However, the point is that the actual value underpinning the loans, which is that of a stream of land and property rentals, is nowhere near sufficient to meet the present, never mind the future, obligations to repay principal and interest that exist.

I believe that the solution to the current problem lies in what is effectively a debt/equity swap by creating quasi REIT vehicles ("Land/Property Rental Pools") which will acquire the properties and then rent them out, probably to the existing - defaulting - borrowers.

Why should this work?

(a) there is no capital repayment, since this is "equity" based on ownership of land, not debt secured against it;

(b) the "Rental" payment may be set at a reasonable (affordable) level, say 3 to 4% but then index-linked.

So the property Occupier/ Co-owner will probably be paying less in cash terms than he was under the original loan.

The property occupier may then acquire equity simply by paying more rental than is due, and thereby acquire "Equity shares" or units in what will essentially be a "pool" of land and property rentals.

While the banks now have a security perfect for pension investment which they can sell on.

I really don't see why such a Debt/Equity approach should not work. After all, buying productive assets with borrowed money, and then packaging them up in funds and flogging them to pension funds, is how people like Macquarie make all their money.

"Any economic unit can emit money. The serious problem is to get it accepted" Hyman Minsky