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I'm starting to suspect what's needed is a global "Jubilee Year" - in the Old Testament sense. A single date, where everyone's debts are zeroed out, where all transgressions are forgiven, and where everyone starts again with a clean slate.
The banks will, of course, scream blue bloody murder at the slightest hint of this notion being taken seriously.
I also think that the way debt is thought of has to be restructured as well. A loan has to stop being a business asset for the banks, something they can trade from one person to another. Instead, it has to be an arrangement between two parties, to be maintained between those two parties until the loan has been paid back. So instead of trading loans as assets, businesses will be required to retain them as a mutual loss on both sides until the debt is paid back in full. No matter how long that takes.
The banks will, of course, scream blue bloody murder at the slightest hint of this notion being taken seriously.
There also needs to be a recognition that high interest rates and freely offered credit are inherently inflationary. They effectively increase the money supply, but devalue the money which is circulating, making the money earned by working people effectively worth less. So credit and high interest have to be heavily regulated, rather than offered on an "open slather" policy.
The banks will, of course, scream blue bloody murder at the slightest hint of this notion being taken seriously.
I'm also thinking the old Hebrew and Muslim thinkers who put up the religious prohibitions on lending at interest were actually onto something. Possibly they'd seen what happened in other societies when such things are permitted to flourish without restriction - the way it acted as a temptation toward bullying and thuggery. "The love of money is the root of all evil" as the wise man said.
Further on the whole "love of money" thing, I also feel there should be an absolute ceiling on profits - particularly the sorts of multi-billion dollar profits which aren't re-invested in the company or the community. I mean really - what are these companies doing with that money? They're not spending it. They're not turning it into bullion and stacking it under the back patio. They're not filling a swimming pool with banknotes so their executives can play Scrooge McDuck (or maybe they are and we're not hearing about it?). No, it's just being accumulated for the sake of accumulation. So maybe there needs to be a ceiling on profits, too - a 10% profit is fair and equitable (that being 10% gross return on investment), but after that, it needs to be either re-invested in the company, or taxed heavily (with the taxes being paid each financial year or face punitive fines).
And if that one ever gets taken seriously, not only the banks, but the entire business community will go up in flames.
The banks will, of course, scream blue bloody murder at the slightest hint of this notion being taken seriously.
I also think that the way debt is thought of has to be restructured as well. A loan has to stop being a business asset for the banks, something they can trade from one person to another. Instead, it has to be an arrangement between two parties, to be maintained between those two parties until the loan has been paid back. So instead of trading loans as assets, businesses will be required to retain them as a mutual loss on both sides until the debt is paid back in full. No matter how long that takes.
The banks will, of course, scream blue bloody murder at the slightest hint of this notion being taken seriously.
There also needs to be a recognition that high interest rates and freely offered credit are inherently inflationary. They effectively increase the money supply, but devalue the money which is circulating, making the money earned by working people effectively worth less. So credit and high interest have to be heavily regulated, rather than offered on an "open slather" policy.
The banks will, of course, scream blue bloody murder at the slightest hint of this notion being taken seriously.
I'm also thinking the old Hebrew and Muslim thinkers who put up the religious prohibitions on lending at interest were actually onto something. Possibly they'd seen what happened in other societies when such things are permitted to flourish without restriction - the way it acted as a temptation toward bullying and thuggery. "The love of money is the root of all evil" as the wise man said.
Further on the whole "love of money" thing, I also feel there should be an absolute ceiling on profits - particularly the sorts of multi-billion dollar profits which aren't re-invested in the company or the community. I mean really - what are these companies doing with that money? They're not spending it. They're not turning it into bullion and stacking it under the back patio. They're not filling a swimming pool with banknotes so their executives can play Scrooge McDuck (or maybe they are and we're not hearing about it?). No, it's just being accumulated for the sake of accumulation. So maybe there needs to be a ceiling on profits, too - a 10% profit is fair and equitable (that being 10% gross return on investment), but after that, it needs to be either re-invested in the company, or taxed heavily (with the taxes being paid each financial year or face punitive fines).
And if that one ever gets taken seriously, not only the banks, but the entire business community will go up in flames.
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More thoughts from another non-economist
Excellent points all around, and I have a couple more that I've been stewing on.
First: resetting everyone's debt to zero would probably be the best conceivable economic stimulus package right now. If people are forking over huge portions of their income to lenders, that's money they're not spending on shoes or bicycles or washing machines or paint. Ultimately, massive debt burdens are taking money out of effective circulation in the broader economy--plenty of money is circulating among the big financial institutions, but not much is circulating among individuals or households or even among business that actually produce goods and services. If the goal is to get some people to make things, and then other people to buy those things, this has got to be just about the worst way to accomplish that.
Second, regarding the prohibition on usury in Islamic thought (and probably also in Jewish thought, but I'm even less of an authority on that), the way I've always seen it was that lending money for interest is almost inevitably exploitative. It's preying upon the needs of those who have less, making them pay more money in the end than they would have had to pay if they had actually had enough to pay for $THING (whether it's education, a house, or a winter coat) than if they had had enough to pay for it in the first place. This might be justifiable as something other than predatory if it happens only among people who are doing reasonably well, but need a loan for convenience's sake, but it's unconscionable when credit is extended to people who won't reasonably be able to pay it back. Which I now realize is pretty much exactly what you said, but I'm going to leave it because I think I'm looking at it more in terms of how it harms individuals, whereas you seem to be focusing on the collective damage.
Third, oh goodness would the business community ever not like having an absolute cap on profits. But, regardless of who wouldn't like it, I agree with you. Because they're not just accumulating all that money for the sake of accumulating money, they are translating their billions into political power. And there is no way democracy can survive in any meaningful form if the system is "1 dollar=1 vote".