----- Original Message -----

From: D.J.Bezemer

To: gang8@yahoogroups.com

Sent: Friday, October 05, 2012 12:52 PM

Subject: Re: [gang8] writedown debts?

Hugh, good plan, on the same principle as Steve Keen has proposed (I think he explained it in a BBC Hard Talk Interview - you'ff find it Googling).

 

My reply plan to Gunnar had the disadvantage that it helps ONLY mortgaged households, which is politically a no go (and rightly so).

 

I wil try to put some Dutch numbers on this to illustrate. 

 

We will only be taken serious with serious, simple-design, workable plans. 

 

Even so, immediately cries of 'inflation! Weimar' will be the response. Knee jerks. 

 

Dirk 

 

On 04-10-12, Hugh Whinfrey <market@svarsmaal.dk> wrote:

 Geoffrey writes:   >So come on all. Let us have some constructive, well thought out, >viable plans for rebalancing society without wrecking the economy >in the process. Let us get on with the hard work.   Here's a stab at it, I have proposed something similar elsewhere in the past:   --------------------------------------------------------------------------------------------------------------   I see several issues to a write-down.   1. Fairness/equity. 2. Simplicity/minimal administrative costs. 3. Economic stimulus for business. 4. Actual debt level reduction. 5. Rectification of impractical and dysfunctional imbalances. Try this for a rough sketch for a solution:   Agree to waive the structure of the present financial system for a pre-defined period of, say 10 years, and let the national treasuries 'print' money by crediting individual taxpayers (i.e. a rough proxy for 'the labour force') with a specific and rather large amount each year for this special period. Created out of thin air (we do know how to do that).   Then take the existing taxation system, and drive it in reverse to dispense these credits to the individual taxpayers.  The exact same tax-free sum for each taxpayer for each of these years. That is the crucial part.   It must not be a token amount but rather an annual amount carefully calculated to actually fix a set of problems.   So the mechanism to do these "helicopter drops" is already there. The income tax system can continue to operate as normal otherwise. This credit would be just another line item on the form and the (whopping) bottom line would then be refunded as usual.   These annual amounts should be calculated so as to bring 'average' households with troubled mortgages and/or excessive debt down to a managable level. Households worse off than than this level will still fail and those better off will have a tidy surplus that will go into bank deposits that will provide the needed economic stimulus once lent out with all the attendant leverage involved. No individual can complain of unfair treatment and business can get back on its feet. The key there is that business entities have to earn their way out of any of their debt problems. With plenty of money around now for them to chase in 'the old-fashioned way', they will do so. Just let capitalism do its thing there and knock off the bailouts. Businesses that can't cut it in the 21st century need to die rather than be put on life support. So the garbage needs to be cleared away regardless. Bailing them out with subsidies doesn't achieve that and if we're doing some wholesale proverbial urban renewal then this is the time to do that.     If this is done across the board in the EU, US and Japan simultaneously the relative currency effects within the block will not be particularly disruptive. Much dubious debt will actually be paid off because the debtors will have the cash to service and pay down the loans to more reasonable levels, i.e. even the businesses by wayof earnings.   Yes, it will be somewhat inflationary, but the inflation will contribute to the solution too. Such a plan should at least allow us to avoid the hyperinflation endgame that probably is in the cards otherwise. And this is also why it should be spread over a pre-determined fixed period of years. The additional effect of this stimulus generating actual real economic activity should also work to contain the inflationary effects.   I can note that this might mean some nasty things for bondholders. Although, I have severe doubts that rates will stay at zero forever, so that isn't in my opinion a sufficiently good objection to going forward with something like this, i.e. bondholders are ultimately going to take it on the chin anyway.   Also, I would bet that politicians supporting and implementing this would find themselves on a fast inside track to re-election, which is a considerable point in its favour. A chicken in every pot works much better than confiscating the contents of a voter's pantry.   About the only other thing I would add is that doing a major re-think of the educational system at the same time is probably appropriate too. The skills folks need for the future will be different. Self-sufficiency skills and business skills need to be taught beginning in the primary schools. At present we're just educating kids to live off of public assistance. Teach them how to fend for themselves and most will actually be able to do so. At the very least how to grow your own food, do basic accounting and some basic marketing/sales procedures.   Hugh