[P2P-F] Fw: [gang8] writedown debts?

Fri Oct 5 14:52:01 CEST 2012

----- Forwarded Message -----
From: Hugh Whinfrey <market at svarsmaal.dk>
To: gang8 at yahoogroups.com 
Sent: Friday, 5 October 2012, 11:46
Subject: Re: [gang8] writedown debts?

Thanks Dirk. Keen's current business partner saw my 
original proposal for this  
methodology quite some time ago on another mailing list :-)) He later left it 
in a huff that I thought was a bit irrational. I'm 
starting to connect some dots now.... 

A couple other points I should make 

1)  I don't see where it is fully sufficient 
to confiscate the "weapons" of the 1 
percent. 

The real issue is the disappearance of the middle 
class and that the middle class 
needs to be recapitalised - and if that can be done 
without the 1% standing in the 
way of the critical path of it, then the 
justification for pursuing it becomes one of ethics 
and practicality rather than absolute necessity.  

So what I had in mind was on the order of EUR 10,000 per year per taxpayer,  
or more, for a number of years. Young people 
in their 20s these days in both 
Euroland and the US are in an impossible situation without this kind of help, 
they are being marginalised before they even leave 
school.Which means that  
the 1% are otherwise going to have to fork out 
massive social transfer payments, 
and that's no way to run an economy. 

2) One of the major problems we have encountered in 
the markets is shorting and  
naked shorting. It 
seems some jurisdictions allow the money received in a short 
sale to be spent and never, ever booked as profits 
if the short is never formally closed.  
So taxes are 
avoided, and operating capital is manufactured for nothing if the short 
is 
naked, particularly if the underlying is driven out 
of business. The issue is - what is the  
interrelationship of "debt forgiveness" with this 
practice. It *needs* clarification as 
it can look like simply a tax-avoidance and 
prosecution-avoidance endgame in relation 
to these practices.  

So the terms and conditions of what is going on 
with it need some work. 

Hugh 
----- Original Message -----  
>From: D.J.Bezemer  
>To: gang8 at 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 at 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   
>   
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