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Debt, Wealth and Climate
Based on the German Currency Reform of 1948 and the “Modern Debt Jubilee” of Steve Keen, a globally coordinated orderly debt deleveraging mechanism is proposed to address the global debt overhang problem is proposed. Since the global debt overhang and lack of sufficient climate finance flows are interconnected, Climate Authorities are added to the mechanism to discuss how this may help to improve the situation is discussed.
The authors would like to thank Yılmaz Akyüz, Dirk Bezemer, Jayati Ghosh, Michael Hudson, Michael Hughes, Steve Keen and Richard Vague for discussions. Michael Hudson brought the German Currency Reform of 1948 to the authors’ attention. Michael Hughes helped improve the authors’ understanding of the German Currency Reform of 1948.
In a recent article (Öncü and Öncü 2019), we proposed a globally coordinated debt deleveraging mechanism with a climate component to address the global debt overhang problem. And a few days after we finished that article, on 14 November 2019, the Institute of International Finance (IIF) issued a warning in its Global Debt Monitor Report that “[h]igh debt burdens could curb efforts to tackle climate risk.” The IIF (2019) wrote
Global climate finance flows remain far short of what’s needed for an effective transition to a low-carbon economy. Total global issuance of sustainable loans and securities to date amounts to slightly over $1 trillion: for context, the IPCC estimates suggest that an average of $3.5 trillion ($3 trillion) in 2010 US dollars is needed annually to prevent global temperatures from increasing 1.5 (2.0) degrees Celsius by 2050. To achieve this goal, public and private climate finance flows will have to be scaled up rapidly.
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