Debt Jubilee Would Set Us Back To Sumer

With U.S. debt at record levels, enthusiasm is mounting for a debt jubilee, in which part of or all the mountain of debt would be written off, to the great relief of debtors and the despair and probable bankruptcy of creditors. The jubilee’s proponents point out that debt jubilees have Biblical sanction, being a standard feature of the ancient world originating in Sumer. However, while a full jubilee would very likely restore us to the joys of Sumerian living standards, there is another way we could take advantage of current crazed interest rates.

The most detailed recent case for a debt jubilee was academic Michael Hudson’s: “…and forgive them their Debts” published in 2018. Analyst David Rosenberg, who believes the world is on the edge of a steep recession, also believes a global debt jubilee is necessary (but nevertheless favors loading up on long-term bonds – don’t ask me why!) Furthermore Bernie Sanders, currently among the leaders for the Democrat Presidential nomination, favors a jubilee for most of the $1.7 trillion in U.S. student debt. So, the agitation for a debt jubilee is not overwhelming, but it is beginning to build substantially, from all sectors of the intellectual ecosphere and several points of the political spectrum.

As Hudson points out at length, debt jubilees have Biblical sanction, being recommended in Leviticus and practiced from time to time by the medieval Catholic Church. They were indeed a standard though not a universal feature of the ancient world; they appear to have originated in Sumer in around 2300 BCE and are then mentioned in the Babylonian Code of Hammurabi from around 500 years later. They do not, on the other hand, appear to have been a feature of the Ancient Egyptian economy, to my mind an altogether sounder civilization, that indeed proved more long-lasting (and provided much of the intellectual impetus for the derivative civilizations of Minoan Create and through that Ancient Greece.)

Sumerian lending was carried out primarily by temples, which had the advantage of spiritual as well as terrestrial debt-collection methods, as well as great wealth. Hudson informs us that new rulers often proclaimed debt jubilees on ascending the throne, or on completion of a successful war. Given the relatively short Sumerian lifespans, you can thus imagine that Sumerian debt jubilees occurred at least every 20 years.

Before we join Hudson in rapturous admiration for the Sumerian civilization and its thoughtful way of dealing with otherwise over-wealthy creditors, you should remember two things. First, according to Sidney Homer’s “History of Interest Rates,” there was very little long-term debt in Sumer and interest rates were around 33%, most loans being made in barley. Hence as a Sumerian farmer, your yearly crop loan had at most a 1 in 10 chance of being forgiven and meanwhile, you paid a very high-interest rate for it. Allowing for a fairly low level of bad debts (temples having the social power they did) the Sumerian temple’s return on its loan portfolio would have been at least 20%, before expenses. A perfectly decent business, in other words, and the risk of jubilee no doubt kept the temples safely in line behind the current King and opposed to wars that to them were ruinously expensive, win or lose.

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Louis Jackson 4 weeks ago Member's comment

I would benefit massively if Sanders or Warren won the election this year and started wiping out student loan debt. Yet I still can't support that kind of moral hazard being set in motion. Many people saved up for college (or their parents did), and I can only imagine how disgusted they would feel to see a bunch of financially irresponsible millennials get most if not all of their doubt wiped out by the stroke of a pen.

Gary Anderson 4 weeks ago Contributor's comment

But you were ok with bailing out the banks to save the economy. Same moral hazard.

Louis Jackson 4 weeks ago Member's comment

No. I'm not sure what I wrote that would imply I was OK with bailing out banks. I was opposed to that 100%.

Gary Anderson 4 weeks ago Contributor's comment

Well, that makes you consistent. Unfortunately, the Great Recession would have become the Greatest Depression without the bailouts. Look what happened to the economy just with Lehman! So there may be a credit crunch that would necessitate bailing out the masses. We aren't there yet but we could be getting closer.

Gary Anderson 4 weeks ago Contributor's comment

Not doing jubilee must be offset by helicopter money. It would be less complicated and doable, from Fed Money.