Regarding the specific case of forgiving debt every N years: wouldn’t lenders simply not offer loans that should be paid back after the next jubilee? Imagine, for example, that 2030 is a jubilee year. Then right now (2020) there would be lots of opportunities to take loans that expire, at most, in 10 years. In 2029, however, only short-term loans would be possible. Why would anybody lend you money to be paid back in 2 years if next year that debt will disappear?
Then if, in 2029, you desperately need to take out a long-term loan (e.g. to cover medical expenses), you would be incentivized to sign a contract where you wave away your right to have the debt forgiven. If this kind of contract is forbidden by law, you are incentivized to take out an illicit loan—backed by illicit violence. Down the drain go the advantages of jubilee.
I can think of only one way to avoid this effect: have the debt-forgiving happen at random. There could be a minimal waiting period to guarantee two jubilees didn’t happen too close to each other, after which it had a certain chance of being declared every 1st of January. The bonus would be that it incentivizes lenders to be careful with their landings. It disincentivizes (but doesn’t destroy) the possibility of long-term landings, which is specially bad for people with a low income. But those same people would be the most positively impacted by the random debt-forgiveness, so it’s a trade-off situation.
IIRC from the book, the debt forgiveness in the ancient middle east was mostly done on ad hoc basis (i.e. semi-randomly). Once the king felt that the things are getting out of control he declared all the debt obligations void.
Regarding the specific case of forgiving debt every N years: wouldn’t lenders simply not offer loans that should be paid back after the next jubilee? Imagine, for example, that 2030 is a jubilee year. Then right now (2020) there would be lots of opportunities to take loans that expire, at most, in 10 years. In 2029, however, only short-term loans would be possible. Why would anybody lend you money to be paid back in 2 years if next year that debt will disappear?
Then if, in 2029, you desperately need to take out a long-term loan (e.g. to cover medical expenses), you would be incentivized to sign a contract where you wave away your right to have the debt forgiven. If this kind of contract is forbidden by law, you are incentivized to take out an illicit loan—backed by illicit violence. Down the drain go the advantages of jubilee.
I can think of only one way to avoid this effect: have the debt-forgiving happen at random. There could be a minimal waiting period to guarantee two jubilees didn’t happen too close to each other, after which it had a certain chance of being declared every 1st of January. The bonus would be that it incentivizes lenders to be careful with their landings. It disincentivizes (but doesn’t destroy) the possibility of long-term landings, which is specially bad for people with a low income. But those same people would be the most positively impacted by the random debt-forgiveness, so it’s a trade-off situation.
Is there another solution?
IIRC from the book, the debt forgiveness in the ancient middle east was mostly done on ad hoc basis (i.e. semi-randomly). Once the king felt that the things are getting out of control he declared all the debt obligations void.