What should be put under control is the overall debt (public+private). However, in the short term, as Michel Aglietta advocated it in a recent conference, public debt should replace private debt.
When we say "Public" we mean "State" or "Municipal".
When we say "Private" we mean "owned by an Individual or a Corporation".
This "either/or" assumption is obsolete.
IMHO we may reinvent Equity, through the use of alternative enterprise models, and in so doing, totally reinvent the economics of public financing.
We should replace Private (Corporation) Equity with Public (Municipal) Equity within legal frameworks other than the conventional Corporation.
Not only is that not difficult, it is actually already being done because it works. By way of example the City of Glasgow has three municipal partnerships, with more to follow, albeit with conventional debt funding.
Debt may be conventional: but it is neither necessary nor efficient.
The use of such Municipal Equity will revolutionise public finance. "Any economic unit can emit money. The serious problem is to get it accepted" Hyman Minsky
However the question of the existing debt remains...
It's refinancing existing debt with "Municipal Equity" that constitutes the "killer application" of a "Unitisation" approach....
Refinancing existing debt - a Debt/Equity swap - typically cuts the cost of existing municipal finance by at least 50%, (due to no capital repayment, and a lower rate of return) and probably a lot more.
This would free many billions for investment in new municipal assets (eg in affordable housing, renewable energy and energy savings) - which takes more time, and involves development risk.
Municipal Equity gives us an entirely new asset class with perhaps a 1.5% to 2.5% index-linked return, asset-based - typically on land and buildings in public ownership - and with a rock solid (because it's affordable) municipal rental stream.
"Pools" of such municipal asset rental streams would give rise to the sort of high quality, secure, low risk returns investors are currently trying, and failing, to get. "Any economic unit can emit money. The serious problem is to get it accepted" Hyman Minsky
