How to Solve our Current Crisis: Cancel All Debt

Our whole economy is jammed up because we have fictional debts that are tied to assets that are no longer worth their book values. In reality, we are as wealthy as we were last month, last summer, or last year, but our economy is no longer functioning because of accounting rules that declare the debts greater than the assets, and thereby prevent banks from fulfilling their function of lending money. The still-collapsing housing prices continue to wreak havoc on the financial industry, by introducing a general deflation into the economy. This deflation is sending everyone's balance sheets further upside-down, since those balance sheets are based on debt that is tied to an inflated asset price.

Everyone sees that we are in a short circuit, an ever-widening crash, but no one can grasp how to break the cycle. The original idea of the bailout was to use government money to buy distressed assets. Now the idea has morphed to wholesale cash injections into troubled companies and industries. Congress is also floating the idea of a new economic stimulus package.

But none of these measures can work. We have already crossed over the event horizon into a deflation, and that deflation is still picking up steam. There is no going back to the artificial boosts of inflationary spending. Extra money put into the system now is unable to bridge the gap between deflated asset value and the debt book value. The banks themselves are unable to release the extra money, because their asset levels are continually falling and they need the extra money to shore up their reserve requirements. Extra money given to consumers in an economic downturn only gets hoarded, not spent, thus preventing any stimulus from happening. Further, because most of our productive economy is based overseas, it is not clear how much the American economy would benefit much from the increased spending, as the stimulus would mainly benefit some foreign country's productive output. And, as we have seen, government redistribution does not increase real wealth anyway, so how does that help? If not redistributing wealth, the government has to rely on more debt spending, which is the source of the problem to begin with!

There is only one way to end the financial short circuit, to get us out of the destructive black-hole void of debt. The solution to our current crisis is quite simple really: cancel the debt itself. All debt, credit cards, car notes, mortgages, the national debt, all of it. Hit the reset button on the financial system. We have reached the blue screen of death, the system is totally locked up. The negative effects of the financial melt down are now negatively affecting the real productive economy. We have already entered a worldwide recession, this is getting really serious.

By releasing all debt, people will get a fresh slate, and can start saving again. Banks, whose only assets are completely fiction -- they call debt an asset -- would take a big hit, but so what? Banks don't contribute to national wealth anyway. Their only utility is to enable real productivity, and in that basic function, they have completely failed, and are in fact, counter-productive right now.

Despite having most of their assets (our debts) completely liquidated, the banking system would quickly recover anyway, because we could use our incomes to start saving again. The productive economy would be truly stimulated and bank accounts would fill up quickly, because all the money we currently use to pay off debt would go into savings, investment, and consumption. Imagine not having to pay all that money every month to your mortgage or car payment. All that money is going to go somewhere, either spent or saved. Given that financing life through credit would no longer be an option, people would begin saving in earnest again.

In short, everyone is given clear title to all their assets that banks currently have liens on. Instead of having to spend thousands of dollars on their mortgages and car payment and credit cards every month, the families of America would be able to save and spend that money. The people who lost their jobs in the financial industry would be able to find new employment quickly in the productive economy.

The American economy resets, the banks reset, we start from scratch, with all of our wealth freed from the fictional burden of debt. From this point forward, people, businesses, and governments are forced to spend only out of their savings, leading to the always-rising standard of living that America experienced for its first 150 years.

Today's problem solved, Great Depression 2 averted.

Spread this idea to everyone you know. Talk about it with your family until you can understand it and explain it. Take it to your Representative and Senator and begin introducing them to the idea, because they are going to have to be the ones who pass the law to make it happen.

Let's get it done now, before it is too late.