Well, it is better than nothing. I think we have to realize that nothing would be the Great Depression. So it will be a “success” if output only contracts by five or seven percent. It will be a “success” if unemployment only reaches 11 percent, because in the Great Depression output contracted 30 percent, and unemployment went to 25 percent.The debt burden, as a proportion of G.D.P., is in the region of 355 percent. So, debt is three and a half times the output of the economy. That’s some kind of historic maximum, and those debts aren’t going away.
I would point people to the various articles and research that suggests no combination of tax increases, or growth, can possibly catch the debt now. The debt has reached escape velocity.He goes on to explain his solution—for people to pay down debt, buy stuff to stimulate the economy, and put it in the bank.:
A 150K for every tax paying adult. Then combine it with new federal limits on credit creation, fractional reserve banking, and limits on personal credit extension. It would be like a mass, societal mea culpa. And then we move into a Slow Growth era. Those not in debt get 150K too. But again, restraints would be needed to discourage consumption. Under this type of plan, public policy would move down the spectrum towards Savings. That would be a huge change to American culture.
I am open-minded on this stuff, and largely neutral. Generally I advocate ideas that will work and reduce suffering. I'm not big on moral hectoring and making people pay too much for their mistakes. However, on the other side of that equation, I agree that chaos and hazard increase if people are trained that their mistakes will have few penalties.
It's a mess. All the solutions so far are a mess. I would at least like to see a discussion of a debt jubilee, with a 150K credit to all, and then new onerous credit creation restrictions, and balanced budget laws both at Federal and State levels.
Bottom line though is that I have few solutions.
Well I’ll tell you what you have to do—you actually have to cancel the debt. There are historical precedents for this.In the past, when excessive debt burdens were accumulated by government, they tended to do one of two things: either they defaulted—this is the Argentine solution—where you say, “Ah, I’m sorry, I’m afraid we’re not going to be able to meet the interest payments this month, and never again will we make the interest payments.”
The other scenario is inflation, where the real debt burden is eroded because the money that it’s denominated in loses value.
I don’t think we’re really going to be out of the woods here until something of that sort happens to the huge debt burdens of the U.S. economy. Either these debts will have to be fundamentally written off in some way, or inflation will have to reduce the real burden.