Sun Oct 13th, 2013 at 06:10:32 AM EST
Joseph Firestone is publishing a series of articles at New Economic Perspectives by way of a response to President Obama' cavalier treatment of suggested options for resolving the US debt ceiling crisis.
Part Two: Coins, the 14th and Consols
Apparently a commenter called Beowulf came up with the idea of Consols, so I thought I would weigh in with a comment, as this is a subject I aired on ET as long ago as August 2009 in the context of Iceland
I'm being a bit more radical by proposing a debt/equity swap on a US scale: Obama's Conversion.
Credit to Beowulf for suggesting Consols recently, but the use of Consols to create a National Equity is something I've been publicly advocating for over 4 years in the UK (where of course they began, and still exist as an anachronism)
Debt Free or Date Free? What can we do with our National Debt?
Sovereign Equity can revolutionise financing of UK Assets
More recently in the context of solving Cyprus's problems
The Case for Cypriot National Equity
I advocate Obama's Conversion, analogous to Goschen's Conversion of 1888 when UK Chancellor George Joachim Goschen converted and consolidated existing fragmented classes of stock into a single class of perpetual Consolidated Stock ("Consols").
A single class of US Consols could be issued and exchanged at a suitable price reflecting the tenor (date of redemption) and nominal rate of interest of all existing classes of US dated credit (mis-named as 'debt').
There would be a single market for a single instrument, and the question of default would disappear. The rate of return would literally depend upon the rate at which of taxation is collected by the US government. The market price would depend upon supply and demand.
Obama's Conversion would literally be a debt/equity swap on a national scale, since undated 'stock' was the original form of funding which pre-dated a 300 year aberration into interest-bearing debt (Loan Stock) and distinctly inequitable equity (Common Stock).
The ethical dimension of such a 21st century debt jubilee, could also be thought of as a conversion in more than one way.