There
seems to be a tendency in organized societies to run up debt that posterity and
/ or prudent savers will ultimately pay for. Often with the great cost in human
suffering of a Great Depression.
Sooner
or later, excess debt must be wrung out of an economy. Orderly well-planned
open methods: bankruptcy, default, jubilees are preferable to chaos. But carefully
concealed chaos generally rules for a while until the pain becomes too much,
and recovery is lengthy and painful.
The
International Monetary Fund has had much experience in applying harsh remedies
to imprudent developing economies. We should pay attention to a prognostication
of the bleak and tumultuous future that awaits the big advanced economies
provided in an IMF paper as reported by a great financial and political
journalist at the bottom of this post.
The
remedy for the common human tendency to over-indebtedness that was provided for
the chosen Nation is found the title passage, reproduced below.
A
portion of Matthew Henry's commentary on the chapter follows together with a
link to the commentary section on the chapter.
Lev
25:8-17 NKJ `And you shall count seven sabbaths of years for yourself, seven
times seven years; and the time of the seven sabbaths of years shall be to you
forty-nine years. 9 `Then you shall cause the trumpet of the Jubilee to sound
on the tenth day of the seventh month; on the Day of Atonement you shall make
the trumpet to sound throughout all your land. 10 `And you shall consecrate the
fiftieth year, and proclaim liberty throughout all the land to all its
inhabitants. It shall be a Jubilee for you; and each of you shall return to his
possession, and each of you shall return to his family. 11 `That fiftieth year
shall be a Jubilee to you; in it you shall neither sow nor reap what grows of
its own accord, nor gather the grapes of your untended vine. 12 `For it is the
Jubilee; it shall be holy to you; you shall eat its produce from the field. 13
¶ `In this Year of Jubilee, each of you shall return to his possession. 14 `And
if you sell anything to your neighbor or buy from your neighbor's hand, you
shall not oppress one another. 15 `According to the number of years after the
Jubilee you shall buy from your neighbor, and according to the number of years
of crops he shall sell to you. 16 `According to the multitude of years you
shall increase its price, and according to the fewer number of years you shall
diminish its price; for he sells to you according to the number of the years of
the crops. 17 `Therefore you shall not oppress one another, but you shall fear
your God; for I am the LORD your God.
Excerpt
from Matthew Henry on Leviticus 25. Link http://bit.ly/1dhYxIY
What
was to be done in that year extraordinary; besides the common rest of the land,
which was observed every sabbatical year (Lev 5:11, 12), and the release of
personal debts (Deut. 15:2, 3), there was to be the legal restoration of every
Israelite to all the property, and all the liberty, which had been alienated
from him since the last jubilee; so that never was any people so secured in
their liberty and property (those glories of a people) as Israel was. Effectual
care was taken that while they kept close to God these should not only not be
taken from them by the violence of others, but not thrown away by their own
folly.
Outline
from Torrey:
FEAST OF JUBILEE, THE / Held every fiftieth year / Lev 25:8,10 / Began upon the
day of atonement / Lev 25:9 / CALLED THE / - Year of liberty / Eze 46:17 / -
Year of the redeemed / Isa 63:4 / - Acceptable year / Isa 61:2 / Was specially
holy / Lev 25:12 / Proclaimed by trumpets / Lev 25:9; Psa 89:15 / ENACTMENTS
RESPECTING / - Cessation of all field labour / Lev 25:11 / - The fruits of the
earth to be common property / Lev 25:12 / - Redemption of sold property / Lev
25:23-27 / - Restoration of all inheritances / Lev 25:10,13,28; 27:24 / -
Release of Hebrew servants / Lev 25:40,41,54 / Houses in walled cities not
redeemed within a year, exempted / from the benefit of / Lev 25:30 / Sale of
property calculated from / Lev 25:15,16 / Value of devoted property calculated
from / Lev 27:14-23 / Illustrative of the Gospel / Isa 61:1,2; Luk 4:18,19
IMF
paper warns of 'savings tax' and mass write-offs as West's debt hits 200-year high
Debt
burdens in developed nations have become extreme by any historical measure and
will require a wave of haircuts, warns IMF paper
By
Ambrose Evans-Pritchard 8:06PM GMT 02 Jan 2014 http://bit.ly/1g4PSwH
The
paper said policy elites in the West are still clinging to the illusion that
rich countries can chip away at their debts with a blend of austerity cuts and
growth Photo: PA
Much of
the Western world will require defaults, a savings tax and higher inflation to
clear the way for recovery as debt levels reach a 200-year high, according to a
new report by the International Monetary Fund.
The IMF
working paper said debt burdens in developed nations have become extreme by any
historical measure and will require a wave of haircuts, either negotiated
1930s-style write-offs or the standard mix of measures used by the IMF in its
“toolkit” for emerging market blow-ups.
“The
size of the problem suggests that restructurings will be needed, for example,
in the periphery of Europe, far beyond anything discussed in public to this
point,” said the paper, by Harvard professors Carmen Reinhart and Kenneth
Rogoff.
The
paper said policy elites in the West are still clinging to the illusion that
rich countries are different from poorer regions and can therefore chip away at
their debts with a blend of austerity cuts, growth, and tinkering
(“forbearance”).
The
presumption is that advanced economies “do not resort to such gimmicks” such as
debt restructuring and repression, which would “give up hard-earned
credibility” and throw the economy into a “vicious circle”.
But the
paper says this mantra borders on “collective amnesia” of European and US
history, and is built on “overly optimistic” assumptions that risk doing far
more damage to credibility in the end. It is causing the crisis to drag on,
blocking a lasting solution. “This denial has led to policies that in some
cases risk exacerbating the final costs,” it said.
While
use of debt pooling in the eurozone can reduce the need for restructuring or
defaults, it comes at the cost of higher burdens for northern taxpayers. This
could drag the EMU core states into a recession and aggravate their own debt
and ageing crises. The clear implication of the IMF paper is that Germany and
the creditor core would do better to bite the bullet on big write-offs
immediately rather than buying time with creeping debt mutualisation.
The
paper says the Western debt burden is now so big that rich states will need
same tonic of debt haircuts, higher inflation and financial repression -
defined as an “opaque tax on savers” - as used in countless IMF rescues for
emerging markets.
“The
magnitude of the overall debt problem facing advanced economies today is
difficult to overstate. The current central government debt in advanced
economies is approaching a two-century high-water mark,” they said.
Most
advanced states wrote off debt in the 1930s, though in different ways. First
World War loans from the US were forgiven when the Hoover Moratorium expired in
1934, giving debt relief worth 24pc of GDP to France, 22pc to Britain and 19pc
to Italy.
This
occurred as part of a bigger shake-up following the collapse of the war
reparations regime on Germany under the Versailles Treaty. The US itself
imposed haircuts on its own creditors worth 16pc of GDP in April 1933 when it
abandoned the Gold Standard.
Financial
repression can take many forms, including capital controls, interest rate caps
or the force-feeding of government debt to captive pension funds and insurance
companies. Some of these methods are already in use but not yet on the scale
seen in the late 1940s and early 1950s as countries resorted to every trick to
tackle their war debts.
The
policy is essentially a confiscation of savings, partly achieved by pushing up
inflation while rigging the system to stop markets taking evasive action. The
UK and the US ran negative real interest rates of -2pc to -4pc for several
years after the Second World War. Real rates in Italy and Australia were -5pc.
Both
authors of the paper have worked for the IMF, Prof Rogoff as chief economist.
They became famous for their best-selling work on sovereign debt crises over
the ages, This Time is Different: Eight Centuries of Financial Folly.
They
were later embroiled in controversy over a paper suggesting that growth slows
sharply once public debt exceeds 90pc of GDP. Critics say it is unclear whether
the higher debt is the problem or whether the causality is the other way
around, with slow growth causing the debt ratio to rise to faster.
The
issue became highly politicised when German finance minister Wolfgang Schauble
and EU economics commissioner Olli Rehn began citing the paper to justify
eurozone austerity policies, over-stepping its more careful claims.
Critics
says extreme austerity without offsetting monetary stimulus is the chief reason
why debts have been spiralling upwards even faster in parts of Southern Europe.
The
weaker eurozone states are particularly vulnerable to default because they no
longer have their own sovereign currencies, putting them in the same position
as emerging countries that borrowed in dollars in the 1980s and 1990s. Even so,
nations have defaulted through history even when they do borrow in their own
currency.
I2C
140103c Lev 25v8to17 Jubilee vs Depression / I2C / 1401 / Lev. 25:8-17 Jubilee
vs Depression
