Why rising defaults worry them

Could a “debt jubilee” happen in the US? Malcolm and Simone dive deep into skyrocketing consumer debt, unsustainable government obligations (like Social Security insolvency by 2032-2034), and historical debt cancellations—from ancient Mesopotamia and Biblical jubilees to Japan’s post-WWII wealth confiscation and modern “Abenomics.”

They debate whether America’s record-high credit card debt, buy-now-pay-later defaults, and cultural attitudes toward money could trigger a crisis, hyperinflation, or forced wealth redistribution. Is bankruptcy already America’s soft debt jubilee? What should you invest in (or avoid) if things get weird in the 2030s?

Hilarious tangents include check fraud “hacks,” Caleb Hammer roasts, ramen lifehacks, and why Japan pulled off drastic reforms while Venezuela and Zimbabwe collapsed.

As Simone outlined this episode, the outline (and links) follows! The transcript is at the end of the post. Merry Christmas, you filthy animals!

Episode Outline

* US consumer debt levels are currently at record highs in 2025, both in nominal and inflation-adjusted terms

* Average credit card debt among cardholders with unpaid balances rose to about $7,321 in Q1 2025, up 5.8% from a year earlier

* People are using buy now pay later services like Klarna and Afterpay at record levels and increasingly paying late

* A LendingTree survey found that 41% of BNPL users made a late payment in 2025, up from 34% the prior year

* April 2025, 31% of federal student loan borrowers were 90+ days delinquent on payments,

* This comes at a time when…

* People are beginning to view debt payoff, the concept of capitalism, and even faith in fiat currency with increasing skepticism

* Loan defaults and late payments are on the rise

* democratic socialist political figures like Zohran Mamdani are gaining serious traction and public attention

* Even our governments are spending like someone with zero expectation of paying off their debt

* US social security likely to falter in 2032-2034

* The UK is set to experience a social security crisis in the early 2030s

* And this matters, because something’s gotta give, and in the past, this has involved various forms of debt jubilees

* So we’re going to discuss:

* The situation with consumer debt today

* The situation with government debt today

* How unsustainable debt has been dealt with historically

* How this could go poorly

* How this could go well and how we as individuals might prepare

Banks and Fractional Reserves

* The post:

* Oct 21 trending discussion: https://x.com/i/trending/1980520651816341983

US Consumer Debt

* Credit card balances hit another all-time high, reaching around $1.21 trillion in Q2 2025—matching last year’s record with annualized growth rates of over 9% in mid-2025.

* Credit card interest rates are commonly averaging 22–24% in 2025, compared to around 15% just a few years ago.

* Delinquency rates for credit cards and other non-housing debts have increased to levels well above pre-pandemic norms. In Q2 2025, about 4.4% of all debt was in some phase of delinquency.

* Klarna reported a 17% increase in consumer credit losses in Q1 2025, totaling $136 million, with repayment defaults rising among users.

* Student loan delinquencies are also rising, especially following the resumption of payments after long pandemic-era forbearance, adding further strain to household finances

* In March 2025, just 35% of federal student-loan borrowers had made their most recent payment on time. The rest were at risk of (or already in) serious delinquency or default.

It has actually been worse recently, though:

* US consumer (household) debt has reached nominal record highs in 2025, but when adjusted for economic growth (e.g., as a percentage of GDP), it remains below pre-2008 financial crisis peaks and has even declined slightly in recent quarters.

* This tracks with bankruptcy search trends (https://trends.google.com/trends/explore?date=all&geo=US&q=%2Fm%2F01hhz&hl=en)

* After adjusting for inflation, average household debt in 2025 is about 2.9% ($1,800) higher than in 2013 but 17.2% ($13,100) lower than the 2008 peak.

* Also, bankruptcy is pretty soft on people

* Basically bad credit for 10 years and non-essential assets can be frozen, but many don’t have much to lose in the face of that.

* What has me worried more is the mindset

* The surging skepticism around communism

* The employment threat of rising AI

* The increasingly absurdist interpretation of money and normalization of putting off money problems

* E.g. BNPL usage is surging, with monthly spending up 21% year-over-year to $243.90 per user in June 2025.

* 41% of users paid late in the past year (up from 34%), 24% faced late payments in 2025, and nearly 40% regret usage due to hidden costs.

The gist:

* Consumer debt is a problem

* Government debt is a bigger problem

Government Inability to Pay Obligations

Social Security Set to Falter

* The U.S. Social Security retirement trust fund is now projected to be insolvent by late 2032; if the disability fund is combined, around 2034. Benefits would be cut about 24% automatically if nothing is done

* UK state pension is pay-as-you-go and generally funded from current taxes, but there are major concerns about the sustainability of defined benefit (private and public) pension plans and the adequacy of future benefits. A liquidity and solvency crisis in 2022 exposed the vulnerability of the system, and ongoing warnings suggest potential crisis if reforms aren’t enacted as liabilities grow

* Other Western nations face sustainability crises from the 2030s, mostly driven by aging populations and shrinking worker/retiree ratios.

* Canada is currently better positioned due to earlier reforms, but is still monitoring demographic risks.

* All systems will require some combination of benefit reduction, tax increases, or later retirement ages to remain sustainable.

Historical Jubilees

TL:DR: Rules repeatedly cancelled debts (without consent from creditors) to end, evade, or calm rebellion, turmoil, class conflict, revolution, or societal breakdown.

Misc

* Ancient Mesopotamia: Kings of Sumer, Babylon, and neighboring regions periodically canceled debts for peasants and small landholders, often at the start of their reigns or during crises.

* Athens, Greece – Solon’s Seisachtheia “sigh-SAK-thee-uh” (594 BCE): Solon forgave personal debts, banned debt slavery, and wiped out mortgage debts in Athens.

* Initially controversial but eventually credited with preventing revolution and laying foundations for Athenian democracy. Credit eventually resumed as societal structures stabilized.

Medieval Japan

In medieval Japan, particularly during the Kamakura (1185–1333) and Muromachi (1336–1573) periods, the shogunate issued edicts known as tokusei (literally “virtuous government” or “benevolent rule”), which effectively functioned as debt jubilees. These were decrees that canceled debts, often in response to peasant uprisings (tokusei ikki) driven by famines, high taxes, epidemics, or exploitative lending practices. The concept dated back even earlier, with roots in the Nara and Heian periods (710–1185), but became prominent in the 13th–15th centuries.

* The most famous early example is the Einin Tokuseirei of 1297, issued by the Kamakura shogunate. It annulled all debts contracted before that year, allowed vassals (gokenin, or samurai retainers) to reclaim pawned lands without repaying loans, and canceled interest on older debts. This was motivated by the need to bolster military strength against potential Mongol invasions (following attempts in 1274 and 1281) and to address widespread debt burdens among the warrior class.

* Later examples include uprisings that forced similar measures, such as the Shōchō uprising in 1428 during the Muromachi period. Peasants in the Kinai region (around Kyoto) rebelled amid famine, high rice prices, disease, and heavy taxes. They looted moneylenders, sake merchants, pawnshops, and temples, destroying debt records to achieve “independent debt relief.” The shogunate did not issue a nationwide order, but local authorities like the Kōfuku-ji temple in Yamato Province responded with a formal tokusei law: pawned items could be redeemed for one-third of their value, and loans over five years old were annulled. A stone inscription (Yagyū no Tokusei Hibun) commemorates the full cancellation of pre-1428 debts in specific villages.

Scary Post-WWII Currency Reform and Debt Resolution (1946)

After Japan’s defeat in World War II, the government faced massive sovereign debt (about 267% of national income by March 1945), hyperinflation, and economic ruin. While not explicitly called a “jubilee,” the 1946 Financial Emergency Measures effectively wiped out much of the real value of debts through currency reform and wealth confiscation.

What Exactly Happened

* On February 16, 1946, the government announced surprise measures: All bank accounts were frozen, old yen notes were invalidated unless deposited, and a “new yen” was introduced at a 1:1 exchange rate. Withdrawals were severely limited (initially 300 yen per household head plus 100 yen per member, later 100 yen per month per person—barely enough for survival).

* This was followed by a massive one-time property tax in autumn 1946, levying up to 90% on assets (including blocked deposits) held as of February 16. Tax revenues were used to repay government bonds and interest. War-related compensations to companies and citizens were offset by special taxes, amounting to a partial default.

* Hyperinflation (prices rising over 500% annually in 1945–1946) had already eroded the real value of debts before the reform.

Effects

* Government debt was drastically reduced (from 446 billion yen in 1948 to 316 billion yen in 1950), taming hyperinflation and enabling postwar reconstruction. It paved the way for the “Japanese economic miracle” of rapid growth in the 1950s–1980s.

* The public suffered massive wealth loss (savings wiped out), exacerbating poverty initially but stabilizing the economy long-term. It was a form of forced wealth redistribution, seen as a domestic default, and provided lessons for modern fiscal policy. No significant inflation spike followed due to the controls, but it eroded trust in financial institutions temporarily

How This Could Go Poorly

Zimbabwe and Venezuela

TL:DR: Both governments saw drops in revenue (caused by different things) but were politically unable to cut spending so they printed more money to pay for things and caused hyperinflation.

* Venezuela

* Experienced a drop in income but had huge social spending programs it felt it couldn’t stop funding

* Venezuela’s government depended on oil for about 95% of its foreign currency earnings. When global oil prices crashed (especially post-2014), government income collapsed.

* To cover these budget gaps, the government printed more bolivars rather than cutting spending or raising taxes. This inflated the money supply massively

* These led to shortages of basic goods, discouraged local production, encouraged black markets, and eroded business/investor confidence.

* Zimbabwe

* Following popular but economically disastrous land redistribution, food and export revenues collapsed. Government, unwilling to reverse course or lose power, financed itself by printing currency

How This Could Go Well & How We Should Prepare

Forms of Jubilee That Worked in the Past

Jubilees in Ancient Israel

* Ancient Israel (Biblical Jubilee): Every 50 years, debts were canceled, slaves set free, and lands restored to original owners.

* Practiced from around 1400 to 500 BC

* Whereby debt forgiveness was granted to Fellow Israelites in debt or servitude; families who lost land or freedom due to loans.

* It was limited only to Israelites

* I think debt forgiveness makes sense within tight-knit, cohesive communities

* Like how family members make loans understanding that the loans may never be repaid

Japan’s Case

In recent decades, Japan has managed its enormous public debt (over 250% of GDP) through a quasi-jubilee mechanism without formal cancellation.

In short, Japan’s debt buybacks are a way to prevent market collapse and maintain low borrowing costs for the government. Most countries avoid this because of the risk of inflation, devaluation, and loss of investor confidence, which can destabilize their economies.

Japan’s problem

* Japan did not have a traditional “debt jubilee” where debts were outright forgiven at a large scale for private individuals or companies. Instead, what Japan has done, particularly over the last few decades since its economic bubble burst in the early 1990s, is a form of government debt management that mimics a debt jubilee through central bank policies.

* The Bank of Japan (BoJ), the country’s central bank, has been buying large amounts of Japanese government debt, currently owning around 40% of it. By purchasing government bonds and holding them, effectively the government owes this debt to itself.

* Why Did Japan Need to Buy Back Debt?

* Prevent Market Turmoil: Japan’s government bond market has experienced surges in yields (interest rates) due to a lack of private investor demand for long-term bonds, government calls for more spending, and worries about its huge debt-to-GDP ratio. Higher yields mean higher costs for the government to service its debt. The Bank of Japan stepped in to stabilize these yields and prevent borrowing costs from spiraling out of control.​

* Without intervention, yields on government bonds would likely have kept rising. This would force the government to pay much more to finance its deficit, risking a “debt spiral” where interest payments consume more of the public budget.

* Support Public Spending: With an aging population and slow-growing economy, Japan relies on fiscal stimulus (public spending) to maintain stability. High borrowing costs could threaten necessary government programs and pensions.

* Confidence and Liquidity: Aggressive buying by the central bank (quantitative easing, and debt buybacks) helps reassure investors that the government debt will be serviced, supporting confidence in markets and maintaining economic liquidity.

* The interest paid on this debt by the government is funneled back to the government. This means the government is not burdened by the debt servicing costs in a meaningful economic way.

* The policy prevented a conventional debt crisis but also meant Japan experienced very slow economic growth and deflationary pressures for decades.

* THE RISK: INFLATION & STAGNATION

* Inflation: If a country’s central bank buys back large amounts of government debt (”monetizes the debt”), it effectively prints new money. Unless managed carefully, this can fuel runaway inflation or hyperinflation, as seen in places like Zimbabwe and Venezuela.

* Japan has relatively low inflation, a high domestic savings rate, and cultural/political stability, allowing its central bank to take these actions without the disaster seen elsewhere. Most countries risk much greater instability if they try the same approach.

* Stagnation: Allows Japan to sustain high debt without default or inflation (unlike hyperinflation scenarios). It supports low interest rates and economic stability but risks long-term stagnation if not paired with reforms. Critics argue it’s a stealth jubilee, while proponents see it as innovative debt management.

How to Prepare

Primary risks to prepare for:

* Dangerous investments

* Insane taxes

* Inflation

Actions to Take

* Investments to Avoid

* Key Sectors to Avoid: Those which hold or rely on consumer debt, making them susceptible to defaults/jubilees:

* Financial Services (Banks and Lenders): Directly impacted by loan write-offs and higher provisions for bad debts. Regional banks with subprime exposure are especially at risk.

* Consumer Finance and Fintech: Firms issuing personal loans, credit cards, or BNPL services face elevated credit risks.

* Consumer Discretionary: Reduced spending from indebted consumers hurts retail, auto, and travel firms.

* High-Yield Debt Issuers: Companies with speculative bonds could default more readily in a downturn.

* Stocks and ETFs to avoid in appendix

* Safer Investments

* Safer Sectors During Consumer Debt Crises:

* Defensive sectors (utilities, healthcare, consumer staples).

* Companies with minimal debt exposure and strong cash flow.

* International funds less exposed to US consumer credit.

* The Ron Swanson Approach

* Crypto

* BTC price over time: https://www.coinbase.com/price/bitcoin

* ETH Price Over Time: https://www.coinbase.com/price/ethereum

* As much self reliance as possible to hedge against hyperinflation risk

* Food

* Shelter

* Medicine

* Defense

Episode Transcript

Simone Collins: [00:00:00] Hello Malcolm. I’m so excited to be speaking with you today because we are gonna be talking about debt, jubilees and debt in general because we live in CL world timeline where debt is getting really weird US consumer debt levels. They’re currently at record highs. I mean, it’s no surprise to anyone, right?

Both in nominal and in inflation adjusted terms.

Malcolm Collins: Hold on. Our fans may not know what a debt jubilee is. Mm-hmm. So Simone and I have a ongoing sort of debate on the show where she believes that eventually debt levels was in the general populace or within the government, are going to get so high that they’re just going to declare sort of bankruptcy either society wide or government wide.

And if you are like, that could never happen, which is my general take on this. Mm-hmm. Simone points out, actually a number of countries have already done this. Yeah. Malcolm, not

Simone Collins: us, Simone. Yeah. Ha. And I’m gonna get into it. So this

Malcolm Collins: happened a bunch of times historically. Mm-hmm. And so we’re gonna investigate when it’s happened historically, what triggered that.

Mm-hmm. And what does that [00:01:00] mean? Is the probability of it happening here and what does that mean for society that this is even like hanging around as an option.

Simone Collins: Yeah. And we’re gonna look at consumer debt and we’re gonna look at national debt because both are really important and both affect everyone in terms of like.

What should your savings strategy be? What should you be investing in? What should you not, if you have money, should you bother? Like, should you just max out your debt? And this is coming from the woman who

Malcolm Collins: purposely makes us have no debt even on our houses. How, how, how do you I’m allergic

Simone Collins: to debt. I, I, I can’t be owed anything.

If someone pays me a compliment, I have to pay it back right away because I can’t even deal with that. You understand? Like, I am, I’ve, I’m phobic. I’m sure there’s some Latin word for it. But yeah. Anyway, I, I learned that there was some like Latin word for mirror divination this morning. So I gotta find the one for, for ness of de of debts.

But anyway, like speaking of debt like just bad toxic consumer debt is insane right now. The average credit card debt among cardholders in the [00:02:00] United States, this is like their unpaid balances. It was true around 7,321 in the beginning of 2025. That’s, that’s up almost 6% from 24.

Malcolm Collins: No, wait. What showed me that our relationship was debt, it’s completely unraveling is, I don’t know if you guys remember, ‘cause we covered it on the show, but there was this thing where like dumb people in America thought there was a free money hack.

Yes. The check fraud hack. What Free Money Hack was is they would put in bad checks, like just write checks that were bad. Yeah. And then put them in their banks like auto cash thing and it would give them cash and they thought they had just gotten free money. Yeah. And now, and then they all found out like, oh wait, like the bank recorded that transaction.

I just now owe this much money.

Speaker 3: Some glitch in the Chase banking app where you can deposit a large check. That is bad. Yeah. And then you have a short time limit to actually withdraw the money in cash from the ATM before the check is cleared. And I guess absolute idiots. They’re doing this on their own [00:03:00] accounts. And then you have other people who are doing this on their own accounts.

Speaker 4: It has their first and last name, their phone number, their social security number, their place of work. Why do I have 11,000 missing from my bank account? Damn. Is this like humorous to you guys? Like do you, yeah. Is this, is it? Yes.

Speaker 6: They will use these. There’s no way.

Simone Collins: Yeah, yeah, yeah. No. Like, and that, that is, that is the culture we live in today. Yeah. Social media really doesn’t help that. And there’s some great viral Caleb Hammer clips where. People are like, oh, well I’m gonna, you know, retire early and travel a ton. And you know, he, at that point, this is for the show financial audit on YouTube, has gone through all their finances.

He knows how much their debt, he knows how much they’ve saved. And he’s like, dude, you. You have no money saved, like, how do you think this is gonna work? How much money do you think they need? And they’re like, oh, I’m just gonna, [00:04:00] like, you know, house hacking something, something. And they just start using a bunch of buzzwords and it’s just clear that like their entire financial strategy is based on tiktoks that are not even like well-founded.

It’s really disturbing. I’ll, I’ll send you a clip. Oh

Malcolm Collins: my God, I love this. A house hacking, of course.

Simone Collins: Yeah. But like, and like literally even the way that they, they use the language implies that, that like they’re just putting in buzzwords and they don’t actually understand the fundamentals of any of this.

They don’t understand what fire means. They don’t understand really what house hacking means. They, they have no understanding if how much anything. Like, it’s weird ‘cause it’s the poor man version of that meme where I can’t, I don’t even know the TV show, but that woman’s like, I don’t know, how much can a banana be $10?

I don’t have time for this.

Speaker: I mean, it’s one banana. Michael, what could it cost? $10. You’ve never actually set foot in a supermarket, have you? I don’t have time for this.

Simone Collins: But it’s like, this is on both ends of the spectrum, you know? Like, I don’t know how much could it be to travel around the, the world all the year, like $30,000.

Malcolm Collins: We did this because we have [00:05:00] friends who live off of welfare who are are close friends of ours and help, help take care of our kids partially.

And they get way more expensive stuff than we get. Like, like pretty much, much. Oh my god. Wherever we are buying something and they are buying something, what they buy is dramatically more expensive than what we buy. Like they buy. Oh yeah, no, we

Simone Collins: get the bargain basement, BJ’s diapers, and they, they get fricking pampers.

That’s like the, that’s the diapers. Like

Malcolm Collins: they have subscriptions to like multiple streaming services, which I just find like obscenely luxurious. Yeah. Like literally

Simone Collins: when we want to watch, when we wanted to watch K-Pop Demon Hunters on Netflix. We, we, we had to log into my dad’s account and then get him to like, call in and give us a code because he was maxed out on all his shares of shared accounts.

We have bought

Malcolm Collins: more cars since we have known them in like the two years we have known them than we have bought in our entire lives by like a factor of two.

I know, I know, I know,

Simone Collins: I know what you gonna do. But again, like that’s, that’s why we need to have these conversations about money [00:06:00] and figure out what we’re doing because again, like while they’re able to do that, also assistance that they receive from the government is not gonna last.

Like, this money is going to run out or. Technically it may not run out, but its purchasing power is going to erode so much that it is not going to matter anymore. So again, let’s get back to it. So credit card debt obviously really high and credit card debt is, is a key thing to look at because of the high interest rates where it sort of balloons to this point where basically you’re never gonna repay it.

You know, when your interest rates like 30%, you’re never gonna repay that debt. It’s just gonna be there with you forever. Mm-hmm. And people are using buy now pay later services like Klarna and Afterpay at record levels and increasingly they’re paying late, which is also telling one lending tree study.

Found that our survey found that 41% of buy now pay later users made a late payment in 2025, up from 34% the prior year. So we’re going from a third, 45%

Malcolm Collins: of buy now, pay later

Simone Collins: 41% made a late payment this year. Oh. And that was, oh my God.

Malcolm Collins: I remember back when, when I, like early in my [00:07:00] finances days when I was building up my credit.

Yeah. I used to have this like existential fear of ever missing a payment. I was, I was, I’ve always had

Simone Collins: automatic payments, always on every card you’ve, you’ve ever had. And I, I, I haven’t even until very recently, been able to stomach the idea of an automatic payment. I would just, every single week pay the card off.

‘cause I was like, I’m not waiting. How could I have No,

Malcolm Collins: but recently, I don’t know, automatic payment has gotten better or something like that. But I don’t, I I remember there was a couple cases in the past where I actually did miss payments and it freaked me out.

Oh my God.

Yeah. But this is years ago. I have a, a near perfect score right now.

Simone Collins: No. Yeah. Our scores I don’t think have ever been higher. Which is weird because I thought that when we, we completely paid off our mortgage. That, that no, that, that

Malcolm Collins: has dinged me. I’m, I, my score has gone down for a tie because we paid off our mortgage, which means we don’t have as many length of credit.

Simone Collins: Yeah. But that also, I mean, like you only need a really good credit score if you’re, you expect to take on a ton of debt,

Malcolm Collins: but get to the juicy stuff. Come on. Right.

Simone Collins: Anyway, so I’m just, I’m, I’m framing this a little bit. And, and, and I’m just pointing out that [00:08:00] people are beginning to view debt payoff and the concept of capitalism and even just faith and fiat currency with increasing skepticism, loan defaults and late payments are on the rise.

Democratic socialist political figures like Zoran, mom, Donny, are gaining serious traction. The betting odds have him at about 95 to 96% now. He’s even citing them in his speeches now ‘cause he is just like, I. Don’t ask me, ask the, ask the people putting money on this. And even our governments are spending like someone with zero expectation of, of paying off their debt.

So US Social Security is likely to falter in 2032 to 2034. That’s in less than 10 years. The UK is, is set to experience a social security crisis in the early 2030s as well. And this matters because something’s gotta give. And in the past this has involved various forms of debt. Jubilee, even though you say that this just doesn’t happen.

So what we’re gonna discuss and what I’ve, what I’ve researched is this situation with consumer debt today, this situation with government debt today, because I think people don’t really realize it or they need to be reminded [00:09:00] how unsustainable debt has been dealt with historically, how this could go poorly.

Because there are times when people tried to. Sweep it under the rug and it doesn’t go well. And then how this could go well and how individuals might prepare, like how maybe we should rethink our investing strategies based on all this. Okay. So yeah, this is, this is important. So US consumer debt is.

Really high. We’re at an all time high reaching 1.21 trillion in Q2. That’s, that’s just, it’s, it’s, it’s getting, people are using a lot of debt. Credit card interest rates are 22 to 24% this year. And that’s, that’s compared to around 15% last year. So not only do people have tons more debt than before, or a lot more debt than before, but like the interest rates are higher, meaning they’re way less likely to be able to pay it off.

Right. So we’re, we’re getting sort of, we’re reaching terminal velocity here. Delinquency rates for credit cards and other non in-housing debts have increased to levels well above the pre pandemic norms. In Q2 of this year, about 4.4% of all debt was in some phase [00:10:00] of delinquency, which just is quite high, you know, it seems like, oh, just 4%.

But like, that’s, that’s pretty high. And Klarna, that’s the buy now pay later company reported a 17% increase in consumer credit losses in Q1. That’s about $1.36 million. So. It’s, it’s, it’s, it’s not good. Student loan delinquencies are also rising, and this is a form of debt in the United States that’s harder to evade using bankruptcy or well, sort of impossible to evade using bankruptcy.

And this is especially after, during the pandemic, there were a lot of like, sort of, we’ll just put this on pause things, and a lot of people thought that it was just gonna be canceled. But yeah no, it’s not gonna be canceled. In March 25, just 35% of federal student loan borrowers made their most recent payments on time.

Mm-hmm. So basically two thirds of people just didn’t make their student debt payments on time, and the rest were at risk or already in serious delin, delinquency or default. So, as much [00:11:00] as I, at first was like, well, this, it’s never been worse. This is, this is actually terrible. Do you think that we’re at an all time low point, or do you think that’s not the case?

Malcolm Collins: I think what do you mean an all time low point?

Simone Collins: Like, are we in more serious debt dodo today than we have been at any other point in our lives?

Malcolm Collins: I, I guess,

Simone Collins: no, it was actually worse before, around the time we graduated from college. So US consumer debt has, has reached nominal record highs in 25, but adjusted for economic growth.

It remains below pre 2008 financial crisis peaks. It’s even declined slightly in recent quarters. So, I, I can sort of show you like, and this also tracked with bankruptcy trends as well. I, I can show you the Google trends for bankruptcy. And it, it peaked around 2008 with that H housing crisis.

So we were actually. You know, as much as things are bad now they’re not at an all time bad. I think things are just a little bit different. Like buy now, pay later [00:12:00] services did not really exist then. People didn’t have the same kind of absurd absurdist to, yeah, these numbers

Malcolm Collins: don’t look high now at all.

Come on, Simone. This looks relatively normal.

Simone Collins: Ah,

If anything we’re at like a low point. The we’re Yeah, it’s, it’s, it’s interesting. Yeah. I mean, like this, I’m, I’m putting this here because I thought that we were at an all time bad point and, and this surprised me. So I do wanna point it out here, but I also at the same time think that the, the mental attitude toward debt combined with our collective pessimism around capitalism and the ability to get jobs at all at this point.

Still makes it different and more dangerous than it was in the past. Mm-hmm. And we’re gonna get into it, but in the past, every time there have been debt jubilees with consumer debt or what you could call consumer debt, like with average people, it hasn’t been because technically they’re in more debt and they can’t pay it back.

It’s because technically they’re showing extreme signs of unrest. [00:13:00] And that’s what I’m feeling. That’s the, that’s the sentiment and the, the zeitgeist right now. Okay. Okay. So, so that matters more.

Malcolm Collins: Explain to me how this has happened before, because right now I’m still thinking, okay, people took out dumb debt, but my thought is still, but companies own this tech debt, pension plans, own this debt.

Nobody’s going to, like, how can you convince them? How can you just take that money from them? Right. Like, well, and I mean, yeah.

Simone Collins: So another, another argument against my point in, in favor of yours is that GR in the US is. I don’t know how this, it’s incredibly soft on people. Basically, you have bad credit for 10 years and non-essential assets can be frozen, but you’re still, like, you can have a car.

You’re allowed to keep, like most of your stuff, like, not luxuries, but like, you actually don’t lose that much. And I think a lot of people, the attitude is just, oh, I’m just gonna declare bankruptcy. It’s fine. No bankruptcy.

Malcolm Collins: The United States actually has an, i, I would say, an incredibly generous and lenient policy [00:14:00] towards bankruptcies, which I think put us in a form of like pseudo communism already.

Yeah. It’s like communism. It’s like capitalism was like gutter rails in Yes. Like you have to keep. Like, like your life is like not, you’re not like an a, a a in debt, in debtor slave or whatever, like used to happen. Right. You know, you don’t even have to go like live in the slums if, if you declare bankruptcy, right?

Mm-hmm. Like, it’s just sort of like, okay, all of the really expensive stuff you own that isn’t part of your, like, daily life that you’re not able to hide well at that, or that you don’t hide well, yes. Yeah. Which, you know, how many people

Simone Collins: are declaring bankruptcy with like a ton of stuff in crypto, cold wallet somewhere.

You know what I mean? Yeah. Which is, it’s, it’s, it’s kind of messed up and that’s why, again, I, I’m pointing to the sentiment more than the actual numbers. And it, it, it still really worries me. But what worries me more is government inability to pay debt obligations. So, like I [00:15:00] said, US Social Security projected to be insolvent by late 2032.

That’s really freaking soon. UK State pensions are, it’s, it’s pay as you go and it’s generally funded from current taxes. So there are major concerns about the sustainability of the defined benefit, both private and public pension plans and, and the adequacy of future benefits. And, and remember, like what it, what the per capita GDP in the UK is worse than the, that of the poorest state in the us right?

Malcolm Collins: Yeah. Yeah. For people who don’t know this, the per capita GDP of the uk is, is lower than, I think it’s Mississippi or Alabama. I don’t remember this one.

Simone Collins: Yeah. And, and so that’s, that’s scary. And other western countries also face sustainability crises in, in the early 2030s. So, you know, okay.

We’re maybe like five years away from starting to see. And bad things happen, but it’s, it’s getting there. Canada’s currently better positioned [00:16:00] actually due to earlier reforms ‘cause they had a, a crisis a little earlier on. But I don’t know. They’re also like, oh, you can’t get the medical care you want.

Why don’t you consider maid why don’t you just end your, end your pathetic existence? So, I don’t know. I feel like they solved it, but not in the way that people want by just being like, yeah, you should consider dying. And basically all systems are going to require some form of benefit reduction or tax increases or later retirement ages just to remain sustainable.

So we also just need to be aware of the fact that, okay, while you’re saying yes, Simone, the government’s or the US is already on this like quasi. Communist system where people just kind of fall back. You know, they declare bankruptcy and they go on government assistance and everything’s fine.

And it’s like, yeah, that’s fine right now, but it’s not gonna stay that way. So let’s, let’s just take a break and look at the past for a second and see how this has gone well and see how it’s gone Poorly. Historical [00:17:00] jubilees are, are interesting and they just didn’t know about them. But basically like people, rulers have repeatedly canceled debts without consent from creditors to end evade or calm rebellion, turmoil class, conflict revolution or societal breakdown.

Like any, any sort of form of like, oh my gosh, just will just like, make it disappear. And a ancient Mesopotamia, king, kings of Sumir, Babylon and, and neighboring mm-hmm. Areas regularly or periodically cancel debts for peasants and small landlords often at the start of their reigns. So you like come in as a new king, you’d be like, don’t you love me?

You don’t have to pay your debts anymore. Which doesn’t seem that dissimilar from like campaign promises made by politic. Well, if you’re a king or

Malcolm Collins: something like that, it’s a little different. Yeah. And there’s a lot of reasons you might do this that you wouldn’t if you were a democracy. So when you’re a king, you’re basically being like, what’s less likely to kill me?

You know, the bankers or the, the [00:18:00] citizens. Right. Especially if I’m about to do a paw grom or something like that. The bankers, right? Like they’re, they’re way less of an active danger to me. And especially if I’m canceling debts on like, big, rich people debts too. Right? So like, I, I think that there was less participation in debt marketplaces in that time where now if you cancel debts, it’s granny social, you, you know, retirement pension that you’re actually robbing rather than you know, some, some, you know, secluded minority, ultra wealthy population.

Simone Collins: Yeah. Who is like pretty easy to take out, you know? ‘cause you didn’t care about them. Yeah. So let’s jump forward though to, to ancient Greece. Where Solon, so Solon. Yeah. Solon. He’s like the early democracy guy, right? Yeah, I guess, yeah. So yeah, Solon was one of their pioneers of democracy. If I’m remembering correctly, I’m thinking back to this great courses lecture, but all I can really remember is the cadence and accent of the woman, the female [00:19:00] professor’s voice, and not what Solon actually is famous for, which is really annoying.

But yeah, so Solans CEC Thea in 594 BCE involved forgiving personal debts. He banned debt slavery, and he wiped out mortgage debts in Athens. And this was originally considered really controversial but it was eventually credited with preventing revolution and laying the foundations for Athenian democracy.

So credit eventually did resume as societal structure stabilized. And this is, I think one of the, the earlier examples of both. Democracy being either enabled or protected by this action. But also about how like, well, well this does initially lead to a crisis of like people being willing to, to give debt, which is essential for innovation and growth and capitalism in general.

Malcolm Collins: Yeah. Like debt is very, very important to make democracies and society work.

Simone Collins: Mm-hmm. It basically like greed and opportunity will bring it back with [00:20:00] time. If, if basically the, the, the, the, the Jubilee is executed in the name of creating a stable society instead of just sweeping something under the rug.

And I wanna highlight this as a core. In my view separation point between the success cases and the failure cases, there are the failure cases where people do this out of greed or I just don’t wanna deal with it, or just give me the power or vote me in. Yeah. And it goes really sideways. And then there are the people who are like, guys, this is really gonna suck.

Like I, I, I don’t know how to tell you this, but we have to do it for the good of our future. It goes really well. If, if initially second. So

Malcolm Collins: tell me those cases, when, when has it worked out other than ancient Greece where again, it’s not really analogous ‘cause you’re not taking it from granny.

Simone Collins: Yeah. So the, I, I, this is Japan.

Japan,

Malcolm Collins: okay. Because Japan has

Simone Collins: actually done this a ton.

Malcolm Collins: Like oh, a lot. Like how many times has Japan done this? [00:21:00] Why doesn’t anyone lend money in Japan? Like I know, I

Simone Collins: know, I know. Because we, Japanese because they are a, a collectivist culture that takes care of their own. And they’re also, I, I would argue, they’re very future oriented. They’re very responsible and they do care about the collective good in a way that’s like very deep set and cohesive that you just don’t really see in more diverse, competitive and less cohesive cultures. So this first happened in medieval Japan during the comma, kura and achi periods.

The, the shogun issued edicts known as Toku se, like literally virtuous government or beha benevolent rule which effectively functioned as debt jubilee. They, they were decrees that canceled debts often in response to peasant uprising given by like, and this was typically driven not by like irresponsibility, but just bad stuff happening, like famines or epidemics or, or it’s in some cases exploitative lending [00:22:00] practices.

And this, this stated actually even earlier, back to the roots in like the NARA and high-end periods. It’s like seven, 710 to 1185, but it became more prominent in the 13th to 15th century. So again, this is going like way back and they did it a lot. The most famous early example is the inin to, let’s see, to of 1297 issued by the ka kog.

It anul all debts contracted before that year allowed vassals to reclaim pond lands without repaying the loans. And it canceled interest on older debts. And it was motivated by the need to bolster the mi military strength and basically protect Japan against Mongol invasions and to address widespread debt burdens among the Warrior class.

So this wasn’t like, oh, do it because I wanna become, you know, like I wanna be secure as the Shogun, or I wanna like take out this one group that I hate. It was like, oh man, the Mongols are coming and. Our warrior class. [00:23:00] Like they, they’ve lost their lands due to like bad debt.

Malcolm Collins: Due to bad debt.

Simone Collins: Yeah. Like we need to protect our land.

So like, maybe we should rebuild a more stable society so we don’t get totally wiped out by the Mongols like everyone else is. Which is, is really, really interesting. So, so there were more but I’m gonna, I’m gonna skip forward to the one that I think is the most scary. That I’m like, Hmm, I could, I could see this kind of happening, especially given the trends that are happening in our government now.

Or like, not in our government, but like sort of the, the vibe shift taking place with regard to skepticism around capitalism and what politicians are getting popular for. So this is the one I’m like, Ooh. So this is world War, post World War II currency reform and debt resolution in Japan in 1946, after Japan’s defeat in World War ii, the government faced massive sovereign debt about 267% of national income by March, 1945.

And this

Malcolm Collins: was Japan?

Simone Collins: Japan, yeah. Who have their aing

Malcolm Collins: about this [00:24:00] is it happened in part due to demographic collapse.

Mm.

And so we’re looking at a scenario that’s very similar to what the rest of the globe might be going through in the near future.

Simone Collins: Yeah. Well, and, and this is, you’re also gonna see this with the next one that happened more recently.

As, as part of what’s come on. Oh, what’s name? So, when

Malcolm Collins: Japan did this, did they do it for all kinds of debts? Like was No, hold on.

Simone Collins: No. This, this is, no, this is way scarier. This is way scarier than a, a, a debt jubilee. But oh Aon omics. You’re thinking about the abenomics reform. This is, this is different and this is more violent, so, right.

So we had massive sovereign debt. We have hyperinflation, we have economic ruin. You know, they got nuked like it, this was a really bad time for the Japanese people. Yeah. Bad time. They needed to rebuild and they basically had like no ability to do so because like nothing was worth anything.

Everything’s broken, everyone’s starving. Like this is horrible. So while this wasn’t explicitly a jubilee, the 1946 financial emergency measures effectively wiped out much of [00:25:00] the real value of debts through currency reform and wealth confiscation. So this isn’t just currency reform, it’s wealth confiscation, which is.

100% starting to bubble up in various state. Yeah. Non-national legislatures. It

Malcolm Collins: always goes really bad.

Simone Collins: Like, have you, are you familiar with the California bill that was proposed or that’s, that’s gonna be voted on this, this election? No. I can’t remember exactly what percentage of it it, it is, but it’s this bill that’s like, Hey, shall we just, you know, we have some financial troubles, shall we just like, have all billionaires in California pay 5% of their net worth?

And this includes just like the value of, of their stocks. Like, not even like their cash, right? Yeah. To, to help us pay off this debt. It’s just a one time thing and like. Like the guys on the All-In podcast who are all billionaires and like, I think one or two of them is still in California and most of them got out obviously.

And this is, this is effective like beginning 2026 if it’s passed. So, you know, they’re all [00:26:00] just gonna like, move out in a second if this gets passed. And, and they’re all like, well, why would people not vote to pass this? Like the vast majority of people are not billionaires and they don’t care. Yeah.

And you would like the billionaires to just handle a problem. But this is an example of legislation that is already being voted on right now in the United States of just like, Hey, why don’t we just confiscate the wealth of the, of, of wealthy people? And that again, this is part of what this Japanese measure was.

So here’s what exactly happened to Japan in 1946, on February 16th. In 1946, the government announced surprise measures. Surprise measures. Okay. This voted up. Surprise. So you don’t

Malcolm Collins: get a chance to leave first.

Simone Collins: Yeah. They, they, they didn’t get the warning that the all in podcasters got. Mm-hmm. All bank accounts were frozen.

All the Y notes were invalidated unless deposited. So if you’re holding a dollar, it doesn’t work anymore. And a new yen was introduced at a one-to-one exchange rate. Withdrawals were severely limited initially. 300 yen per household [00:27:00] head, plus 100 yen per member later. 100 yen per month per person.

Barely enough for, for survival. So just to be clear, again, your money doesn’t work anymore. All the cash you have is, is broken. Only the stuff you have in banks is still valid with now a different kind of yen. But you, you, you’re only allowed to withdraw. Yeah. A tiny amount, barely enough to survive. Okay.

And then, so this was followed because this is just the beginning by a massive one-time property tax in autumn of 1946 levying up to 90% on assets, including blocked deposits. So not only were your bank accounts frozen, you couldn’t even pay it because you couldn’t take out the money. Yeah. I mean, I mean, I mean, you had, you know, maybe you had a thousand yet in your account, now you can only take out, you know, 300 plus 100 per additional family member.

Oh, but by the way, we’re gonna tax 90% of it, you know, so,

Malcolm Collins: you know.

Simone Collins: Yeah. It doesn’t even, it doesn’t [00:28:00] even fano away. It’s, it’s not even decimated because it’s, it’s the inverse decimated. And this happened in 1946.

Malcolm Collins: Yeah. And people dunno how bad it was in Japan during this period. One of, one of the fun things I learned recently actually is, you know, a lot of people, they criticize the us They’re like, the US doesn’t have any of its own native foods.

You know, like, they’ll be like, french fries don’t count ‘cause they were invented here, like, burgers don’t count ‘cause they were invented here. And I’m like, well, they’ve definitely been modified since then. But I’d point out here, what a lot of people don’t know is if you are going by that definition of where a food was invented mm-hmm.

In which nation gets to own the food. Ramen is an American food because ramen is only popular in Japan because American aid efforts delivered it to Japan in large amounts and heavily subsidized it for a period. So many Japanese people during this period of intense poverty grew up eating tons of ramen.

Simone Collins: Yeah. And isn’t that funny that, like, even now ramen is kind of, it’s, it’s like, shorthand for. [00:29:00] Eating poor person food. Yeah. And, and what it was would eating ramen or whatever,

Malcolm Collins: which I’ve done, you know, I’ve, I’ve, I’ve had the you know, two, two pencils for my chopsticks to eat Ramen. That doesn’t sound safe.

Well, I didn’t have other chopsticks at the time. Sweetheart why’re so special in the head that that’s what you’re gonna find.

Simone Collins: Oh boy. Yikes. Not to take our, our, our ramen deviation too far, guys, but, so there’s this, like I learned, I discovered when, when I traveled to Malcolm, to Seoul with Malcolm, this thing where they, it’s ramen, but macaroni and cheese and, and oh yeah, yeah, yeah.

And then you, it’s freaking the best thing in the world. And then Malcolm and I found this amazing Asian food store close to us where I could buy that stuff, but it’s really, it’s like $5 per packet. Whereas, you know, obviously you can get. 1620 ramen packets for like $5. Mm-hmm. And I discovered that, and I’m an idiot for not realizing this, but I’m [00:30:00] saying this ‘cause maybe you don’t realize this either, is you can just take, we buy bulk cheese powder, like the kind that you get in mac and cheese, but we just buy it in bulk.

Who’s your farms on Amazon? And you can just put that. In the ramen, like you drain most of the liquid out of it. I still put in the, the chicken or beef or whatever season it’s

Malcolm Collins: you go. If you

Simone Collins: could put mac and cheese, cheese on ramen. It’s a freaking amazing. Oh, ah. It’s like all I, it’s all I want right now.

So good. Anyway. Are you gonna have that tonight? I’m also craving popcorn though. I’m craving, I’m so hungry. I’m so, I’m, I’m always hungry anyway, whatever. But anyway. Right. So, right. You, your bank account is frozen. The money doesn’t work anymore. Just when you think it can’t get any worse because you’re on, on like this really limited budget as imposed by a government.

Now 90% of the money in your bank account evaporates. But this is also property tax. So like, you’re also like any of your assets, your property, your, you know, real estate, property, et cetera, is being taxed as well. These tax revenues are [00:31:00] being used to repay the government bonds and interest. So the government’s actually being good on that stuff, and then war related compensations.

‘cause Japan, you know, we nuch them and stuff, but now they’re still, you know, there are punitive damages that Japan is expected to pay to, to both companies and citizens we’re, we’re offset by these special taxes. And, and so that, well, you

Malcolm Collins: know what I like about this in Japan’s context, while I could sort of understand it, even if I was a rich person Yeah.

I’d be like, okay, my country sort of went all in on a war with another country. I, as a citizen of this country have to bear the cost of losing that war. Yeah. Yeah. And I mean, I feel

Simone Collins: like the, the Japanese people of all like, are more likely to collectively be like, yeah, we’re gonna have to take this for the team.

You know, like. This, this, this sucks. Also, like one thing that makes this a little bit worse is that one, by the time this happened, hyperinflation was already so bad that it had eroded the real value of many debts even before the reform. [00:32:00] And we’re talking like, prices rising, rising over 500% annually. Oh wow.

So I mean, like, to a certain extent, a lot of this was absurd anyway, but it’s still like scary and bad. And again, we’re, we’re likely to face hyperinflation before we also experience similar reforms to this. So I, I’m still like, I don’t know, you know, history doesn’t repeat itself, but it rhymes. And this is a form of rhyming that I feel like I’m starting to, I’m, I’m, I’m.

I’m hearing the beginning of this little, this little couplet, this little limerick. I’m, I’m getting worried. So what happened was basically government debt drastically reduced ‘cause they actually got the funds from it from 446 billion yen in 1948 to 316 billion yen in 1950. And that’s this tamed to the hyperinflation and enabled post-war reconstruction.

It paved the way for the Japanese economic miracle of rapid growth in the fifties to eighties. This that would not have happened had this sacrifice me. Okay. The public did suffer massive wealth

Malcolm Collins: loss. This problem [00:33:00] doesn’t ha I love the, the racist black guy when he is like, this does not happen in Japan

Simone Collins: .

But like, actually that’s, that’s the thing. It’s, well, I mean, you can’t, well, but anyway, so, so what happened, right? So like one, we had this a massive economic boom. It was basically a form of forced wealth redistribution seen as a domestic default. But it, it provided lessons for a modern fiscal, fiscal policy and there was no significant inflation spike after these controls.

It eroded trust in financial institutions, but only temporarily because again, like when, when these kinds of things, what’s funny

Malcolm Collins: is as soon as people start making money again, the, the, the face in financial institutions seems to immediately return. No, it’s,

Simone Collins: that’s the thing. It’s like greed is. Greed is very powerful especially when couched in functional institutions and act.

This is a good time for us to switch to two examples in which this went [00:34:00] really poorly. When, when these, these mechanisms well do over buttons, more modern

Malcolm Collins: time. I thought Japanese we’re, we’re

Simone Collins: gonna, we’re gonna jump forward to that. We’re gonna, we’re, we’re gonna jump forward to omics after we look at how this doesn’t work well.

And, and essentially it’s when you respond, but into a bad system. And we don’t want that. So the classic examples are Zimbabwe and Venezuela. In both examples, governments saw drops in revenue caused by different things but they were politically unable to cut spending. Does that sound familiar? So they printed more money to pay for things, and that caused hyperinflation.

So in Venezuela there was a drop in income, but it was related to huge drops in, in their oil revenue. Their oil revenue dropped. Like basically that was, well, oil revenue was 95% of its foreign currency earnings. Yeah. And I think a lot of the younger audiences who listen to this podcast don’t realize that like, Venezuela used to be famous for being rich.

Yeah. Even on shows that [00:35:00] Malcolm and I grew up loving to watch like Parks and Rec there’s this whole arc in like this show where this Venezuelan delegation comes, like they become Sister Cities with some city in Venezuela and they’re all insanely rich and they all have like mansions and servants

Speaker 8: We are quite tired from our trip.

Could you have your servant collect our back? What did he call me? Tom, please. It’s a different culture. Okay?

Do we just, uh, select the woman we desire. I’ll take the large black one did you have some kind of a book with photos of the women available to us? If not, I will also take the sexy black one.

Simone Collins: And, and, and Malcolm had all these like rich Venezuelan classes, boarding schools and stuff

Malcolm Collins: growing up. Yeah,

Simone Collins: yeah.

Malcolm Collins: But they’re

Simone Collins: not. But that was the oil. That was the oil. And then, and then as soon as the oil prices crashed, especially post 2014, it wasn’t

Malcolm Collins: just the oil prices crashing. The core reason Venezuela became so poor is they stopped reinvesting in the refineries.

And so the refineries basically degraded because you need to be constantly [00:36:00] reinvesting in making sure that these oil refineries like work well. Yeah. And they basically cut all of that because you know, more money for the people, whatever, whatever, whatever. Yeah. And, and through corruption. And so all of the parts of the refineries broke.

So they’re producing of, I were corrected like 6% of the oil. They used to Oh my. Something like, gosh, like very little oil anymore. Like they’re, they’re basically working with. Because the refineries, they didn’t even build them. Right. Like the refineries were built by private companies. They just stole them.

I socialize them. Right. This is why you don’t wanna socialize something. Yeah. When you don’t like, actually own something yourself. And when you are not going to be, you know, immediately responsible for the cost of that. Like, you don’t need to go to the shareholders who are going to say, Hey, you haven’t been reinvesting in the refinery.

Mm-hmm. Those things begin to break down and everyone suffers as a result. Yeah. Which is why communism and socialism works so, so poorly at the time. And this is, this is when people are like, oh, well then just completely give like [00:37:00] ownership of everything. You know, make it completely regional. Make it completely whatever.

Right? Like, like, like, like completely. What, what are those? Anarcho, communists, right? Oh, anarcho Communism. Cannot effing run an oil refinery. No. Right. Anarch cannot run a semiconductor fab. No. And new communism. No, I’m sorry. It just can’t, it cannot run any of the things that your daily life relies on.

Mm-hmm. Right. American communism basically requires an agrarian society, which we do not have. And if we move to, we don’t want it. I don’t want it.

Simone Collins: You, you guys can do you, I mean, like, I’m okay with that on like a, a local homestead level, but that’s not what is necessary anyway, so like, yeah. Basically they’re like.

Okay, we have no more money, but we can’t stop the social spending. Let’s just print a ton of money. And that led to a super inflated prices, shortages of goods. It discouraged local production, it encouraged [00:38:00] black markets. It eroded business and investor confidence. Now look at Venezuela, not, not great, and then in Zimbabwe, basically following popular but economically disastrous land distribution.

And see, this is another example. It’s like you, you think like, oh, well then all wealth distribution is good per the earlier Japan example I gave. No, it’s sometimes really bad. So following the wealth distribution that took place in the Zimbabwe, food and export revenues collapsed and government the government UN was totally unwilling to, to reverse course or lose power.

It, it financed itself by printing currency and, and hyperinflation resulted. So I just wanna point out like there are good ways to do it and there are bad ways to do it. And the good way to do it is like everyone taking a hit for the betterment of the, of the country because they’re willing to fight on the same page.

But when you have a divided populace or government or just a selfish government, you don’t get that, so what happened with with Japan? Oh, actually, look, here’s one more example though. ‘cause it’s, it’s not just the Japanese. That, [00:39:00] that this, like, the one really ancient example of Yeah. By, by the way,

Malcolm Collins: this is, this is pretty interesting.

I was just looking at the erco communism, like how, how could, ‘cause I decided to ask rock, like, okay man, this for me, right? Like yeah, yeah. How could eneco communism run a fab? Okay. Basically the answer is you wouldn’t have any technology that required microchips in OCH communism because the, the problem is, is, is OCH communism cannot manage large investments like a fabric requires like 10 to $20 billion.

Yeah. And I know that people are like, we don’t need billionaires. Well, you need billionaires if you want cell phones. Okay. You need people who can risk and say, I want to risk 10 to $20 billion. Yeah. And you can’t get that by crowdfunding from people with, you know, savings of like a hundred thousand dollars each or something.

No,

Simone Collins: no, no. You just can’t.

Malcolm Collins: They wouldn’t even be able to get the expertise. It’s like you wouldn’t be able to get the funding for the years of labor and study to make it work. Yeah. Oh, and then they’re talking about even the global supply chain because, you know, you typically require you know, one part of [00:40:00] the fab is designed in one place.

This is that way typically work, and then it’s produced in another. You wouldn’t be able to get that either in n communism. No.

Simone Collins: No, definitely not. Absolutely not. But the, the other form of I would say like Japanese style, like this is social cohesion at work. This is people taking a hit for the betterment of their society.

Is, can you guess It’s a kind of biblical example. Did Jerusalem, I know this right? Yes. The Biblical Jubilee. Every 50 years debts were canceled. Slaves were set free, and lands were restored to their original owners. And this was practiced from around 1400 to 500 bc Debt forgiveness was granted to fellow Israelites, not anyone else.

Let’s be clear. Fellow Israelites.

Malcolm Collins: No. Hold on, hold on. This is actually a really good way to do debt. Yes. Yes. So I’ll explain why it’s good. Because this, this people might be surprised that I’ve been so against it up until now. I think this is a good way to do it. Yes. The reason why it’s a good way is because all debts that are made have this [00:41:00] priced into them.

Yeah. You know,

Simone Collins: it, you know, the, the, the way I look at it is this is the same way that anyone views giving a loan to like a family member. It is like, you know, I know Cousin Jed probably isn’t gonna pay it back or may ever pay it back. Like, great if he does, if he doesn’t. I’ve planned for this and I’m okay with it ‘cause he’s family.

That’s what this is. But,

Malcolm Collins: but this is, so the way you would do this, if you were gonna do this is you would say, starting this year, any debt, any debts made after this year mm-hmm. They get forgiven at the jubilee mark. Any debts from before this year do not get forgiven at the Jubilee mark because that way that can be priced into every debt, given that there’s going to be this jubilee.

Mm-hmm. But what people probably don’t consider was an, an existing system. Why this could be so dangerous and why you’d probably want staggered jubilees based on a random factor like some, right. Because if

Simone Collins: you’re like, you’re 49 outta 15. Yeah. Because

Malcolm Collins: if it’s year 49 outta 50, [00:42:00] nobody’s making any debts anymore.

Yeah. If society grinds to a halt, right?

Simone Collins: Yeah.

Malcolm Collins: You know? Yeah. You, you, you need to, you need to have a system for handling that. Maybe the way that you could handle that is, oh, oh, okay. Here’s how I handle it. Okay. I stagger the way that jubilee’s work. Mm-hmm. So the Jubilee I say we’re gonna have a jubilee in 50 years.

Any debt made from today until the day of the jubilee is wiped out at the ju Sorry. Any debt made from today to 25 years from today is wiped out at the Jubilee. But at that 25 year mark, then you get into the next Jubilee period where any debt made from that 25 year mark to the end of the Jubilee, it’s wiped out at the next 50 year jubilee.

Mm. So you never have a period where there is more than 25 years before the Jubilee on the debt associated with that period. Now of course, biblical thinkers wouldn’t have come up with this idea. But that could actually work really well and I think be a very effective thing for [00:43:00] society.

Simone Collins: Yeah. Okay.

I like that. Yeah. So then let’s, let’s jump back ahead as we wrap this up too. The Omics Japan functional Debt Jubilee, but it’s a little more complicated than that. Okay. And it really only works in Japan and doesn’t cause hyperinflation and stagnation because you have basically a high domestic savings rate.

Like you have people who are very responsible and they just save their money. And you have cultural and political stability, which, you know, like not everyone’s great at that. So most countries would risk much greater instability if they tried this approach. And this is another reason why I feel like, you know, techno feudalism.

And our future is more like group, like the Israelites and then the techno puritans and the whatevers like the, the racist white national, its return to land group, like everyone taking care of their own, [00:44:00] because that’s how these, like, these solutions work. But what basically happened in Japan is that they, they manage this enormous public debt over 250% of GDP.

That’s, that’s a lot of debt. Yeah. Through a quasi jubilee mechanism without formal cancellation of their debt. And, and the way that they work is, is they use debt buybacks as a way to prevent market collapse and to maintain low borrowing costs for the government. Most countries avoid this because of the risk of inflation devaluation and loss of an investor confidence, which can destabilize their economies.

But the problem basically is that Japan. Has their, their Bank of Japan, like their, their central bank has been buying large amounts of Japanese government, that debt. So they’re buying their own debt and they now own around 40% of their own debt. And by purchasing the government bonds and then holding them, they, they owe the debt to itself.[00:45:00]

Which is interesting. And, and this prevents market turmoil. So the, the bond market has experienced surges and yields basically interest rates due to their lack of private investor demand for long-term bonds. And government calls for more spending and then worries about the huge debt to GDP ratio.

Higher yields mean higher costs for the government to service its own debt. And the Bank of Japan stepped in to stabilize these yields and prevent borrowing costs from spiraling out of control because without intervention yields on government bonds would’ve probably kept rising. And then this would’ve forced the government to pay much more to finance its deficit, making a debt spiral where the interest payments would consume much more of the public budget, which is what people are really afraid of happening in the United States, for example.

So with an aging population, obviously, and it’s slow growing economy, what you were pointing out to with demographic labs, which is why everyone has to be watching out for this. Japan relies

Malcolm Collins: so I can understand this better. So they did not, for example, like pay off normal people debts. This was just government.

No, no,

Simone Collins: no, [00:46:00] no, no. This is, this is with regard to national debt, which is the much bigger risk here.

Malcolm Collins: And they didn’t, they did not default on national debt. They didn’t

Simone Collins: default it, they just bought it back. And then now they own a little less than half of all of their national debt to keep Okay. The interest rates low so that they can afford to, to keep it.

They, they didn’t cancel anything. And by

Malcolm Collins: the way, the US, the Democrats have, have, have talked about like actually canceling our national debt, which I know, I know. Really mad if that happens.

Simone Collins: Yeah. And but the, the weird thing about this and why I’m like, this is just so I don’t understand, like I can’t fully wrap my head around it, to be honest, because the interest paid on this debt by the government is fun, funneled back to the government like they’re paying themselves.

I think that’s true for a lot of this means the government is not really, it’s not burdened by the debt servicing costs in any meaningful economic way. Okay. And then, but, but what essentially they did was they, they prevented a con, a conventional debt crisis. But this also meant that Japan experienced very slow economic growth and [00:47:00] deflationary pressures for decades.

And that is the big risk of a policy like this is both inflation and stagnation, which I think is kind of it, it’s one of the reasons why you don’t really see Japan being anymore. Mm-hmm. This source of breakaway innovation and success that it used to be like when you and I were really little, Japan was like the place where like all the robots came from, you know, and it’s not that anymore.

And I think a lot of that is actually downstream of this policy which created stagnation. I mean, you, you sort of create like zombie companies from this because it also allowed companies to maintain, like, to continue existing, like it didn’t kill companies that were inefficient. Because they were still able to get cheat debt, get

Malcolm Collins: rid of company debt, it just got rid of government debt.

Simone Collins: Well, but it still made interest rates low.

Malcolm Collins: Oh, so because they had really low interest rates. Yeah. So they

Simone Collins: were able to continue servicing their debt and continue to survive instead of just like die when they probably should have. And that’s sort of where this stagnation comes in through. But, so let’s just say that like what [00:48:00] we can expect and what I keep talking about and what you, you agree with too is that as the 2030s hit, and as countries, at least like the United States that can kind of get away with this, I have to contend with it.

They’re not going to like, from the way that politicians get voted into office, no one’s gonna get voted into office saying, I’m going to end your social security benefits, even though social security’s gonna go insolvent. Right? Like no one is getting voted into office for that. Like in France, when it was like proposed that we raised the retirement age, even young people came out and were like, I don’t support it.

Which is crazy. So like obviously that’s gonna not happen. So what’s gonna happen is governments are just gonna print more money. Just like Zimbabwe, Venezuela you know, like a lot of these countries and, and we’re gonna see inflation. So what we should avoid is basically any sector that, I mean, one like is subject to inflation, but then in terms of like, I think maybe more people declaring bankruptcy in the future just ‘cause they’re like, I can and people are starting to [00:49:00] take on more unsustainable debt.

People should just avoid any sector that relies on consumer debt. Like, so financial services, consumer finance, and FinTech, consumer discretionary. Because obviously like once you do declare bankruptcy and you can’t like.

Malcolm Collins: Well, my, my take on this is we’re not at a uniquely high period of debt right now.

Yeah. Isn’t that interesting? Just for bankruptcy. Yeah. Outside of government debt, which is uniquely high

but the government wouldn’t default on the debt because that’s gonna like damage all the old people who Yeah. For the one to control who gets elected and everything like that. Yeah.

Yeah. So I see that as being fairly unlikely unless some like radical socialist gets into power. Mm-hmm. And then if it’s on personal debt, I think a debt jubilee in the United States is virtually impossible.

Simone Collins: I feel like we almost have an ongoing debt jubilee just because we have bankruptcy as long as bankruptcy exists.

Because what happened when they were actual regular de Jubilee is like, nah, man, you were a slave. Can’t pay your debts, you’re a [00:50:00] slave. But no, it’s more, it’s more now that I’m like, after doing all this research and realizing, oh, actually this probably isn’t gonna happen on a consumer level, we have to be concerned about the government level.

What we need to avoid is, is stuff that exposes you to government stuff. So, I mean, okay, assuming the government doesn’t go crazy or whatever, the safest investments are the defense sector companies with minimal debt exposure and strong cash flow and internal inter international funds that are less like, yeah.

Although I honestly, I wouldn’t even do international. ‘cause I, I wouldn’t, right now

Malcolm Collins: I’m, I I kind

Simone Collins: of also though I like the Ron Swanson approach. Just bury your gold. Yes. And also crypto that might make gold or, or did I, what, what, who would, he was like, I have gold buried all over my, or do I? But that’s, I think everyone’s gonna be like, I, I believe in crypto or do I but like.

Bitcoin is at an all time high. I mean, Ethereum is kind of all over the place, but it’s, it’s also now like close to, its all time high.

As you can probably tell this episode was [00:51:00] recorded ages ago because it’s Christmas and obviously we’re not recording episodes around Christmas because that would be insane, although it was really fun to be going viral right now.

What a lot of people are missing about the viral clip is it was recorded back when Simone was pregnant, so ages ago. And as soon as she stepped on that question and that line of reasoning, I was thinking, how do I argue that she’s wrong?

In a way that isn’t so completely destroying of her position that the clip doesn’t get aired. And, and frankly, I thought I had failed. I thought, there’s no way she’s gonna air this. I just too concretely debunked the position she had, , but apparently not. , So I am very fortunate for that, but that’s why my arguments come off as somewhat nerfed.

Simone Collins: Do you wanna sell our Ethereum? Did we sell, we we have some Ethereum.

Malcolm Collins: Yeah,

Simone Collins: but what, what are you asking?

Malcolm Collins: I’m asking if you think we should sell it.

Simone Collins: Oh, should we sell it?

Maybe the last time we sold it all, we got a, we got a car just from like, [00:52:00] yeah. I don’t know. Profit. Maybe when we need the, the big sprinter van for our kids, we should do

Malcolm Collins: an inventory of what crypto we have and where in the near future

Simone Collins: stresses me out. I

Malcolm Collins: know

Simone Collins: I hate money. But yeah, I mean, I, I kind of, I think when it comes to like the Japanese approach of like, we’re now like, especially if we’re coming to this like capitalism is bad, let’s redistribute wealth.

Crypto is gonna be one of the really big things of like the way that people will, because it’s what the government is gonna have a harder time taking. Yeah. Be like, I don’t know, I lost it.

And there’s gonna be a lot of lost crypto around the time well think about

Malcolm Collins: crypto is you can build it into the blockchain that a, a debt mechanism works.

So you’re not really reliant on laws or the governments to ensure that somebody pays back their debt. The, the blockchain itself can make them pay back their debt.

Simone Collins: You could, but I’m just, I’m just referring to like, what are ways, aside from [00:53:00] literally burying gold in your yard. I mean gold is at all time highs too now.

Where you could more effectively shield your money from governments that are like. Money, please.

Speaker 3: Money, please, money. Please.

Simone Collins: And I, one worries about these things. Man, I’m just like going hard on parks and Rec. Yeah. This, this episode. Yeah. Basically the TLDR is yeah. Debt, consumer debt right now is actually not as bad as I thought.

Malcolm is kind of right. We basically debt jubilee’s, at least in the United States already because we have bankruptcy. And bankruptcy is just to get out of jail. Free card right now. But where things are unsustainable I is when it comes to social programs in the 2030s, and this isn’t even factoring in dependency ratio cascades, when we have more old people and like net tax drains and we have net tax contributors in countries with demographic collapse, just making this so much worse.

So things are gonna get weird. We are likely to face hyperinflation, we’re likely to face like a crisis of [00:54:00] capitalism and people turning to socialism and who knows if AI’s gonna be sufficient to help us through all that. Mm-hmm. And, and so we need to expect that. And just, just be ready for it.

And maybe the more self-sufficient you are, the better because basically only cohesive societies where everyone’s in to go on, like, things together, like in Japan or like in Israel, probably that’s, they’ll be fine. America, like we’re not, we’re not known for our

Malcolm Collins: through social cohesion. No, I think it would go over terrible.

I think we’re Venezuela in a few years if we do some sort of debt jubilee here.

Simone Collins: Yeah.

Malcolm Collins: So unfortunately I very much, I would love if California passes that law and the, the bunch of tech billionaires move, you know, I mean, I,

Simone Collins: I kind of don’t know how they couldn’t pass that law. Like how are people not gonna vote for that?

You know, so

Malcolm Collins: anyway,

Simone Collins: I’m

Malcolm Collins: watching it closely. It’s, it reminds me of that Freedom Tunes one where it’s like, you, you don’t have a million dollars. You don’t have a hundred million dollars. Like, why do you care? [00:55:00] Why do you care? And he’s like, well, it’ll crash the economy if we do. And they’re like, you don’t have a hundred.

Do you hear? This guy thinks he has a hundred million dollars. My God, I just, yeah. I, anyway,

Speaker 11: My concern is that forcing the best for four week stockholders to sell off 25% of their earning shares would completely crash the market forever.

Speaker 12: You don’t count a hundred million, bro. You don’t know. You don’t got a hundred million. No, you don’t. Don’t count. Hundred million.

Speaker 11: Okay. The ba, the best case scenario. Best case it raises enough to fudge the government for less than three days.

Malcolm Collins: I love you. He’s like, economists

say this is a bad idea. And then they’re like, do those economists have a hundred million dollars? Oh my God.

Simone Collins: We’re, we’re all doomed. I don’t know what’s gonna happen, but money’s great.

Malcolm Collins: All love you to decimal.

Simone Collins: Love you too. Okay.

Malcolm Collins: Well, I usually only listen to podcasts except for Malcolm [00:56:00] and Simone, but I, I always watch that. But we put a lot of effort into the visuals for the podcast, so I Why

Simone Collins: you do, stop giving me credit. Credit belongs where credit is due.

Malcolm Collins: Lighting a bit to see if that,

Simone Collins: there

Malcolm Collins: it is.

Simone Collins: Where was it?

Malcolm Collins: It was behind something not far to where I normally put it

and for people who ask about camera quality, the camera that I’m plugging in, the one that we like more is actually like half the price of the other camera. It is just so hard to find,

but it’s food. Thank you.

It is important to eat. . And I think I look good now. Right?

Simone Collins: You look gorgeous. You just look better by the day. And then, oh my gosh, when your hair turns white, I don’t know what I’m

Malcolm Collins: gonna do with myself. It the other way for people who don’t [00:57:00] know my family I don’t know why our audience would know this, but a, a trait that we have is our hair turns like actually white.

It becomes silver fox. Oh my gosh. And,

and it doesn’t decrease in volume or anything. Yeah, it’s, it just gets very voluminous white hair, which I already have quite a bit of that. You just, you know, it gets drowned out on my other hair.

Simone Collins: There’s more, there’s more than before, but I mean, you’re not anywhere close to going all white.

You got such a long way to go, so I have a lot to look forward to.

Malcolm Collins: What you like that look the, all the, all white look. It’s so

Simone Collins: pretty. I wish I had all white hair. I’m never like my, my family never really goes. White, I think. I don’t know. I don’t know. We’ll see. Anyway, anyway, can just, anyway. How did people respond to the episode today?

They liked it. What I found to be really comforting was there, you know, a lot of married couples listen to our podcast. Yeah. And a lot of women chimed in to say, yeah, early in my wife days, I too was sassy or dismissive or, you know, openly [00:58:00] made fun of my husband in public. And then I saw that it really hurt him and I stopped and I’m glad.

And then there were also husbands who were like, yeah, my wife used to do this. And I pushed through. And after a lot of talking about it, it finally worked. So like, I think a lot of the functional couples who listen to this podcast. Have been in this position.

Malcolm Collins: Mm-hmm.

Simone Collins: And I think, you know, we’re, we’re all just being raised in this culture where a lot of really normal or, or sorry, toxic things are normalized.

And it’s encouraging to know that people, when they see how logically this really hurts others is they, they get over it and they’re able to push about

Malcolm Collins: wives sassing their husbands. And I think only by watching this podcast can you escape the nightmare that you will live in if you don’t watch this podcast aren’t exposed to this.

‘cause then you get normal celebrity culture.

Simone Collins: Well, there was this one other anecdote that someone posted I don’t know if they were married or not. That I thought was really a, a great, I guess, analogy or just way to, to frame this differently too for [00:59:00] women that I, I might. Present which is, he was talking about playing a ga like Fortnite or some kind of like first person shooter group game with his little brother.

And he kept calling him like just trash talking him in the chat, just like calling him stupid and stuff. And his brother at one point, you know, wrote back and all kept, I’m not stupid, like in a really defensive way. And he realized that like this, this actually hurt his brother’s feelings. And he, he never, never would’ve called his brother stupid if he actually thought his brother was stupid.

You know, like he, he didn’t, he didn’t believe what he was saying in any way. And he didn’t think that his brother would’ve interpreted this as a real accusation or something offensive. But he did. And I think what’s going on with this sassy woman, or like belittling husbands in public thing is women think that they’re trash talking and being funny and witty and that it doesn’t hurt their husbands.

And they don’t realize [01:00:00] that in many cases their husbands are being wounded just like this little brother. And that they’re really hurting them. And that’s what one of the wives pointed out too. Like she used to do it in public and then she, she like saw how her husband reacted and that it just made him really sad and she felt really bad about it, so she stopped.

And, and that’s, yeah. So anyway, the comments were, were good, really. I mean, of course then, you know, we had all the men who were like, well this is, you know, it started ‘cause men stopped backhanding their wives. But like, that’s, those are very boring, boring comments. I, I love

Malcolm Collins: just the shock, shock, shock, shock dog.

You know, no one person

Simone Collins: pointed out since Alec Baldwin was got a, got his hat tip in, in that episode that the year that he accidentally shot someone on, on the production crew, on, on set of on a film set that, that was kind of the viral Halloween costume that someone came to a party dressed as Alec Baldwin with a.

A prop gun. Oh my God. And like the new version of that costume this year [01:01:00] is is Hassan and Kaya, which that’s just, that, that is the costume of the year. Maybe, maybe Twitch and ou another, another great themed costume. So

Malcolm Collins: yeah. That’s, that’s wild. And another funny thing about the whole somebody’s pointing out that like, it’s so weird that we live in a society where you have Hassan who is like this incredibly rich Nepo baby who lives this incredibly wealthy lifestyle, who’s like chief socialist of like the internet.

And then you have Asma Gold who is like chief capitalist of the internet,

Simone Collins: who grew up. He’s not even like a capitalist. No. He really supports social programs. That’s my favorite thing about him. He’s like, listen, like. I had this period where I was on the dole and I just like sat at home and played video games all day.

And now I gladly pay my taxes to support a new generation of men to sit at home and play video games all day. Like he pays it forward. And that is my, that is the best take on, on that that I’ve ever heard. I love it

Malcolm Collins: that that’s actually how he lived that lifestyle was just living [01:02:00] on welfare.

Simone Collins: Yeah. He, like, he owns it.

He knows exactly what he did on welfare. He knows where his welfare checks go. Like, I, I really don’t like the takes on welfare of like, well, these people are bettering themselves, these people are saving the world while receiving their welfare checks. Like, no, like that, that doesn’t, that’s very disingenuous as, and that’s just another great example of why and how Asman Gold is just, he is so beloved now because he’s so authentic and he says it like it is and he doesn’t sugarcoat anything.

And he has fun. So, yeah. But enough glazing asthma. Gold.

Malcolm Collins: Shall we get into the podcast?

Yeah, we can get into the podcast. I love you. Love you, love you.

All right. Lemme get it off. Very

excited for this one because you, you prepped me for it this morning and I was like, oh, that’s actually an interesting take.

I thought it was gonna be boring, so I put it off forever.

Simone Collins: Oh. I mean, this is different from, it is part of my money series. This is different from the what is Money one, which I’m still outlining. But I still think it’s interesting and I still think we need to talk about it, so, and I still think you’ll find some parts of it that are [01:03:00] interesting.

Oh, yeah. ‘cause yeah. You wanted to know about the Japan stuff and we, the Japan

Malcolm Collins: stuff. Yeah. I mean, I like when I heard you talking about this, I was like, oh, this is basic information I need to know for like informational literacy.

Simone Collins: Yeah. Yeah. And I, I mean, I wanna hear what your takeaways are from it too, because this matters from an investing standpoint.

Malcolm Collins: Mm-hmm.

Simone Collins: All right.

Speaker 13: Tell me about the presents. Guys tell me. Oh, wife said it comes a tower and a little lifeboat. I think. Map, I don’t know. And Iny, I think you got Titan. That is a really cool present.

Speaker 16: There’s the same top, there’s, there’s the dinosaur in there and there’s the beagle, the same beagle. There’s the whole culture. It’s the same little culture like this. There’s dinosaurs just being detected. You sound really excited. Yeah, we got some Mandarins [01:04:00] classic books. More side than horse. And what about you?

Speaker 13: You got a panda bear? Well.

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