Worldwide debt forgiveness

[Paul Or Nothing II]

Bolded is incorrect. It increases savers purchasing power because currency becomes more scarce. It DOES, however, reduce the value of the market (say, housing) that has been defaulted upon as supply is dumped onto the market.

Case and point: What happened in 2008? Mass default on homes...what happened? Housing valuations dropped a stunning amount...and deflation took over - wages and savings went UP in value (albeit for a short time until TARP, QE etc).

You're just looking "skin deep" & ignoring all the deeper consequences of the situation

Firstly, PP increases for whom? Those who didn't have their money in the bank & didn't invest but what about those who weren't so lucky, they lose their purchasing-power because it's been consumed by the defaulting borrowers
And didn't the savers pay higher prices for stuff when banks & borrowers were pushing up the bubble? Of course, they did, they were buy fewer stuff because of it
When it eventually collapses & banks get wiped out so does enormous amounts capital of the savers, because the borrowers didn't produce enough as much as they'd consumed at the expense of of savers

When the bubble is going up, it leads to massive MISALLOCATION of capital, labor & economic resources because higher prices & higher profits signal "scarcity" to the markets & markets try to increase supply & lower prices by having producers to produce more through profit-incentive - the production of things which aren't going to it & that leads to overproduction of things which aren't needed as badly as some others but capital, labor & economic resources are wasted on it anyway because prices & profits are signalling the market to do so
All of that capital, labor & resources could have been used elsewhere in the economy to provide a better living-standard for the savers but when the collapse, all you have is a situation where defaulting borrowers have consumed more than what they've produced - at the expense of savers
More on how prices & profits get the market to allocate resources, read at least the chapters, "How the Price System Works" & "The Function of Profits - http://www.hacer.org/pdf/Hazlitt00.pdf

The event causes so much destruction of capital that in short-run, YES, PP increases TEMPORARILY for those who HAVE money but fewer capital means fewer production & generally lower living-standard for the whole economy & once the earlier production gets consumed, prices start rising again & production starts picking up again but in the meanwhile even those who did act responsibly & lived within their means suffer for the bad decisions made by the defaulting borrowers

By your logic, recessions & depressions would be good for people, wouldn't they?
There's a BIG DIFFERENCE between a "normal" deflation caused naturally, let's say under gold-standard, which is good BUT a deflation followed by an inflationary boom is NOT good for people at large, may be some lucky ones benefit but most suffer badly, only because banks overlent & borrowers overborrowed

Here's a decent video on resource-misallocation

[Arklatex]

Paul referring to when has repeated "debt liquidation" or "liquidation of debt" for the last 8 years

"liquidate the debt we owe the federal reserve"

If the law was enforced there could be many people in jail for fraud mortgage related business and conspiracy in the financial industry(fed banks) for several years running, if the truth were known there'd be revolution before morning. Iceland was the first domino.

think there is a battle going on behind the scenes of some of the most powerful forces of society? There is more to this story than whatever is throw out by the media I promise you that!

The most powerful men in the world, you'll never know their name, won't be on the Forbes top 100 richest men list, and have knowledge and riches going back ages. They have been running a slave planet since Atlantis.

[Paul Or Nothing II]

Paul referring to when has repeated "debt liquidation" or "liquidation of debt" for the last 8 years

By "debt liquidation" he means NOT bailing out the banks, which is correct, they made bad decisions so they should take responsibility for themselves; but that ALSO means NOT bailing out the BORROWERS, they must also take responsibility for their actions!

"liquidate the debt we owe the federal reserve"

It's just an accounting entry more or less because it's the debt that government owes itself so there's every reason to write it off instead of raising the debt-ceiling!

Iceland was the first domino.

If you think Ron Paul is going to endorse such socialist market-intervention like mass-pardoning of debt then you're dreaming; he believes in markets, NOT government-bailouts - be it bailing out the banks or bailing out the borrowers - both of whom made bad choices & they should suffer the consequences themselves rather than collapsing the economy & making everyone else suffer as well

Ron wants a TRANSITION from the current system, NOT a collapse because he knows that if the whole economy collapses & economic conditions worsen then people will be more likely to accept socialism/communism than freedom! FDR gave America socialism & misery & America elected him 4 times, those times were one of the worst in American history; this is what Ron Paul fears might happen again & that's why he said he decided to run again so he is actually trying to avert the total collapse & effect a transition to a better system

[cubical]

[H][/H]

If you gave a reason I could refute it, but it's not like that at all.

Ok, who is going to repay all the social security recipients? They are just going to accept not getting paid?That is just one example.

[osan]

One of the rumors going around the internet is the possibility of future worldwide debt forgiveness.

The idea is that on a certain date leaders around the world would announce they had agreed that all public and private debt was forgiven and that this would be a reboot of the entire financial system.

What is your view on this? Would it work in practice?

Forgiveness? Not likely. What may be called "forgiveness" would at best be acceptance of collateral or perhaps some other sort of agreement between the debtors and holders of the debt. One may speculate rather wildly on this as there are all sorts of possibilities. Whatever may prove the case, I feel confident in my belief that the transaction will not be to the average man's benefit. Much the contrary.

Forget forgiveness and embrace the idea of repudiation. Utter, complete, and universal repudiation of such debt. It would cause serious problems, but IMO no worse than continuing on with this ridiculous charade. It would provide the opportunity to begin afresh, were we to prove sane and smart enough to not make the same mistakes again. I'll not be holding my breath on that last bit.

[thoughtomator]

[H][/H]

Ok, who is going to repay all the social security recipients? They are just going to accept not getting paid?That is just one example.

they're already not getting paid what was promised... like everything else, the value of the payments to them will simply be less and less over time until they are completely pointless - eventually it will be more expensive to mail the check than the check is for

[osan]

the public will instead be named as a bunch of bad investors, all of whom simply need to forgive one another and move on.

This is largely true.

[cheapseats]

Forget forgiveness and embrace the idea of repudiation. Utter, complete, and universal repudiation of such debt. It would cause serious problems, but IMO no worse than continuing on with this ridiculous charade. It would provide the opportunity to begin afresh, were we to prove sane and smart enough to not make the same mistakes again. I'll not be holding my breath on that last bit.

THE CONCEPT OF ODIOUS DEBT IN PUBLIC INTERNATIONAL LAW
No. 185 July 2007
UNITED NATIONS

The concept of “odious debt” regroups a particular set of equitable considerations that have often been raised to adjust or sever debt obligations in the context of political transitions, based on the purported odiousness of the previous regime and the notion that the debt it incurred did not benefit, or was used to repress, the people...

The concept of “odious debts” has taken on a growing legal and political significance in the early 21st century. Since the post-colonial era, and continuing in recent years, a large number of political regime changes have occurred, whether due to war, revolution, secession, or the peaceful evolution of societies from one form of Government to another. Such transitions pervasively raise issues of the continuity of legal obligations from the old regime to the new, including the disposition of debt obligations acquired by the previous regime.

The odious debt concept seeks to provide a moral and legal foundation for severing, in whole or in part, the continuity of legal obligations where the debt in question was contracted by a prior “odious” regime and was used in ways that were not beneficial or were harmful to the interests of the population. Usually, it also has been pertinent to the concept to establish whether or not the creditor knew or should have known of these circumstances at the time the debt was contracted.

The relevance of the odious debt concept to political transitions is both distinct from and related to the debate on whether, as a matter of law or policy, international financial institutions or other potential creditors should ex ante be prevented or deterred from lending to existing regimes that are declared “odious”. This is a point associated with the issue of lending conditionality...

The modern concept of odious debts was first articulated in the post-World War I context, by the jurist Alexander Nahun Sack, in his 1927 book The Effects of State Transformations on their Public Debts and Other Financial Obligations. For Sack, odious debts were debts contracted and spent against the interests of the population of a State, without its consent, and with full awareness of the creditor. Sack (1929) wrote as follows:

“...if a despotic power incurs a debt not for the needs or in the interest of the State, but to strengthen its despotic regime, to repress its population that fights against it, etc., this debt is odious for the population of the State.

“The debt is not an obligation for the nation; it is a regime’s debt, a personal debt of the power that has incurred it, consequently it falls within this power....The reason these ‘odious’ debts cannot be considered to encumber the territory of the State, is that such debts do not fulfill one of the conditions that determines the legality of the debts of the State, that is: the debts of the State must be incurred and the funds from it employed for the needs and in the interest of the State. ‘Odious’ debts, incurred and used for ends which, to the knowledge of the creditors, are contrary to the interests of the nation, do not compromise the latter – in the case that the nation succeeds in getting rid of the Government which incurs them – except to the extent that real advantages were obtained from these debts.”

Sack divided odious debts into several categories: war debts, subjugated or imposed debts, and regime debts...

http://www.unctad.org/en/Docs/osgdp20074_en.pdf