Our rising debt levels are becoming unsustainable – soon we may be talking about wealth confiscation

According to research from the Bank for International Settlements, levels of debt this high eat into the permanent growth potential of the economy: more debt equals less growth. Eventually, this put us into a Catch-22 situation. To pay off our debts, we need to increase growth, but to increase growth, we need to pay off our debts. This may sound like an argument for more austerity, but it isn't. Unfortunately, even more spending cuts wouldn't help much. Rising household debt levels are partly a consequence of falling government spending. Cut more, and you will end up with lower growth and higher household debt. It's the paradox of thrift in action. If everyone tries to pay off their debts at the same time, then unless we miraculously find new export markets, the entire economy will shrink, and no one will succeed.

So what on earth can we do? Well, BGC Partners has one striking idea – confiscate wealth. It is often forgotten that for every debtor, there is a creditor; even in Britain, most of our debts, household and Government, we owe to each other. Huge sums of money are tied up in pension funds, trust funds, investments held overseas and so on.

In a report published last year, the firm suggested that a one-time wealth tax of 27 per cent on financial assets would be enough to reduce the total non-financial sector debt burden to 180 per cent of GDP – the amount that the Bank for International Settlements says is the maximum sustainable amount. They also reckon that for much of the West, it could become the only logical option.

Confiscating wealth would be hideously unpopular and unfair. The only significant wealth tax we have, inheritance tax, is incredibly modest and yet widely hated. Most people think that once you own money, it should be yours to keep, and rightly. But as growth slows and austerity fails, this idea may gain traction. Debt forgiveness has always been one of the principle demands of revolutionaries: if we don't deal with our problems soon, we may start hearing the calls again.