Saturday, 14 May 2016

Does Steve Keen’s debt jubilee add up?

As I understand it (and perhaps I don’t) his jubilee consists of having a helicopter drop, with the condition that debtors use their windfall to repay some of their debt. Now there’s a big problem there, namely the sheer size of the average mortgage, which in the UK is £85,000, compared to the likely size of a helicopter drop.

To illustrate (and plucking numbers out of thin air) assume half the country are debtors and half are creditors. Also assume that stimulus to the tune of a helicopter drop worth £2,000 per person is need (though bear in mind that in some years, very little stimulus is needed).

£2,000 is a BIG helicopter drop: £40 per week per person lasting for a year.

That means creditors get £2,000 plus the £2,000 that comes from debtors. Meanwhile debtors get nothing (or to be accurate, they get £2,000 but have to hand it over to creditors, plus debtor’s debt declines by £2,000).

That means £80 a week extra for creditors (to spend or save as they wish) and no extra spending money for debtors. I’d imagine riots would ensue.

Plus £2,000 is less than a fortieth of the £85,000. I.e. it doesn’t scratch the surface of Keen’s allegedly horrendous debt problem.

Incidentally the above points arose out of a discussion involving me and other Positive Money supporters in the North East of England.


P.S. (17th May 2016) .Mike Shedlock criticised Keen’s debt jubilee idea in 2012. Apologies: I didn’t realize Keen started advocating the idea that long ago.

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