The Effect of Mortgage Default

The cancellation of all mortgage debt would disconnect the destructive short circuit in the larger economy caused by the deflation of the housing market. Housing prices could fall to their natural level without destroying other sectors of the economy. The real productive economy would be supercharged as people could devote their income to the real economy rather than paying debt.

At first, the banking industry would be devastated, as the fictional basis of their assets -- our debts -- disappear into the imaginary world from which they came. Banks would still exist, but would be forced to return to the real world of reserve assets based on customer deposits. Banks would quickly grow on this positive and sane basis, as deposits streamed in because of the growth of the productive economy. Think of all the money you pour into your mortgage or rent every month. If that debt was suddenly lifted, what would you do with that money? You would suddenly be cash rich, not having to piss away all your money paying off debt. How much extra would you have to spend or save every month -- $500, $1000, $5000? No imagine that same question being answered by hundreds of millions of your fellow Americans. Trillions of dollars would suddenly flow into the productive economy. Much of the money would be saved for future use, thus allowing banks to quickly rebuild their asset bases. People who lose their jobs in the parasitical banking industry could quickly find other employment in a productive sector.

Banks should also be subject to new rules, limiting their profits and executive salaries. This sounds like a bad thing, like a betrayal of capitalistic principles, but remember, banks are not like other industries like car companies or oil companies, because banks do not produce wealth. Banks are a parasite on the productive economy. Bank profit means a loss in the productive economy. The only economic utility of a bank is based on how well they match saved capital with the needs of potential producers. Banks are serving a vital public function, yet have the potential to cause tremendous damage, as we now see in our current economic collapse.

The Federal Reserve system was created to prevent bank panics and smooth out the monetary system, but this is the second time in the last 80 years that it has presided over a massive and sustained financial and economic disaster. In fact the disasters under the FedReserve system are far, far worse than those that occurred without it.

While pondering the downfall of most of the banking industry, keep in mind that if all the money in the country disappeared today, we would still be as wealthy as yesterday, because MONEY IS NOT WEALTH. It is only a convenient means of conducting commerce. Our money system is now doing the opposite: strangling commerce and destroying productive activity.

By cancelling all debt, the economy would suddenly be transformed, with a flip of the switch, from a debt basis to a savings basis. The price of land and housing would fall to sane and affordable levels, as they were no longer subsidized by bank debt. Rents would fall accordingly. The boom and bust process of economic bubbles would stop as inflationary dollars no longer distorted economic activity and investment. Real savings, the basis for national investment and growth, would become the norm.

Cancel our doubt now, before the economic problems become too great.

Spread the word to your family, friends, and coworkers, forward an email to all your contacts, put up flyers in your community and school, donate some money to this website so we can pay for some advertising, call your lawmakers and begin the lobbying process. Do something productive, and never forget: Yes, we can!