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Economic Re-Boot and Summer Grace (by Tomáš Sedláček)

Those, who are familiar with the television series, I.T. Crowd, or have ever phoned up a computer service hotline, know that after listening to the frustrated user describe the specifics of the ongoing malfunction, the first suggestion by the computer experts will be: “Let’s try to turn it off and then back on again”.  Programs are pure rationality, mathematical algorithms, zeros and ones, no emotion, no inconsistence, no psychology, no philosophical views, no animal spirits ... nothing. Nothing but pure logic.  And here's the interesting thing: computer programs also get stuck.  So in the moment when its functionality becomes inoperable, the simplests form of troubleshooting is sometimes the most effective. Why worry about the specific causes? Bill Gates gave special recognition to the software programmer who came up with the technique of simultaneously holding the CTRL, ALT, DELETE buttons to quickly reboot the MS Windows operating system, even when the system was totally frozen. After all, systems simply crash from time to time and they need to be restarted.  Why waste time and energy considering a complex investigation into the causes: Simply reboot, wait a bit, and then get started again.  Could such a fix to a system-wide credit freeze work just as well?

A similar occurrence may happen from time to time within a market or society. And like many facts and conditions of life which our ancestors were well aware and prepared to deal with, we have forgotten their existence and consider them an alien phenomenon when they confront us. There was a regulation in the Old Testament, which rebooted an economy once every 49 years. This cycle is roughly equivalent to the Kondratiev wave, which takes about fifty years. This innate tendency in the economy was discovered independently by two Dutch economists at the beginning of the last century, but because nobody really bothered to translate their work into any other world language, the world offered its gratitude to them only posthumously.  However a far worse fate was destined for Kondratiev, his finding somehow upset the Soviet dictatorship and upon refusing to withdraw his new theory was sent by the authorities to the gulag to die.

Due to the nature of our society and ourselves, finding such a cyclical trend through simple observance is not easy, usually because within any fifty year period a large scale war erupts, or some other insanity  acts as a catalyst for the system to "reset" itself. Somehow all the pressures, conscious or subconscious feelings of wrongs and injustices, small and large deceptions, thinking only of profit, the consequences of selfishness and stupid decision-making, somehow have to escape from the pressurized pot. Now the question for the clever: how to do so with no spilt blood, to remove the faults of the systematic functions, how to be prepared for the unpredictable and how to resolve the accumulated sense of injustice to be perceived as a fair result?

Summer grace

I do not want to say that we should introduce into today's economy an institution from the era of the  Old Testament, but there is something about this ancient idea should be but it will probably never be considered feasible in our modern era by the powers that reign in and over our debt-based society. This ancient concept was a simple economic reboot; once every 49 years, debts were forgiven and the slaves, who were more often than not designated as such because of debt, were released and the land was returned to their original owners.  By this method, contemporary antitrust actions to restrict the extreme concentration of capital in the hands of the few would also probably be eliminated.

But mostly, it was a system reset, with which everyone could count on and thus calculate exactly how long from any given point in time it would occur. In other words, if I know that my computer freezes weekly, it’s not a bad idea to do it actively “on my own”, when I am not consciously leaving something important unfinished during this temporary “offline/online” reboot, this approach to the procedural management is less risky and more transparent. And third, it was a move that was fair, in other words at the beginning of the game we all accept it, because nobody can say for certain how the market will react and where the final at the end of the 49 year period, for each participant there exists a huge question: whether it will be positive or negative for them.  Regardless of the individual standpoints, capital is shifted from the rich to the poor and not the other way around, but the motivation to try and prosper still remains. It is also necessary to note that did not gain anything, but land and freedom, therefore still remained rich and poor also after this summer grace, but the biggest gaps in inequalities were systematically erased.

Furthermore, a great testimony to the legitimacy of this concept is the fact that Jesus began his first public sermon at Nazareth as quoted in the Book of Isaiah: “I came to proclaim the summer of grace.”

About the Author: Tomáš Sedláček (1977) is a Chief Macro-economic Strategist at ČSOB. He served as a non-political expert advisor to the First Deputy Prime Minister and Minister of Finance of the Czech Republic, with special responsibility over fiscal consolidation and the reform of the tax, pension, and healthcare systems. He also served as an economic advisor then-president of the Czech Republic, Václav Havel. (