In an article published for Financial Times, Harvard professor Niall Ferguson quickly and cleanly describes the incredible debt and leverage worldwide that’s subsuming developed economies. Interestingly he starts the article pointing out that, in ancient times, debt forgiveness was used to reduce the burden of debt. In fact, he notes, that’s what a “jubilee” was: A periodic absolution of debt.
“Historically, such reductions have been done in one of four ways: outright default, restructuring (for instance, bankruptcy), inflation or conversion. At the moment, more and more American households are choosing the first as a way of dealing with the problem of negative equity, while more and more companies are being driven towards bankruptcy. But mass foreclosures and bankruptcies are not a pretty prospect.” Ferguson writes.
Read the article here.
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