Should we abolish Household debt? With Johnna Montgomery
Interview with Johnna Montgomery at her office, King’s College, 2019
Johnna Montgomery has written an amazing book, Should We Abolish Household Debt. I first met her with Hilary a couple of years back when she was at Goldsmiths and one of the leads at PERC (Political Economy Research Centre). I remember it clearly because there was a storm blowing the roads were swept with rain and broken umbrellas were flying across the roads. Hilary and I were on my motorbike, so it was a hair raising adventure. During our coffee, I really felt we clicked and ever since I’d been hoping to get an interview with her into the Bank Job film. But her book and the subsequent interview are so valuable – and of course a full length interview like that would be impossible to go into our feature doc, so I thought it would make sense to add it into one of our podcasts. Not everyone has the time to listen of course, so we have transcribed the audio below. Many thanks to Olivia Hird for all her work on this!
DAN:
So, Johnna. Creditocracy. Let's start with that. You know, professor Andrew Ross, this is what triggered me in this journey to discover about econ- because I never knew anything about economics, I have to say. Other than the very basics of, like, I need to produce, I need to make at least, you know a minimum every month to keep afloat. That was my grasp of economics before I started this.
JOHNNA:
Cash flow.
DAN:
That was it. You know and I thought, well, as long as I make that money, economics could take care of itself, you know. I didn't really appreciate, like, you know, the depth at which it affects us all. But when I when started looking into it and I heard about the people in America who bought up millions of dollars worth of student debt, and medical debt and then abolished it, I was just intrigued. I knew they were making a point about something. I didn't really understand yet at that point, what it was that they were - where they were really coming from. But when I read that book, the "movement literature" as it's termed by Andrew Ross, you know, called 'Creditocracy'. Then things began to really - I think scales began to fall from my understanding of economics, you know.
So I'd love to hear from you whether you think that that term creditocracy has value as a tool for analyzing reality.
JOHNNA:
Absolutely. Well, I think one of the most powerful contributions of the concept of creditocracy is really to expand the notion of finance as something that doesn't happen out there, or credit as something that is very abstract, but rather to think about all the ways in which increasingly, we need credit just to participate in economic life. We...you know, we could think of the very obvious examples in which today's generation unlike previous generations, have to mortgage their future to get access to university education, but also increasingly trade education. They need to buy their tools on credit. They need to get their certification on credit. They need to be paid apprenticeship wages, for how many years? And supplement their living standards with credit. So that in that way, if you don't have access to credit, you are denied opportunity. So you need credit to participate in the contemporary economy. You need it often - you need to access shelter. It's not just about buying a home.You need to have a good credit rating, to access private rented accommodation. And what happens if you don't?
So increasingly, credit is not just a gatekeeper to the formal economy. It is also a kind of reflection of your economic citizenship. Are you a good or a bad economic citizen? is largely determined by how much credit you can get and how good you are paying it back. And I think that's incredibly dangerous, because this has happened - this has been a sort of silent march towards a credit-based citizenship in which people have never really been asked or invited to reflect or comment on whether they think that's appropriate. Most people don't know what their credit score is, even though it will determine a large portion of what - of their access to the economy, as it were.
DAN:
Great answers. I love that that image of the - marching towards a credit-based citizenship.
JOHNNA:
Yes.
DAN:
That was really Orwellian. That was really intense. I love that. Really good. You'll wear your credit score on your, you know, it'll be like a little, your - like a little bit badge - like, almost tattooed on your forearm.
JOHNNA:
Yeah, exactly or on your phone, right? Your Apple Pay will soon display your credit rating in real time.
DAN:
Yeah, and your worth as a citizen, effectively, is being controlled by, you know, these big companies, which are outside of public scrutiny, people don't really understand, like, Experian and all those kind of companies.
JOHNNA:
Absolutely, yeah.
DAN:
Kind of shadowy, you know, things which are basically determining our lives. Okay, I'm just trying to think back to that conversation that we had a while back...
JOHNNA:
I can talk about anything you like, really. The new book. 'Should We Cancel Household Debt?' - 'Should We Abolish Household Debt?'
DAN:
Yeah, that's where we need to get, basically.
JOHNNA:
Well, and I like the abolishing, uh - At first, you know, it was "forgive".
DAN:
Yeah, that's interesting. It was going to be called "forgive debt," was it?
JOHNNA:
Well initially it was "forgive," but I thought, you know, but that was kind of commented on straight away as that, you know, what do debtors need to be forgiven for? I mean, forgiveness has this kind of religious, sort of moral connotation. And then it was "cancel" household debt. And then it was "abolish". Because I really thought a lot more deeply in terms of like,the credit peons that Andrew Ross talks about - kind of peonage, debt peonage. But more crucially about the acts of enslavement. So how, you know, how did slavery come about? Well, it came about via legal contract, right? This was about how do we legally define certain types of human beings as property and others as free, right? And - What is a credit contract? Where does all of its power come? You know, it's from the legal contract that says, you know, there is a creditor, there is a borrower. You must pay. There is no claim to hardship. There is no - you know, the onlyrelief you have is bankruptcy, and that's becoming more and more difficult. So I thought, like "abolishing" set the right tone, because this is not just about forgiving or cancelling, this is about recognising that the legal system and the regulatory system in place around debt is - is what needs to be changed. Not the debtors themselves.
DAN
Yes. Yeah, yeah yeah. I like that. And that's what we've always talked about "abolishing" as well. Because you know, "forgiving" clearly has that sort of paternalism inbuilt into the word. You know, like it sort almost infers stupidity on the debtor, doesn't it? As well, like "oh, you stupid debtor."
JOHNNA:
Well again, it puts all the blame on the debtor as well. Because ultimately, in this day and age, you know, who - Who needs to be forgiven? I mean, people take on debt, not because they choose to, which is the rhetoric. I mean, "you chose to take that loan." Is it really a choice to try to secure a mortgage so that you have a place to live that is not at the whim of your landlord who's completely unregulated? Is it really a choice to - to want to go to university when you know that university is the only way to get a high paying job? There are no other high paying jobs for non-qualified applicants. Are you choosing these things? Are you are you choosing to buy your groceries with credit cards? These are not choices that people make. These are inevitabilities. These are a set of circumstances in which it's eat or don't eat; take on debt or don't take on debt. It's not as clear cut as that. So to ask for forgiveness is to - somehow admit you're the culpable party here when you never really choose to go into debt. There's not really any alternatives for a lot of people, besides destitution, starvation or living in precarious private rental accommodation. And there's an absolute refusal on the part of the people that govern the economy to do anything about those conditions that might make debt less of a - of a stark choice for people. And so therefore, they shouldn't be the ones that should be asking for forgiveness in the problem of debt that we have today.
DAN:
So I'd like to just ask you quickly about the 2008 crisis. Just spool back a little bit. And what happened historically during that 2008 crisis and then how it was dealt with bypeople like - Gordon Brown and Barack Obama under the administration. Talking a bit about quantitative easing and how that's actually played out over the last 10 years.
JOHNNA:
Okay. Well the first point that I would make about the 2008 crisis, that is really important to remember in the contemporary context that, you know what triggered the crisis has not gone away in all the years, in all the 10 years since. And that is essentially that, a portfolio of non-performing loans, right? which were subprime mortgages. U.S. subprime mortgages were a fraction, they were not even 1% of global lending. They were a tiny, tiny basket - or pool of loans. They began to have as - um, the Central Bank, the federal reserve began to ratchet up interest rates bit by bit, 1/4 percent at a time. As that began to happen, people on these subprime mortgages began to not to default; they didn't pay their mortgages. And as those rates of default slowly climbed for this portfolio of loans, it was like setting off a spark in - in a tinder dry forest. And it lit a fire storm that almost burned the entire global system down because that's how fragile the global financial system is, that it couldn't withstand a slow ratcheting up of non-performing loans in a tiny pool of subprime mortgages.
But the interesting thing that happened with 2008, a story that I believe is untold about it, is the way in which we can begin to foretell the present day with the rise of a very kind of racialised divided you know, scapegoating political culture. Because who was the subprime crisis blamed on? Right? It was blamed on minority black and Hispanic people living in quite deprived areas of urban America. You know that they were the ones, it turns out, that started the global financial crisis by wanting more than they could have, which was a home. I have dug into the depths of every securitized loan pool that I could find of subprime mortgages, and I have found not one shred of evidence to suggest it was minority communities that were the trigger. It was race-baiting at its purest form, as long as we could blame this on a group of, um, poor people living in urban centers that people would be prepared to accept, that the crisis wasn't the fault of the banks that were lending billions and billions, and the owners of the investment pools that collapsed like, as a result of this non-performing - this small pool of non-performing loans.
So I think that those are two really crucial ways in which what happened in 2008 really sets the tone for what we all live, in a very frightening reality 10 years later, in which race-baiting is pretty much on a daily basis on the news. And time and time again, we're told that it's other people that are the source - you know, some outsider group that we can blame, that is really the source of all of the economic problems we have when we know in fact is an absolute failure of political leadership and governance of markets. And it is the blatant profiteering of large corporations that has caused the economic problems, global economic problems we still have today.
So in that respect, I think 2008 for all the things it needs to be remembered about, I want to tell that slightly untold story. To remind ourselves that from the very beginning of this crisis that we cannot see Brexit, we cannot see Trump, we cannot see the rise of fascism in Europe as separate - because it's political - from the economic reality that was created this time 10 years ago you know, in 2008.
DAN:
I totally agree with that. I absolutely agree with that. So well put, so perfectly formed.
JOHNNA:
I really just came up with that. I talk about it a lot but not that succinctly.
DAN:
Now let's talk about what happened in terms of the bailout.
JOHNNA:
Yes.
DAN:
You know, from there now that, you know, it was - I remember like, and this was during the height of my ignorance, you know, say about economics. 2008... I think I had just started up a kind of commercials production company. So I was like filming in helicopters down the Thames, and it was very glamorous and I was having really good fun. And I remember having no clue about economics whatsoever and thinking,"Thank God Gordon Brown has said he's going to bail the banks out" Because I just wanted some stability because actually it was a very precarious world that I was in. And I just needed a tiny bit of stability, you know? So I thought, this is great. We're not going to have the apocalypse now. Like, we're not all going to be like lights off.
JOHNNA:
No money out of the machine.
DAN:
Yeah, wandering through a sort of barren 28 Days Later version of London. So I was pleased, you know and I thought I'll still get paid for flying on you know, renting a helicopter or whatever. I was happy about that in a way. You know, in some ways, it was good to feel there was some form of stability for the normal people who had not participated in whatever was happening. That was my sort of very emotional response, and I think, probably shared by a lot of people. But what do you actually make of the solutions? You know, the quantitative easing packages. And have they actually helped people? What's the political reply if you like, to the question of what comes next in 2008. What do you make of that? Because it's been playing out for 10 years now.
JOHNNA:
Yeah. Well I think you know it is kind of interesting how, to your point - The crisis hits. The immediate response is we need to act. I don't think that was the wrong answer. I'm not such, you know, a believer in free markets. I think, as everyone was, every great believer in free markets, once the crisis hit began to believe well, uh huh, maybe the sharp end of the free market stick isn't so great. Banks going bankrupt. Lehman going bankrupt is more problem - you know, is more destabilizing than - more problematic than a pure ideological reasoning. So there was a kind of turn to pragmatism. And I think that that was warranted because - - there was great potential for what was the folly of people who believed that they knew how to price risk and transfer risk. We shouldn't all have to pay for their lunacy, ultimately. And the bailout, I think, was their first attempt to to like you said, not make the average person pay for financial calamity.
But the crucial problem with the bailouts was that there was never a systemic plan to fundamentally change or reform the role that finance was playing in society. Finance leveraged, because they're quite good at it, this weak position that they were in at the time to ensure their own mastery later on. So by playing vulnerable, by basically saying that, "there will be no more money and there'll be no more banks, if you don't bail us out" they protected their role as master of the economy. Rather than implementing an entire array of reforms that would ensure that they were servant to the economy. Which is really where finance ought to be. Finance and credit should be playing a role in which they are facilitating and enabling economic activity. Not strangling it or drowning it out with their own claims.
So that was a - the bailout in and of itself in the first instance wasn't bad. But what first became drastic reductions in interest rates. Cash bailouts. Then became unquantified risk guarantees. So this was the bazooka option. They had it in the U.K. They also then had it in Europeduring the sovereign debt crisis, in which the Central Bank says we will defend with any amount of money necessary to protect our financial system. Unquantified risk guarantees then become asset buyback. So we'll buy up all your toxic bad assets that you know, "your loans that you've made that aren't performing, we'll buy up." "The loans that you can't pay, we'll refinance." This all became then repackaged into quantitative easing that then again gets renewed over and over again. And what we've seen clearly from quantitative easing is that we've just implemented, in the age of austerity we have, in Britain, almost doubled the national debt. And that doesn't even include the debt that the Bank of England has taken on.
The Bank of England's balance sheet has expanded five times over the past 10 years, so it is one of the biggest balance sheets in the world. Creating all this credit to - to distribute through quantitative easing. So the effects on the economy are to deal with the debt crisis by creating more and more debt for the banks to perpetuate on the rest of us. So this has been a great blunder. And I think that people who believe they are the masters of the universe become quite sheepish when they have to admit that they can't even with our most sophisticated data sets and model - econometric models, prove that they've done anything of use with the huge amount of money that they've been provided by the state to fix the banking problem.
We are no further away from replicating 2008 today, than we were in 2009 or 2010. We are just susceptible today for a small portfolio of non-performing loans to blow up the entire financial system. And the banks will need yet another bailout.
The other problem is that quantitative easing has now reduced the yields on government, you know, debts so low that we're gonna bankrupt the pension funds. So they're also going to need a bailout. So we're in a position now where we are actually damned if we do and damned if we don't. So it was just pressing the pause button. It's like the economy had a major trauma in 2008 and we put it on life support for 10 years. And we need to ask ourselves now, every year, should we just keep this quantitative easing life support machine plugged in? or should we pull the plug and admit, um, that this system is dead?
So that's why I like the kind of metaphor of the zombie. The zombie economy is that the economy is dead, but it has been reanimated and brought to life with quantitative easing. But all these economic zombies want is more debt contracts. They have to eat, you know, instead of your brains. they need to eat up your debt. And there's just conceivably not enough human population with enough debt to keep the zombie hordes from annihilating the entire economy. They will do it. And then the collapse will come at that point. So I think that that's a key issue today, that nobody in power really wants to address, is that they must structurally reform away from a debt dependent economy.
But they politically can't because their own party, you know, is heavily invested by the fi - you know, finance, insurance and real estate industries so much so that they can't act. Or, they're just... putting their head in the sand and imagining there isn't a problem, you know and that we need some sort of centrist solution. Which is also not the issue at stake. We need fundamental reform of a debt dependent growth model.
One example I use to explain what I mean by a debt dependent growth model is that where we are today is that we have people are dependent on debt to participate in the economy. Businesses are dependent on debt or, you know, the banks are dependent on our debt and the government debt to continue their business model. The government is dependent on their debt to finance the banks and - and household debt to keep the economy ticking over, that we're stuck in, you know, in what is a very mutually sort of toxic relationship of dependence. In which we all know that we're destroying each other but we can't stop. And we can't stop because there's just no leadership and no vision for what would be an alternative to debt dependence. So a lot like, you know, the opioid crisis.You have soldiers coming home. They need pain relief, but very quickly they cannot function without pain relief. Now we have many, many, many people hooked on opioids. We don't know what to do with these people. We don't know how to stop. But the dependence level in the population is getting bigger and bigger to the point where it's tearing society apart. Debt is a lot like that. It's not just people that are addicted to debt. It is the government that is addicted to our debt. And it is surely the banks that is - that are also addicted to our debt.
DAN:
Wow, that's great. So that does bring us to your book now, I think. We're there now. I’ve just got another question to try and bear it in mind, But it's about what do we do? Really. And I think that is your book, isn't it? You're laying out some very clear ideas because you've been able to clearly identify the big issues that we're facing around economics. But you've also given a lot of thought, haven't you? To how we can look to overcome it.
JOHNNA:
Yes. Okay, so the solutions to the problems of debt dependence are really about identifying, the problem debts within, you know, that exist within the current outstanding stock of debt. And if you look, just a very basic measure of outstanding debt owned by the household sector in Britain, it looks like an actual mountain. So this mountain of debt sits atop of our society, taking first payment of your income regardless of what else has to be squeezed. So we're stuck in a kind of debt based recession. We only look to the future thinking, you know, hopefully one day I'll be debt free but it's so far in the future that we can't imagine it. So we try to maintain our debts. But we can't save. We can't invest. And we can't move beyond the financial crisis because we're still living every day with our own claims against our income. So how we solve this problem is by targeting the most toxic and troublesome debts within that massive mountain. The ones that are actually causing negative economic effects.
So I want to get away, first of all, from saying there are such things as good credit and bad debt. So, like I said, getting credit is good. You know, you want a good credit score. You wanna have a good amount of credit you can access. But debt? Ooh, debt is bad and having too much debt is a bad thing. I mean these are exactly the same category. We're just signaling different moral registers. So I want to get away from that. You can have good debt and you can have bad debt. And I believe that we can just address the bad debt in the system. How I propose that we do that is through a coordinated package of debt cancellation - debt abolition. That can happen in two different ways. That should work together.
One is to make cheap credit a public good. So we have enjoyed for the past 10 years, but even longer than that, historically low interest rates. The problem is that the household sector has no access to those interest rates because the low interest rates we've enjoyed for the past 10 years is only enjoyed by large corporate actors. Mostly banks. They trade in what's called the discount window. So the bank sets the overnight interest rate. What - what makes it negative is that inflation is higher than that rate of interest. So when you're a bank trading the discount window, you can actually get credit at a premium, at negative real rates. So a lot like how a savings account would act. It's better - you will make more money borrowing £100 million today at negative real rates, uh, more return - than you would taking that money and keeping it as asset or liquidity as capital. So that's important to understand is that, the discount window is only for a very small group of people. Low interest rates, they say, "Oh, we're low interest rates" It's only available to corporate boars or extremely wealthy people. The household sector in general pays many, many, many more times interest than that. So, if interest is that 0.5%...0.75% I mean you're looking at mortgages, a 90% mortgage is 4%. I mean, that's a great spread.
Not many businesses can get 3% yield on on any asset they invest in. I mean, this is a privilege that the banks enjoy. Um, and therefore, how we can eliminate the burden of debt is to allow households to have access to this cheap financing. Which is by creating a pool, you know, creating a pool of credit that is available to allow people to refinance.And that means giving everybody a 0% balance transfer. And I argue that we should do that up and to the value of £25,000 which the median real income in Britain. So allow everybody to have access to a 0% balanced charge will equal to the value of one person's median income. Because again, if the debt isn't a problem, I'm not forcing everyone to do it. I'm only forcing those people who can identify £25,000 - up to £25,000 - as a problem. If you're servicing your debts just fine and it's not a burden to you, then you do not have to take refinance. Although I believe the average rational person would. But it's important to note that that this is a choice, right. If you could take your £25,000 of credit card or student debt or payday loans or overdraft loans, you could bundle them all together. Get the 0% refinancing and allow, you know, spread the payments over seven years. Then we would at least begin the process of weaning ourselves off our dependence of debt. It would prevent people from borrowing more. Just cancelling the debt and then going out and borrowing more. But payments would be manageable, and whatever isn't paid off after seven years then, to cancel that.
The other way - the other kind of package that I advocate for is a comprehensive package of debt abolition. That is, um, for example like taking the example of the Debt Jubilee in America. To point out that companies that are discharging already their non-performing loans and getting a tax cut for it. That we now link that tax cut to the cancelling of the debt, not the selling it on to debt collectors. So you can still be free as as a lender to sell your debts on to debt collection agencies. But when you do that you will - you will no longer be allowed to write off your non-performing loans against your taxes. If you want a tax write off, the debt has to be cancelled. The value of what you're writing off has to be cancelled.And I think that's really important because again, we have to look at the distinct advantage that financial companies have, that lenders have. By debt collection companies, by buying your loan.that your lender has long since given up paying for, then pursuing, is like me going to a store, you know, going to H&M and getting a top on sale. Regular price £30, I get it for £2. I go back the next day to H&M and I say, "Okay, I want full redemption. I want £30 back." Right? They'd laugh in your face, they'd call security, first of all. But why is it that a debt collector is allowed to do that? Why can they buy at a discount and then claim full redemption value? That is purely a legal and regulatory reality that nobody has has dared to address. That could be addressed quite simply. And by cancelling debt we're recognising that this is an unfair business practice.
The other debts that can be cancelled, student debt, I think, is really important. The Jubilee 2021? I think. Danny Dorling's idea around cancelling student debt, is really important. I think debts, for example, that are old. I think debts, any debts originated before 2008 should be liable for cancellation because these are debts that the banks have long been bailed out for. There's I think a big cause - especially in housing debt, to look at levels of cancellation tied to primary residences so we can take the overheating of the housing - the debt out of the housing market to bring prices back down again. These are all ways in which we can use all the mechanisms that finance has at its disposal. Use them creatively, use them innovatively in order to create relief - debt relief, for people who are struggling. Because their struggling is not their own personal problem.
And that is the one thing I want to say about debt. You might not have any debt, right? You might think of it as everyone else's problem, but debt is a bit like air pollution; you might not drive a diesel car, but you sure as heck breathe the air full of diesel particulates. And you may not have debt, but you live in a debt economy that is wholly dependent on other people's debt.And the minute those people cannot take out any more debt or cannot service their loans, you're stuck in the same financial crisis they are. So in the end, we are all in this together, whether we wanna admit it or not.
Now in terms of the arguments against debt forgiveness, Uh, Martin Wolf talking about number one, banks will never lend again or number two, it's the savers that are really hurt. Number one is Chicken Little. Okay? This argument that banks will never lend again if we cancel household debt is Chicken Little saying, "The sky is falling, the sky is falling." It's the same thing they said to get a bailout out of us. That if we don't give them exactly what they want, they aren't gonna lend to anyone. Can I ask a question then? What is the point of a bank that won't lend? If what your threat is that this is a firm that won't trade unless we give them the terms that ensure their profitability, what is the value of a firm like that? To the economy?To the industry that they're in? This is not the role of finance to act as a - to hold us all to ransom that they get their preferential terms. I mean, every other builder and anyone else in a trade knows that you got to get out there, and you gotta make good decisions to turn a profit. But finance gets to say, I determine the terms of which I guarantee my profitability. And if you don't give me what I want, I will never lend again. Well, I would say that maybe we need to look at banks then that are capable of lending. Knowing that if they overlend, they're gonna have their debts cancelled.
We need businesses that are agile, not dependent on welfare. We need businesses that are sound enough that they'll make good loans. And if they make bad loans, they'll take their hit and keep going. All this is saying is that I won't do my job because I don't get what I want. I think we need to ask ourselves whether these are the people that we should we - should be taking economic advice from because they're pretty clear who - who they work for, which is their own pocket. Their own bottom line. They're not interested in stability of the economy. And so I'm very worried, you know, at how captured central bankers are, treasury officials, economists and banks by this basic principle that yeah, if we cancel debt, no one will ever lend again, the whole system will collapse. Well, what does that tell you about how fragile, and how poorly run the financial system is that it would collapse if we cancelled a portion of debt that is choking the economy. I mean, this tells you how bad the economic situation is.
Chicken Little is warning us that the sky is falling, but the sky is gonna fall whether we cancel household debts or people just can't pay their loans, or there's another corporate scandal. If you haven't noticed, financial crisis since the 1970s is getting bigger, more persistent. every cycle. Every crisis is bigger than the last. And their threat to us is if you try to take any action we're never gonna lend again. I would be worried about - I would not take what they're saying at face value. I would ask, what kind of business says this? And is it one that deserves the protection of the Central Bank and the treasury? I would think not.
The second argument around, is another - well, I call this the kind of German argument. The people who really suffer from debt cancellation is the savers, right? This again is quite a clever sleight of hand. And I instinctively believe it's a slightly dishonest argument Because either you know nothing about finance to make this argument or you know enough to know that you're gonna pull the wool over someone's eyes. This argument is based on an old model of banking that says we need saver's deposits in a bank, and what lenders are is multiples of those savings. This is intermediation. This has not existed for a very long time. Banks make money at the stroke of a keyboard. There are no savers. Rather what they're saying instead, you know, who the savers are in this argument is the people that own your debts. Or the pension funds are buying up people's debts, securitized debts, so if we cancel your debts, then the all the financial profit earned from those from those debts is gonna be eliminated, and that will hurt your pension. This, perhaps, is true. It will hurt your pension. What else is gonna hurt your pension is quantitative easing. I do not hear anybody who argues that we shouldn't cancel debts, that we should stop quantitative easing. Because one is a bailout for the banks and the other one hurts their profits. So, whenever, it's supporting bank's profits it's a great sound technocratic form of financial intervention. And when it's helping out the households, it is a form of heresy. You are going to destroy people's savings. Okay, I did not see in 2008 these same people going up to, to the financial institutions and saying, "Your actions have destroyed people's lives and let that be a reason to not bail them out." It's a very strategic emotional argument that they put out. Pensioners are not doing great. I won't - I'm 40 years old, I will not have a pension when I retire. That's how bad the industry is. If they want to choose blaming debt forgiveness for the reason that I'm not gonna have a pension, Uh, I would say that that is a very disingenuous argument. Pensioners and savers have already been hurt. Small savers are virtually decimated because the same system that says, I need to pay 4% on my mortgage pays somebody, you know, a small saver and a pensioner, zero on their savings - liquid savings. So how they go about blaming the debtor for all of this is again, a really cruel sleight of hand because it's simply not true, and they deploy this argument as a way to somehow justify that cancelling household debt will hurt people who are unaffected by it. Yet in all the other machinations of finance, we do not ever hear that argument deployed. That this action will hurt others, therefore, we shouldn't do it.
DAN:
Are you optimistic that we will meet the challenges that we have?
JOHNNA:
I'm increasingly more optimistic. I think that there has been a great opening up of the space in which people who govern the economy, both politicians and technocrats, are increasingly opening their mind and their horizon of possibilities to begin to think more crucially about the role that household debt has in the economy. I've been researching this for the better part of 15 years, and it has only been in the past two years, that I can say I've had real high level interest in what are the problems around household debt? Why would a Debt Jubilee solve these problems? What are the ways in which we can implement it? Um, I haven't had that before, so I think it shows that there's a kind of waking up of those who are in charge of the economy, that this problem isn't gonna go away. They can't just ignore it. They can't just give us, Uh, "banks will never lend again, it can't happen"and beginning to realise that maybe it should happen. Maybe it doesn't have to be complete cancellation, maybe strategic cancellation. We'll do enough to uplift the economy. But it's becoming clear that there are very, very few options on the table. There are no more mechanisms for the Central Bank to use. No more tools. QE hasn't worked. I mean we're running out of options now.
So, increasingly, debt cancellation is - or abolition is seeming like a good idea or a plausible idea in a way that it never did before. And I think that that's a very positive sign because we need to - We don't want to go out with a bang. It won't end well for anyone, not just the debtors. And I think that's the point, right? That I wanna make about - you know, we can't always think about debt as like a problem that poor people have. It's a debt that a lot of people share. And doing something about it will not just benefit the debtors, it will benefit the entire economy, the entire society.
This is not about poor relief. Debt relief benefits everyone in all kinds of ways. And therefore it should be considered more closely as a really viable common sense solution to ending our dependence on debt overall in the U.K.
DAN:
Well thank you so much. You were brilliant.
JOHNNA:
Oh, thank you.
DAN:
You were brilliant. So good.
JOHNNA:
I try!