The writer, Michael Hudson, is an academic economist with strong Marxist leanings. While I don’t agree with his politics, his work on the history of money and debt seems pretty solid to me. His perspective on the Covid-19 response is therefore worth examining.
A debt jubilee, which in ancient history was often the same thing as a tax holiday, is the ultimate supply-side economic stimulus. Its straightforward effect was to restore national production so that consumers could get the goods they need.
There is, however, one difficulty. In the ancient world, the majority of debt contracts rolled up to the palace, or government. It would take centuries for a truly privatized financial sector to emerge as we know it today. As a result of today’s distributed debt contracts, it is not so easy to cancel debts on a broad scale as it once might have been. Doing so could damage trust in contracts in general, on which so much commerce depends.
There may be a solution in the fact that money today consists almost exclusively of bank credit which, in turn, is created on computers out of thin air. I suspect there’s an acceptable settlement range in which creditors could take haircuts on paper without losing their ability to remain in business providing money for industry and commerce.