채무위기 경제를 극복하기 위한 두 가지의 길: 베일 아웃(bail out)과 부채탕감(debt jubilee)

[논둑길맨발로]

채무위기 경제를 극복하기 위한 두 가지의 길: 베일 아웃(bail out)과 부채탕감(debt jubilee)


전후 독일 : 화폐개혁을 통한 부채탕감-도약의 발판


사실, 1948년 연합국에 의해 집행된 화폐 개혁인 현대판 부채탕감 그것은 독일이“경제적 기적”이라고 부르는 것을 만들 수있다.
레히마르크를 대신하여 도이치 마크 (Deutsche Mark)가 도입되면서 정부 및 민간 부채의 90 %가 소멸되었습니다. 독일은 현대 경제를 도약시킨 저렴한 생산 비용과 더불어 부채가 거의없는 나라로 부상했습니다.

In fact, it could create what the Germans called an “Economic Miracle” — their own modern debt jubilee in 1948, the currency reform administered by the Allied Powers. When the Deutsche Mark was introduced, replacing the Reichsmark, 90 percent of government and private debt was wiped out. Germany emerged as an almost debt-free country, with low costs of production that jump-started its modern economy.


어떻게 하면 경제를 활성화시킬수 있을까?
2008년 금융위기 이후 줄곧 악화되어 오던 경제상황이 코로나 사태로 1929년 대공황을 연상케하는 극단으로 치닫고 있습니다. 전세계적으로 각국이 경제 활성화를 위한 다양한 정책들을 내놓고 있습니다. 그런데 미국을 위시한 자본주의 진영 국가들의 기본방향은 화폐의 양적완화를 통해 기업을 지원하는 진부한 베일 아웃 bail out 정책으로 일관하고 있습니다.
(최근 독일 미르켈 정부는 기업을 지원하고 긴축재정을 운영하는 기존 신자유주의적 경제 정책으로부터 근본적인 변화를 시도하고 있다는 기사도 있긴합니다
https://www.counterpunch.org/2020/03/25/germany-signals-a-historic-shift-from-austerity-that-could-upend-the-economy-of-europe/ )

이에 반해 진보적 경제학자와 시민단체들은 서민들의 과도한 부채를 국가의 재정지원을 통해 탕감해주는 것이 진정한 경제활성화를 위한 유일한 길이라는 주장을 펼치고 있습니다.

아래 소개하는 기사에서 한 필자는 부채탕감이 경제 활성화에 대한 긍정적 효과의 예로 독일의 사례를 들고 있습니다. 이차세계대전 이후 국민들은 막대한 빚에 허덕이고 경제는 발전 동력을 잃게되자, 정부는 과감한 화폐개혁을 통해 서민들 부채의 90%를 탕감해주는 조치를 취했다고 합니다. 이것이 독일의 기적이라고 부르는 전후 독일 경제발전의 밑받침이 되었다고 합니다.
이것이 어느 정도 사실일까요. 가계부채로 신음하는 한국 경제 현실을 고려할 때, 시사하는 바가 큰 주장이라 생각되어 함께 논의해 볼 것을 제안합니다.



채무 위기의 경제
1. 기업을 살리는 길 bailing out

현재와 같은 양적완화를 통한 기업 bail out 정책은 기업의 거품가치를 지속시키기 위한 , 경제적 해결책이 아닌 정치적 선택의 길

MARCH 25, 2020

A Brady Bond Solution for America’s Unpayable Corporate Debt

by MICHAEL HUDSON

Even before the Covid-19 crisis has slashed stock prices nearly in half since it erupted in January, financial markets were in an inherently unstable condition. Years of quantitative easing had loaded so much credit into stock and bond prices that stock price/earnings multiples were far too high and bond yields far too low by any normal and reasonable historical standards. Risk premiums have disappeared, with only a few basis points separating U.S. Treasury bills and corporate bonds.
The Fed’s Quantitative Easing since 2008, plus large companies using their earnings for stock buybacks, drove the prices of financial assets into a realm of unreality. The result was that markets already wee teetering on the brink of fragility. Any rise of normal interest to more normal conditions, or any external shock, was bound to crash the artificial value at which financial markets were priced. The Fed’s policy was to perpetuate this situation for as long as possible, acting in effect as the Republican re-election team by pumping in yet more credit. But at near-zero interest rates, there was little that could be done.
A close parallel to this situation was the state of Third World debt in the mid-1980s. Mexico’s announcement that it could not meet its foreign debt service was the shock that brought ugly financial reality into conflict with the assumption that somehow any government debt could be paid – even debts denominated in a foreign currency.
The international financial system was rescued by the issue of Brady bonds – “good” new bonds for old “bad” ones. The capital value of these bonds was still far below the original debt, but they had the virtue of setting realistic levels by bringing the debt balance more in line with the actual ability of debtor countries to earn the dollars or other hard currencies needed to service these bonds.
The current crisis requires a similar wrote-down and recognition that fictitious price levels must give way to reality at some point. In fact, we have reached the end of an illusion – the illusion that bond (and stock) prices could be sustained indefinitely simply by financial engineering, without an economic base capable of producing enough surplus revenue to justify existing bond and stock prices.
So attractive were the former unrealistic bond and stock levels that the markets are still in the “denial phase” hoping that the Corona virus bailout may be used as an opportunity for yet further infusion of capital into the financial markets. But that merely postpones the inevitable adjustment to bring back financial asset prices in line with real economic capabilities.
There certainly is a financial panic, and prices are not necessarily more realistic in a panic then they were in the bubble leading up to it. The question is, what is a sustainable asset-price level? What needs to be supported is a realistic value of stocks and bonds. Bad debts should be taken off the books, not supported in an attempt to recover the unrealistic pre-virus levels.
A successful way of coping with overpriced bonds and other debts
This was the situation with Third World debt in the early 1980s after Mexico triggered the Latin American debt bomb by explaining that it did not have the money to service its foreign bonds. Prices for Third World bonds plummeted as investors calculated the dollar-earning power of countries that had to export goods and services (or sell off their assets) to pay their foreign-currency debts. But their export proceeds simply could not cover the debt service that was owed.
The Sovereign Debt market was trading at such low prices that these foreign government bonds had become illiquid. Unable to obtain further credit, countries confronted by this financial state of affairs were threatened with political instability.
That is not presently the state of the U.S. bond and stock market, thanks to the Federal Reserve’s long Quantitative Easing and support of the financial markets (euphemized as the Plunge Protection Team). This artificial life support aimed at saving banks and large companies, pension funds and state and local finance from insolvency. But in doing this the Fed was subsidizing illusory values that could not be sustained.
The reality is that large swaths of the remarkable expansion in the post 2008 corporate bond market boom have seen a proliferation of corporate bonds that cannot be paid. The economy’s shutdown makes all bond and stock prices “virtual prices,” as if they would be in the absence of a virus and debt crisis. The fracking industry is only the most visible example. Airlines, entertainment, hotels and retail companies are facing losses that threaten their solvency.
The Fed fears a free market when it comes to asset prices. Or at least, it fears the political and economic consequences of withdrawing artificial support. But reality overpowered the Fed’s mid-March intervention – until an even larger infusion was anticipated. Even before the Corona virus, markets were debt-strapped that even the announcement of $1.5 trillion in a day did not stem a steep DJIA sell-off.
In recent days the Fed “announced that it would buy corporate bonds, including the riskiest investment-grade debt, for the first time in its history.”[1]
This is the “Denial stage” of the grieving crisis over the loss of an illusion – the illusion that the stock and bond run-up could be turned from government manipulation into an actual market reality.
Where is this supposed to end? The Fed could buy up all the bonds – from corporate junk to state and municipal bonds as a way to prevent their prices from falling. At an extreme, this business-as-usual scenario would lead to the Fed owning the junk- bond market and a large swath of the stock market.
This could admittedly have a silver lining: having concentrated the debt in its own hands, the Fed would then have a free hand to write off the debt, privatize the companies and start all over again with a lower debt overhead. That is what China’s central bank has been doing: simply forgiving debt that is owed to itself. The Fed would swap “good” public debt (good in the sense that the government can print the money to pay) for bad (meaning unpayable) bonds and stocks.
Bringing financial markets in line with reality would mean writing off a large swath of corporate debt and realizing that much corporate equity “wealth” has been created by decapitalizing corporations in stock buybacks instead of investing in the country’s productive capacity, including decent wages for workers. The American airline industry over the last decade has spent as much as 96% of its cash on stock buybacks – giving financial wealth to their CEOs and shareholders rather than buying up real wealth in the economy. Such financial wealth, if not underpinned by real wealth, is built on quicksand, and it is now disappearing as all asset markets are plummeting. So stock buybacks and other artificial ways to ‘create wealth’ were “investments” that have had drastically negative returns.
To implement a rationalization of bond and stock prices bringing them in line with reality, it has to be in the interest of holders of these securities. Acknowledging that bonds are not worth as much as the price at which the Fed is supporting them will not appeal to bondholders as long as prices are artificially supported. A bond-swap (new good bonds for old bad bonds) can only be achieved in a situation where it is more realistic and less risky to have a sound good bond than a low-priced (or fictitiously high-priced) bad bond.
Therefore, the Fed should let prices sink to their “market” level sans interference.
The Fed is trying to support the unsupportable. By doing this, it has blocked a reasonable solution bringing financial asset prices in line with the realistic ability to carry debt.
Without the Fed’s support, bonds would need to be written down and stock prices continue to plunge. That would prepare the ground for something like the Brady Bond solution for Third World debts in the 1980s. Latin American and other Third World bonds were selling around 25 cents on the dollar in the wake of Mexico’s announcement that it could not pay its scheduled debt in 1982. There was widespread recognition that Latin American governments couldn’t pay their bonds. That was because these bonds were denominated in US dollars, and foreign governments can only print their own currency. When they did this to throw domestic money onto foreign exchange markets, their exchange rates plunged.[2]
Brady bonds addressed the problem by a swap of “good bonds for old.” The new bonds would receive IMF and other support, and were based on what foreign countries actually could pay in foreign exchange (mainly U.S. dollars). Bondholders could swap their old bonds, which were selling from 15 to 25 cents on the dollar, for new bonds priced higher than the market price but less than the original issue, but which at least were secure and less risky. They were “reality bonds.”
The government can organize something similar for corporate bonds after the market takes the artificial QE-added values out. However, to create a market environment for such an alternative, the Fed must let bonds and stocks fall to their natural “realistic” level recognizing that the existing debt overhead can’t be paid. Then, new “reality bonds” can be issued and the economy can start again with a non-crippling debt level.
Banks and major creditors would have to absorb much of the loss resulting from the runup of stock and bond prices to overvalued levels. But something similar was a feature of the Brady reforms, which called for burden sharing by banks (the London club) and also governments (the Paris club) who had to provide debt relief.
The alternative is that we will face reality without a solution.
Notes.
[1] Jeanna Smialek, “The Fed Goes All In With Unlimited Bond-Buying Plan,” The New York Times, March 23, 2020. This report adds: “Because the Fed cannot take on substantial credit risk itself, the Treasury Department backs its emergency lending, using money from a fund that contains just $95 billion. Treasury Secretary Steven Mnuchin on Sunday suggested that the new money in the Republican bill could be leveraged by the Fed to back some $4 trillion in financing.”
[2] The situation was much like German reparations in the 1920s. (I have chapters in my Trade, Development and Foreign Debt on the German experience and subsequent IMF theories that were equally disastrous.
* Dirk Bezemer and Paul Craig Roberts provided much help in this article.

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Michael Hudson is the author of Killing the Host (published in e-format by CounterPunch Books and in print by Islet). His new book is J is For Junk Economics. He can be reached at mh@michael-hudson.com

https://www.counterpunch.org/2020/03/25/a-brady-bond-solution-for-americas-unpayable-corporate-debt/

거대은행과 기업만을 위한 베일 아웃

MARCH 24, 2020

The New Federal Reserve as Garbage Can for All Capitalist Debt

by JACK RASMUS

Yesterday, the Federal Reserve crossed its latest liquidity free money Rubicon. It announced it will provide unlimited credit–and assume the bad debts, not just of banks, shadow banks, and wealthy investors but for what it called ‘Main St.’
But by ‘Main St.’ it doesn’t mean consumers or households. It means that virtually any capitalist financial enterprise that has bad debt it can now dump it on the Fed. In today’s announcement of its latest ‘lending facility’, as it is called, the Fed declared it would ‘support’ small business loans, student loans, auto securitized loans, and credit card debt. But that does not mean the Fed will ‘support’ consumers and assume their loans. Oh no! It means it will support the financial lenders making such loans for students, auto purchases, credit cards and small businesses.
It means these lenders can now dump their bad, defaulted, or otherwise non-performing debt from credit cards, auto loans, student or small business loans on the Fed. The Fed will eat it for them, and add it to the Fed’s own $4 trillion plus indebted balance sheet–soon to rise to $8 trillion or more.
I propose therefore we erect a new Statue of Money Capital on the steps in front of the Federal Reserve building in Washington D.C. A companion to the Statue of Liberty in the New York harbor. And on it we should inscribe the following motto:

“Give me your busted financial speculators, your bankrupt businesses, your huddled hedge funds yearning for guaranteed high yield. The wretched of your banking system. Send me your former millionaires with now empty accounts and I will make them whole again. I lift my greenback lamp beside my free money door. Come in and get what you want!”

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Jack Rasmus is author of the recently published book, ‘Central Bankers at the End of Their Ropes: Monetary Policy and the Coming Depression’, Clarity Press, August 2017. He blogs at jackrasmus.com and his twitter handle is @drjackrasmus. His website is http://kyklosproductions.com.




2. 서민 부채 탕감의 길

MARCH 23, 2020

A Debt Jubilee is the Only Way to Avoid a Depression

by MICHAEL HUDSON


Photograph Source: Adán Sánchez de Pedro – CC BY 2.0

Even before the novel coronavirus appeared, many American families were falling behind on student loans, auto loans, credit cards and other payments. America’s debt overhead was pricing its labor and industry out of world markets. A debt crisis was inevitable eventually, but covid-19 has made it immediate.
Massive social distancing, with its accompanying job losses, stock dives and huge bailouts to corporations, raises the threat of a depression. But it doesn’t have to be this way. History offers us another alternative in such situations: a debt jubilee. This slate-cleaning, balance-restoring step recognizes the fundamental truth that when debts grow too large to be paid without reducing debtors to poverty, the way to hold society together and restore balance is simply to cancel the bad debts.
The word “Jubilee” comes from the Hebrew word for “trumpet” — yobel. In Mosaic Law, it was blown every 50 years to signal the Year of the Lord, in which personal debts were to be canceled. The alternative, the prophet Isaiah warned, was for smallholders to forfeit their lands to creditors: “Woe to you who add house to house and join field to field till no space is left and you live alone in the land.” When Jesus delivered his first sermon, the Gospel of Luke describes him as unrolling the scroll of Isaiah and announcing that he had come to proclaim the Year of the Lord, the Jubilee Year.
Until recently, historians doubted that a debt jubilee would have been possible in practice, or that such proclamations could have been enforced. But Assyriologists have found that from the beginning of recorded history in the Near East, it was normal for new rulers to proclaim a debt amnesty upon taking the throne. Instead of blowing a trumpet, the ruler “raised the sacred torch” to signal the amnesty.
It is now understood that these rulers were not being utopian or idealistic in forgiving debts. The alternative would have been for debtors to fall into bondage. Kingdoms would have lost their labor force, since so many would be working off debts to their creditors. Many debtors would have run away (much as Greeks emigrated en masse after their recent debt crisis), and communities would have been prone to attack from without.
The parallels to the current moment are notable. The U.S. economy has polarized sharply since the 2008 crash. For far too many, their debts leave little income available for consumer spending or spending the national interest. In a crashing economy, any demand that newly massive debts be paid to a financial class that has already absorbed most of the wealth gained since 2008 will only split our society further.
This has happened before in recent history — after World War I, the burden of war debts and reparations bankrupted Germany, contributing to the global financial collapse of 1929-1931. Most of Germany was insolvent, and its politics polarized between the Nazis and communists. We all know how that ended.
America’s 2008 bank crash offered a great opportunity to write down the often fraudulent junk mortgages that burdened many lower-income families, especially minorities. But this was not done, and millions of American families were evicted. The way to restore normalcy today is a debt write-down. The debts in deepest arrears and most likely to default are student debts, medical debts, general consumer debts and purely speculative debts. They block spending on goods and services, shrinking the “real” economy. A write-down would be pragmatic, not merely moral sympathy with the less affluent.
In fact, it could create what the Germans called an “Economic Miracle” — their own modern debt jubilee in 1948, the currency reform administered by the Allied Powers. When the Deutsche Mark was introduced, replacing the Reichsmark, 90 percent of government and private debt was wiped out. Germany emerged as an almost debt-free country, with low costs of production that jump-started its modern economy.
Critics warn of a creditor collapse and ruinous costs to government. But if the U.S. government can finance $4.5 trillion in quantitative easing, it can absorb the cost of forgoing student and other debt. And for private lenders, only bad loans need be wiped out. Much of what would be written off are accruals, late charges and penalties on loans gone bad. It actually subsidizes bad lending to leave them in place.
In the past, the politically powerful financial sector has blocked a write-down. Until now, the basic ethic of most of us has been that debts must be repaid. But it is time to recognize that most debts now cannot be paid — through no real fault of the debtors in the face of today’s economic disaster.
The coronavirus outbreak is serving as a mind-expansion exercise, making hitherto unthinkable solutions thinkable. Debts that can’t be paid won’t be. A debt jubilee may be the best way out.
A version of this column first appeared in the Washington Post.

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Michael Hudson is the author of Killing the Host (published in e-format by CounterPunch Books and in print by Islet). His new book is J is For Junk Economics. He can be reached at mh@michael-hudson.com


https://www.counterpunch.org/2020/03/23/a-debt-jubilee-is-the-only-way-to-avoid-a-depression/



3.신중론- 부분적, 조건부 탕감

The debt jubilee: an Old Testament solution to a modern financial crisis?

April 30, 2013 3.22pm AEST

The overhang of debt in Europe and the US has made recovery from the global financial crisis particularly tenuous.
Is there a dramatic and simple way out of all this? Some argue that there is: a “debt jubilee”. Drawn from the Old Testament book of Deuteronomy, the concept derives from the biblical injunction for a day of rest one day out of every week, a “sabbath” day that reflects the teaching the God rested on the seventh day after creating the world in six.
There is another injunction for a sabbath year every seventh year, in which people are to not work and on the year after the seventh of those sabbatical years , i.e. the 50th, (one year after the 49th) there would be a jubilee year during which any slaves would be emancipated and everyone would return to their land and family to live off of natural providence. A clear implication of this teaching is that all obligations, including debt obligations, would be forgiven in the process.
The jubilee year is a moral and religious issue concept, not an economic one, and was not practised in actual fact. However, it has been an inspiration to the modern debt jubilee movement, which drops the religious context but makes political and economic (and to a degree moral) arguments for extinguishing all or at least some of the debts the world is currently drowning in.
The main economic justification for a modern debt jubilee is simple. With debts forgiven, governments, households and individuals could spend the money currently devoted to interest and principal repayments on consumption which would, in turn, increase economic demand and encourage economic growth, and eventually take the world economy out of constant crisis.
This would also be an ethical policy, which lifts debts incurred through financial manipulation (such as unscrupulous mortgage bankers) and undue political influence (such as taxpayer bailouts of banks that caused the crisis in the first place). It would be fairer than the current arrangement, in which current debt largely burdens poor people with repayments falling to rich and culpable individuals and institutions.
Two basic questions arise: is a debt jubilee really a new idea, and would it work?
There is some precedent for debt relief as a solution to economic crisis. Perhaps the most famous example was the campaign launched by U2 rock star Bono to provide debt relief to developing countries. Bono was a major public face of a coalition called Jubilee 2000, which managed to get the G8 group of major economies to commit to write off $100 billion in developing country debts to developed nations. The idea has similar foundations to the current debt jubilee movement, except it is much more narrow in focus.
Private markets also deal regularly with situations where a debtor can no longer repay debt, technically referred to as a default. In those cases, a debt workout may be instituted which may include a stretching out of payments, forgiveness of parts or all of the debt by lenders, or even an outside infusion of capital to the indebted party to help them keep current with payments (the major way in which the European Union (EU) is dealing with public debt crises in Greece, Ireland, Portugal and Spain).
So private lenders often forgive debt but, unlike a jubilee, this is not out of goodwill. The intent is to get as much of the loan repaid as possible, even if this might be injurious to the borrower or the larger economy.
So there is a precedent for debt forgiveness. But would the widespread and broad application of such forgiveness as called for by the modern debt jubilee movement actually work?
The experience of developing country debt forgiveness suggests that forgiveness there did have the desired effect of freeing up resources in low-income countries which could then go to more pressing development needs. However, some resources thus freed up got wasted anyway and an argument was also made that forgiving loans frittered away by government merely encourages such recklessness in the future. This certainly could be a risk for a modern debt jubilee.
Also, a blanket debt jubilee within the developed world would be much bigger, touching the greater part of the world economic, financial and monetary system. Applied globally, a big issue is that one person’s debt is another person’s asset. While a debt jubilee would cancel the burden to the borrower, it also would eliminate the value of the debt as source of wealth to the lender.
Imagine if all Greek government debt was cancelled. The Greek economy would be better off, but all the banks who made the loans could well be wiped out.
This is the main reason why the EU is going to such great lengths to bail out Greece, rather than eliminate or allow a debt default there. There are ways to avoid this problem, especially if central banks printed special money to give to debtors specifically to pay back debt, a form of cancelling the debt without actually eliminating it as an asset to the lender. However, inflationary pressures and other monetary distortions would certainly come along with that solution.
It is also argued that defaults and bankruptcies, while painful, do clear out unproductive actors in the economy, clearing the way for more dynamic businesses to take their place, much in the way that a forest fire destroys older trees to make way for new ones. Japan’s ‘zombie economy’ is often pointed to as an example of how a debt jubilee could make the economy worse in the long run.
While Japan never instituted an actual debt jubilee, it has had almost zero interest rates for a long time, making debt repayment obligations minimal and allowing inefficient “zombie” companies to drag along, locking out more entrepreneurial potential (a concern, by the way, being expressed about current central bank policies of very low interest rates around the world). It is indeed plausible that a widespread debt jubilee might lead to the same sort of outcome on a global scale.
So is a debt jubilee the answer to our woes — a providential gift, so to speak? From an economic perspective, the answer is likely to be no — at least for a full version of it. However, there might be an argument for targeted debt forgiveness or at least lenient and well-ordered bankruptcies containing forgiveness in especially acute cases.
And in many ways, a debt jubilee is said to be more ethical or moral than current arrangements. Which may very well be true, just not necessarily always economically sound.


https://theconversation.com/the-debt-jubilee-an-old-testament-solution-to-a-modern-financial-crisis-11816