What would happen if all debt was wiped out? It seems like it would be glorious – and maybe it would be for a moment or two – but the real world ramifications of Mr. Robot-esque events would be catastrophic. If you're not familiar with the critically acclaimed USA drama, it's about a hacker with a social anxiety disorder and clinical depression named Elliot Alderson.
Seeking a means to right perceived wrongs perpetrated by financial institutions, he ultimately joins a "hacktivist" group called fsociety, and by the end of Season 1, actually succeeds in wiping out all consumer debt (which comprises nearly 70% of total debt).
The immediate aftermath of fsociety's scheme shows people rejoicing in the streets for being freed from their loans, but the global economy is thrown into chaos. And that's precisely what would happen in reality. Like it or not, our economy is dependent on debt, and wiping it away in an instant would cripple the very foundation of our capitalist, consumer society.
If the events of Mr. Robot were to occur in real life, there would be some serious trouble for everybody... except the rich. They'd be fine. Here's what would most likely happen.
Consumption Would Cease
As people would literally be without the means to purchase anything, there would be an almost immediate halt to consumerism. The economy is complex, but the central tenet is the buying and selling of goods and services. If that ended in an instant by necessity, the economy would likely collapse. There would have to be an immediate legislative response instituting a new form of currency, at the very least.
Unemployment Would Skyrocket
In the aftermath of such an event, with no real currency in circulation and so few people actually participating in the consumer economy, thousands of businesses would collapse. Few companies could actually survive in a world in which anyone who owed them money ceased to owe them money, or if the very concept of money itself became inert.
Bottom line, unemployment always increases during a recession, and this hack would cause an immediate recession.
Crime Wouldn't Necessarily Increase, Though
There's a bit of a silver lining here: Crime wouldn't necessarily increase, and it could, in fact, (somewhat counterintuitively) decrease.
Christopher Uggen of the University of Minnesota conducted a study of crime rates during the Great Recession (2007-2010). What he discovered is actually pretty surprising. Despite the fact that unemployment rose and people were generally in more dire straights financially, crime actually decreased.
He notes there could several factors for this, but one directly linked to the recession could simply be that people were more apt to stay home. With no discretionary income for people to go spend (or maybe even no job to travel to), there were fewer people out and about. With fewer people in public, fewer crimes were committed.
The Very Definition Of Money Would Change And A New Currency Would Be Put In Place
Most of our net worth is determined by equity in fixed assets, ownership of big-ticket items like houses or cars. But as so few people actually have the liquid assets to back that up (in this case, that would mean physical currency by necessity), all of those people would immediately cease to own those things, in a sense.
So if the majority of what constitutes "money" disappears, what fills that void? On a local level, bartering could make a comeback, though the economy at large wouldn't likely adopt this system. Whatever the case, an arbitrary definition of worth would need to be assigned to something, lest everything collapse.
To stabilize the economy, a new currency would have to be established immediately. Given our current dependence on all things digital, this would most likely be a crypto currency. Not to mention, the production of any type of physical currency would take too long to distribute.