26th January 2009
Further to the suggestion of the ICTU that the government consider a “recovery bond”, might a “forgiveness bond” also be possible?
The political success of the Jubilee Campaign for international debt
cancellation in the year 2000 showed the concept of debt forgiveness and a new start for people was an idea that was simple to grasp and one that gained widespread popular support. Forgiveness bonds would seek to address the debt situation within the domestic economy. The agency responsible for their management would buy bad debt from bank’s
mortgage books and set about rehabilitating debtors through negotiating manageable repayment packages. The bonds would be secured against a property portfolio purchased at heavily discounted prices and would be supported by the substantial goodwill both of politicians, who would find the problems of negative equity alleviated, from those in receipt of “forgiveness”, and from a wider public appreciative of a source of stability in the property market.
The launch of the bonds would require substantial political backing and the returns would be unspectacular; they would, however, represent secure and steady progress in the context of very high levels of market volatility. During World War II, the British government issued substantial loan stock, encouraging people to be both patriotic and to have a reasonable return on their investment. A forgiveness bond might be marketed in a similar way, as something both patriotic and beneficial.
Is there any possibility of such a bond ever being launched? Probably not, but wouldn’t it be worth a try? It can’t be worse than negative equity and prolonged recession.
They have not printed the last four I wrote, so there is not much chance the above will appear. The ‘forgiveness bond’ idea was something I entered for a Financial Times competition last autumn – it didn’t win!