[hnracer]

Consider a jubilee date occurring in N years. The result would be that nobody is willing to lend with a maturity of more than N years. This is rather problematic as it means that primary debt markets can't function when N approaches zero. It would make it impossible for me to get a mortgage if N=5 for example, locking me unfairly out of the housing market for half a decade, artificially depressing house prices until N=0 when suddenly five years of pent up demand causes a demand spike/bubble.

I also don't agree that a jubilee date won't increase rates. The default risk is simply much higher now and therefore the rates must go up to compensate for the added risk. In the current system, debt isn't forgiven when repayments are late, which allows for lower rates since the default risk is lower. If late repayments automatically implies default due to the jubilee date, then rates must be higher.

[mikem170]

I wouldn't argue that rates wouldn't go up. We might not agree on how much. For example, would jubilee in 20 years have an affect on a 5 year car loan? As far as homes go, maybe we'd just do home loans like the Canadians do, renewing/refinancing them every five years or less, timed with the debt jubilee. Doesn't need to be a big deal.

I look at it as mostly a thought exercise, questioning the way we currently handle debt. I think there is a lot of room for improvement. Maybe debt jubilees would act as a check on out-of-control debt, which seems to be a thing lately.

Take student loans. Politicians are talking about forgiving those debts. Maybe it's not such a crazy idea? But then again what they plan on doing will amount to just giving the banks the money, either inflating the money supply or treasuries that future generations have to pay back. Ugh.