I wrote here about a debt jubilee. Proponents of a debt jubilee include heterodox economists Steve Keen, and Michael Hudson. They are two of the handful of economists who predicted the GFC.

Anything that humans have done to rip other humans off can be undone with the benefit of time and the will.

The systemic imposition of compound interest 'created out of thin air' can be undone. Writing off household debt will restore purchasing power, and may defer economic collapse.

But that's all it will do. Buy time.

Affordable dense energy has no equivalent, and its depletion will bring about economic collapse and massive food shortages. Guaranteed. It's only a matter of time.

We're not going to husband what's left or ration the benefits, let alone on the basis that 8 billion of us were born equal.

Added to all of that is climate change. Even if we stopped the burn tomorrow, it will take time for the earth to recover from its 'smart monkey' plague.

And, there's always the chance that the 'post collapse' biosphere won't be human friendly, notwithstanding that there'll be far fewer humans and domestic animals to be friendly to.

If you want to know more, read Richard's Vague's new book, The Case for a Debt Jubilee.

And, for my Christian readers, the Lords Prayer was changed from "and forgive them their debts" to "and forgive them their sins"

Let's paint a quick picture of a banker.

There are not many privileged bankers in our 8 billion. Even among the bankers, there are not many that influence lending policies. That's an enormous concentration of power. What could go wrong?

We'll use a bank sheep as our example. One able to make loans by rote.

Our example sheep only sells the local money for profit. We'll assume that other bank sheep lend in foreign currencies.

His cost of sales is zero, and he can maximise profits. His losses are socialised, that is, government bails out bad banks (too big to let fail).

When he wants to lend, all he needs is a prospective borrower who's prepared to sign his loan agreement. The loan agreement is written by lawyers for the bank's benefit.

The money to fund the loan isn't coming out of savers deposit accounts. He's not going to borrow the money. He's not going to consult the bank's regulator. He's not going to call in IOUs from the central bank (Reserves).

If the loan can't be repaid, he won't have to repay his bonus. He won't get involved in the messy clean up. The evictions. The crying children.

And, then all the bankers will swap banks, and none of them will learn a bloody thing.

Other bank sheep, with the help of corrupt credit agencies, will sell the bad income stream (loan) to some indifferent fund manager who cares nought for your retirement savings. He won't return his bonus either.

So the money is created out of thin air when the borrower signs the bank's loan agreement. As soon as the signature hits the page, the banker prepares for a long lunch and maybe a round of golf, daylight permitting.

The accounting is:

Bank asset

1. debit income stream (IOU from the borrower)

Bank Liability

2. credit borrowers bank account (IOU from the bank)

The banks IOU is called money. Your security is that the bank stays in business.

An IOU from the currency issuing government is the best security but it's denied to you. Your retirement funds have to be invested in neoliberal markets.

I'd much rather invest it with the Reserve Bank.

I'd much rather put my money in a government owned bank. The Commonwealth Bank was privatised if you remember.

The banks IOU from the borrower is secured by property and insurance.

Our banker isn't silly. The borrower, when he signed up, promised to compensate the bank for the erosion of money value caused by inflation, and the risk of default by the borrower.

The bank wants to eliminate risk so the borrower will also borrow the insurance premium.

The borrower's also allowing the bank to make a profit. That profit is determined by a market which may not be competitive. That's the neoliberal way.

In Australia, the banks operate as a cartel. I haven't been invited to their meetings at the Melbourne Club so how do I know?

Australia's banks are among the world's most profitable. They've seen off the government owned bank, building societies, credit unions, and foreign banks.

And, of course, the locals are foreign banks. We don't own any of them. We need to look to the US banks, and the GFC, is see how things might pan out when the shit hits the fan.

And, finally some banks were prosecuted recently but got off. Can we say that they've got deep pockets and friends in high places?

Let's stop there because bank management of risk could go on forever. We haven't covered derivatives et al.

The bottom line is that inflation, risk and profit are rolled up as compound interest.

The clever reader might be wondering where the money comes from to pay the compound interest if it's not the bank.

There is only one other entity that creates money out of thin air. The federal government creates it when it spends into the non-government sector.

"Compound interest (or compounding interest) is the interest on a loan or deposit calculated based on both the initial principal and the accumulated interest from previous periods."

So this is why a debt jubilee is required.

If the borrower can't make the loan payments, interest spirals out of control.

If the price of say oil increases faster than income, the borrower may not be able to afford it and so will borrow more at a compound rate of interest to make ends meet.

The decisions in the 70s to create a fiat reserve currency, and to make the sheep eat credit, has come home to roost. The world is awash with household, business and local government debt that can never be repaid under any circumstances.

Banks are allowed to hide their bad debts, so we're in for any almighty shock when all is revealed.

We can't repay the debt, and we can't afford the energy that drives our current lifestyle.

We seem to be worrying about a whole lot of things except this.