Throughout history, societies have faced the perils of mounting debt and potential social upheaval. These crises have led ancient rulers in Babylon to introduce debt jubilees to alleviate the burden of indebtedness and prevent violent revolts. In today’s modern world, governments, corporations, and individuals are drowning in unprecedented levels of debt. The ancient practice of debt jubilees may find a modern resurgence. Are we on the cusp of witnessing a debt jubilee that could reshape the financial landscape altogether?

The Redistribution of Existing Wealth

Jubilees, seen in recent events, are not magical solutions that create new wealth. Instead, they involve the redistribution of existing wealth leading to a much wider gap of winners and losers. Just as the ancient Babylonian rulers enacted debt forgiveness, recent measures such as the paycheck protection plan or the PPP loans and President Biden’s student loan forgiveness have set the stage for a potential debt Jubilee revival.

These actions have sparked concerns about inflation, but they have also established a precedent that may be challenging to reverse. The growing resentment and desire for debt relief may push the government to consider further jubilees as more people realize they have been burdened by others’ choices. The question arises, how will the government finance these debt jubilees?

The Government’s Options

Raising taxes alone will be insufficient, and issuing more debt to cancel existing debt will be counterproductive. The most likely course of action appears to be more currency creation, which, in turn, can fuel inflation. The situation becomes more alarming when examining the consumer debt crisis in the United States, with debt levels surpassing a staggering 16 trillion dollars.

Rising interest rates further burden individuals, making it increasingly challenging to meet their debt obligations. Recent events have shown that a simple stroke of a pen by the president can wipe out billions in debt, amplifying the political pressure to implement further debt relief measures. Given the combination of mounting debt levels and the desire to secure voter support, debt jubilees may be an irresistible tool for politicians this upcoming presidential season.

The Daunting Challenge of Federal Debt

However, the most daunting challenge lies within the US federal government and its largest debt burden in history. The debt has grown at an alarming rate, putting the government on the brink of financial collapse. The interest expenses alone are projected to surpass current tax revenues, and a return to historical average interest rates would be insufficient to tackle the inflationary crisis.

In this dire situation, a federal debt jubilee of unprecedented scale is increasingly seen as a potential solution. But how will the US government address its insurmountable federal debt burden? Explicitly defaulting on the debt is highly unlikely as it would jeopardize the country’s position as the center of the Global Financial system. Instead, a stealthy approach involving a federal debt Jubilee through inflation appears more feasible.

The Impending Debt Jubilee and Its Implications

Consequently, a massive wave of inflation may accompany the federal debt Jubilee as well. At the end of the day, the impending debt Jubilee could lead to the eradication of trillions of dollars worth of liabilities and usher in a new era of inflation. This monumental wealth transfer has the potential to appreciate the financial landscape and redefine what we would consider winners and losers during this Currency Reset.

Unfortunately, those who have been prudent savers and hold assets tied to government securities such as bonds or creditors may find themselves on the losing end. On the other hand, individuals who own valuable unencumbered assets stand to benefit from this monumental shift massively. It is crucial to recognize the reality of this potential upheaval and take steps to protect one’s wealth by diversifying assets that are not reliant on a single currency or burdened by debt.

Conclusion

At the end of the day, it’s going to boil down to the actual possession of the things you believe are worth something, such as assets that retain value and benefit massively when debt gets out of hand. Are we witnessing a modern resurgence of debt jubilees? The answer to this question remains to be seen. But one thing is sure – those who can anticipate and adapt to the changing financial landscape will be the ones who come out on top. Stay vigilant and be prepared for the unexpected.

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