically bankrupt, the loan will probably never be repaid, is probably worthless and probably can’t support the issue of fiat currency. However, it’s not really “evidence” until it’s admitted into a bankruptcy court where an official declaration that a debt has been discharged is a final determination that the debt has been cancelled, no longer exists, and can no longer support the issue of debt-based currency.

Rather than admit in bankruptcy that a debt-instrument is worthless, creditors call the loan “non-performing” in order to pretend the loan is still sufficiently valuable to be counted as an asset that can justify the issue of “debt-based,” fiat currency.

Greece hasn’t paid a significant part of its debt in five years and shows no evidence of being able to repay any of that debt in the next five years.  And yet, the creditors have struggled to “restructure” Greek debt and/or lend Greece more currency to “pretend” to repay part of its existing debt.  The whole process seems silly, absurd, and irrational.

But the Cypriot and Greek “debt crises” make sense in a debt-based monetary system, since debts—mere promises to repay—have become the basis for our fiat currency.  To cancel any of the debt must therefore also cancel however much fiat currency is based on that debt and thereby reduce the currency supply.

To protect the currency supply, Greece and Cyprus should not be allowed to file for bankruptcy.

•  Compare this argument to America of a century ago when our money was gold or silver coin. Suppose we lived back then and I loaned you five ounces of gold.  You would sign a promissory note (paper debt instrument) that acknowledged your debt to me and promised to repay it. If you filed for bankruptcy, the paper promissory note would become worthless and I’d lose my claim on the five ounces of gold.

Nevertheless, the five ounces of gold would continue to exist. I might not have them and you might not have them, but they’d still be available to the economy.  Because we had an asset-based monetary system, the money supply would not be reduced by your bankruptcy.  You might be broke, but the economy would be largely undamaged.

But, that’s not true today when we have a debt-based monetary system.  Whenever you cancel a debt, you also cancel whatever correlative fiat currency is based on that debt.  When the debt disappears, so does the correlative currency.

Imagine what would happen to today’s US economy if government were forced to admit that half of the “official” $18 trillion national debt could not be repaid.  According to my hypothesis, repudiating $9 trillion in National Debt would result in the destruction and withdrawal of $9 trillion in currency from our economy.  Given that the total US domestic currency supply is about $4 trillion, what would it mean if $9 trillion were “disappeared”?

There’s no rational answer.  It’s like asking for the square root of –1.

Q:  Why don’t we have a rational answer to questions about our domestic money supply?

A:  Because debt-based monetary system is inherently irrational.

Implication:  You can’t base your currency on debt and expect to come to happy, or even rational, ending.

• “In previous reviews Cyprus has been praised for implementing a harsh bailout adjustment programme which it agreed with lenders. Nicosia has said it will stick to the bailout agenda no matter how unpopular.”

The Cypriot government has agreed with its creditors that its debts will never be forgiven (repudiated) and will be forever imposed on the Cypriot people—with or without their consent.  There’ll be no national bankruptcy procedure.

“Cypriots have had to endure tough austerity measures which have seen wages slashed in the private and public sectors, while consumer and property taxes have also increased.”

Because their government’s debts will not be cancelled (forgiven through bankruptcy), the Cypriots (and, similarly, the Greeks) have been forced to accept a kind of economic slavery under the guise of “tough austerity measures”.

•  I’m arguing that, in a debt-based monetary system, government needs and seeks to encourage ever-more debt. They don’t care about payments.  They want and need debt.

My argument sounds farfetched.

Still, if you stop to think about our former “gold-based monetary system,” it’s obvious that the more gold government had, the richer the government was and the more gold-based paper currency that might be available to the people to spend and stimulate the economy.

OK—then shouldn’t it follow that in a “debt-based monetary system,” it’s equally obvious that the more debt government had, the richer government became and the more debt-based paper currency that will be available for people to spend and stimulate the economy?  The logic of a “debt-based monetary” system indicates that the more debt you have, the richer you’ll become.

•  In the A.D. 1987 movie Wall Street the principle character, Gordon Gekko, dared to declare that “greed is good”. Audiences were shocked.

But in a debt-based monetary system, Gekko’s declaration would be wrong.  In a debt-based monetary system, “debt is good”.

Are you shocked?

You should be.

The implications aren’t just mathematical, economic or political.  They are also spiritual.

Remember the Lord’s Prayer?  There’s a phrase that says, “forgive us our trespasses as we forgive those who trespass against us.”  That phrase is translated in some Bibles to read, “forgive us our debts, as we forgive our debtors.”

That phrase implies that the words “debt” and “sin” are at least similar.   If we are to be forgiven by God for our “debts,” those debts must be somehow sinful.  You borrowed.  You promised (even contracted) to repay your debt.  You failed to repay.  You broke your promise/word/contract.  That’s a sin.  Maybe not a mortal sin, but a sin nonetheless.

If “debt” is a kind of “sin,” what is a debt-based monetary system?

If that system is not, in itself sinful, isn’t it at least conducive to sin?

If a debt-based monetary system results in huge, unpaid and even unpayable debt, and if debt is the foundation for our perceived wealth, can secular debts ever be substantially “forgiven” without sending the nation into secular bankruptcy, poverty and chaos?

Does it follow that in a debt-based monetary system, sin/debt can never be forgiven without going broke?  Does this explain why the creditors have treated Cypriot, and now Greek, debtors so brutally?  Aren’t all of the “austerity” programs that’ve been imposed on the Cypriot and Greek peoples evidence that their debts have not been, and will not ever be “forgiven”?  Isn’t “austerity” evidence that the debts may be non-performing, but they are still likely to be somehow, some day, repaid?  Isn’t “austerity” evidence that the underlying debts are still valid?

Q:  If so, how does this refusal to forgive debts through bankruptcy relate to the Lord’s Prayer that prays to God to “forgive us our debts, as we forgive our debtors”?

A:  If it’s true that, in a debt-based monetary system, we can’t forgive debts without destroying our secular wealth, then we each have a financial incentive to refuse to ever forgive each other’s debts/sins.  If that financial incentive compels us to refuse to “forgive our debtors,” can we still reasonably pray to God to “forgive us our debts/sins”?

Remember?  God, please “forgive us our debts, as we forgive our debtors”?

If we can’t or won’t forgive our debtors, will God forgive us?

But, in a debt-based monetary system, we can’t forgive our secular debtors—at least not en masse—without destroying our currency supply and risking an economic collapse.

Do you see the spiritual conundrum created by a debt-based monetary system?

•  Based on this line of conjecture, we can wonder whether the primary purpose of a debt-based monetary system is to acquire wealth, stimulate the economy or ensnare souls in the sin of refusing to forgive debt/sin.

[courtesy Google Images]

Could it be that the single most revolutionary and spiritually-liberating act that mortal men can perform would be to cancel, repudiate, forgive and destroy all of the existing debt?  In the Bible, God mandated such debt-forgiveness every 50 years.  It was called a “Jubilee”.

Would bankruptcy and the cancellation of all Cypriot debt give the Cypriot people a spiritual revival?

Would bankruptcy and the cancellation of all Greek debt give the Greeks a spiritual revival?

It seems irrational and impossible, but I wonder—could we expect a spiritual revival in America if Americans could somehow cancel and forgive the National Debt?

Or would forgiving the National Debt be insufficient to inspire a spiritual revival?

Would a true spiritual revival require us to do away with our debt-based monetary system that prevents or at least discourages all forgiveness of debt–and return to a monetary system based on assets like silver or gold where debt-forgiveness is relatively easy since it doesn’t destroy the money?