Dr Johnna Montgomerie, head of the Department of European and International Studies, says that the debt write-off provided to the financial sector after the 2008 financial crisis should now be offered to households, in order to alleviate the longer-term problem of chronic debt.
Dr Montgomerie said that a “comprehensive package of debt cancellations” should be considered for the household sector, a move she argues will encourage growth and signal an end to “debt-dependent growth” in the economy.
In an article for the Sheffield Political Economy Research Institute, Dr Montgomerie said: “My argument is that co-ordinating monetary policy and making fiscal space for debt write-off for households – the same kind of co-ordination and space the financial sector received 10 years ago – will generate macroeconomic uplift.
“Eliminating targeted segments of households’ private debt stock, which reach new historic highs year on year, will bring macroeconomic renewal by freeing up household cash-flow: It will signal an end to debt-dependent growth.
“In fact, targeting the household debt stock for cancellation will generate economic growth in the same way a tax-cut would: allowing people to keep more of their income as ‘pounds in their pockets’.”
Achieving this “debt jubilee” for households, Dr Montgomerie added, would require “overt political repudiation or a small shift in the principles that govern financial regulation, or a combination of both”.
You can read the full article here.