What would happen to the economy if creditors gave everyone a clean slate?

Question

Would it completely ruin the economy?

Answer 1

No because no one's paying them, anyway haha. And people would probably spend more, knowing they don't have any debts to pay off anymore. It might actually help the economy. But who knows.

Answer 2

A lot of banks would fail and in a year things would be right back to where they were before, only with fewer banks.  consumers' slates would be just as dirty after a year only then they would have a lot few banks to choose from.

Answer 3

I think it would actually help the economy because then people would go out shopping which would help support local businesses.

Answer 4

It would destroy the financial system because  banks hold their assets in loans/bonds. All  money market funds, savings accounts and checking account would be would pay 10 cent on the dollar or less unless the government bailed them out with massive tax increases. Less than 3% of the of the home mortgages are in foreclosure, and that was enough to cause a recession,   a 100% non payment would stop the economy in its tracks..

Answer 5

Within 6 months a large number of people would be up to their eye balls in debt again.