Australia now has the highest private debt in the world. It’s mainly household debt and can’t possibly be repaid.  As Michael Hudson says with some finality: “Debt that can’t be repaid, won’t be repaid.” You can’t get blood out of a stone, so things must end badly for Australia – as they did in the USA and Europe in 2007 and 2008.

Here’s what Australia must not do:

Going back a step, to the bursting of Japan’s property bubble in 1990, we’ve had 25 years of Japan now proving you can’t possibly manage a debt deflation by printing money to bail out banks, nor by offering zero interest rates on your money. [Now it’s negative rates: The Japanese banks will now charge you to deposit your money and pay you to borrow!]  Clearly, this hasn’t worked, yet it’s the same anchor to which the USA has shackled itself!

As Steve Keen says, we’ve got to bail out people, not the banks. Somewhere along the line, Australians will need to be given a significant grant of money. This will provide for borrowers to pay down their debt, and give other Australians the confidence to spend.

But it can’t be allowed to stop there, as it did with the Rudd government’s $900 grant, the ‘pink batts’ scheme, and the building education revolution. It must be accompanied by complete reform the Australian tax system – which would abolish taxes, along the lines proposed by the Henry Tax Review, and to capture, as we once did, more of our public funds from land-based revenues.

That’s really the only alternative to Greek austerity, or to Japan’s zombie-like ‘lingering death’.

Economies need to resurrect.  Let Australia be the first to do so.


  1. No, David, that’s not it. The “Jubilee” in this instance takes the form a massive government payout to ALL citizens. (Let’s remember Japan and the US have spent trillions on their BANKS, not on their people). HOWEVER, those with debt must pay it down, using this payment, whereas people such as you can do what you want to do with it. Problem is, in a deflation, why would you want spend THEN, when you know prices of goods are going to continue downwards? You’d be inclined to wait, to delay your purchases in order to get things cheaper. That’s why I reckon Steve Keen’s idea must be supplemented by abolishing AT LEAST all of the taxes the Henry Tax Review nominated, and increasing taxes on land and mining they suggested – in order to instill confidence and get the economy producing instead of speculating – and thereby stem and put an end to the deflation. There are two sides to a depression: cheap prices, sure; but those heavily in debt will become absolutely crippled by it. Many have been suckered into impossible debt by so-called ‘low’ interest rates. Many may still not get out of it even with the government payout, but they’d be in a far better position. These may seem to be hypothetical situations at the moment, David, but just watch this space ….! Fascinating times!

  2. But do I as a saver (who has been priced out of owning) lose my savings because of a debt jubilee/bail in. If this is the case I’ll lose my savings and those who speculated will be rewarded. If there is a debt jubilee lets hope it only applies to PPoR. All underwater investors/speculators must lose their “investments”.

  3. For the last 30 years, Japan built and exported nearly every car and motorbike ( Honda, Toyota, Mazda, Isuzu) that drives on the planet as well as the vast array of electronics found around the globe, (Sony, Hitachi, Panasonic-the list goes on.) Yet such a powerhouse had to introduce 25 years of QE to stop its economy falling into a debt depression against such a powerful manufacturing and exporting backdrop of quality products.

    Australia has nothing except iron ore which has now collapsed.
    With that in mind, when Australia adopts QE, I give it week of delaying the inevitable.

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