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There are four ways to reduce real debt burdens:

   1. by paying down debts via accumulated savings.
   2. by inflating away the value of money.
   3. by reneging in part or full on the promise to repay by defaulting
   4. by reneging in part on the promise to repay through debt forgiveness

I believe that there is a 'Fifth Way' solution through a new approach to equity, using legal frameworks based not upon Companies but upon partnership principles - although trust law could work after a fashion.

Conventional approaches are aimed at the quantity of legal claims over productive assets, particularly land. A debt/equity swap approach acts upon the quality of claims, by removing the repayment date.

Qualitative Easing, in other words.

.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Wed Apr 14th, 2010 at 10:53:46 AM EST
Since the wealthiest 0.1% of the US population probably hold, directly or indirectly, over 70% of the total debt in the U.S. economy, excluding foreign debt holders such as China, and since they or their representatives are among those who have captured Washington D.C. I am sure they would prefer your solution to my favorite:

I will be the skunk at the garden party and note that the duration of a balance sheet recession brought on by fraudulent investment activities could be significantly reduced were the guilty prosecuted, the fraudulent debts they created are repudiated, and their net worth clawed back as partial restitution.

Even in a partnership relation such as you propose the fraudsters would remain the ones with the claims on wealth. I find this morally repugnant, but then I have found most of what has happened, especially since 1980, morally repugnant. I suppose we could do both. First change the debt into an equity partnership and then prosecute the fraudsters and use clawbacks to finance Bruce's Brawny Recovery and/or buy back shares of the equity partnership, if that seemed desirable. I don't know how that might play out.

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Wed Apr 14th, 2010 at 11:27:47 AM EST
[ Parent ]
Since the wealthiest 0.1% of the US population probably hold, directly or indirectly, over 70% of the total debt in the U.S. economy

Well, the private share of the US public debt is quite small, so the wealthiest 0.1% do not own it directly.


source: wikipedia

But, indirectly, since the top 1% own a huge share of the financial wealth, they certainly have a disproportionate influence on the economic and political decision-making.

source:Who Rules America: Wealth, Income, and Power

"Ce qui vient au monde pour ne rien troubler ne mérite ni égards ni patience." René Char

by Melanchthon on Fri Apr 16th, 2010 at 03:51:03 AM EST
[ Parent ]
Considering that much of what is shown as belonging to the Fed, >50%, is "trash" they are holding for TBTFs and that the next largest portion, >30%, of the pie is held by foreign governments and individuals, and the third largest amount is held by state and local governments, over 80% is thereby accounted for. Of that I excluded the portion held by foreigners.

The Fed is subservient to the banks it is supposed to regulate, who are largely owned by those in the very top percentile, so an argument could be made that that money is effectively controlled by the very rich. Depository institutions and insurance companies are disproportionately owned by the very rich and recent events have shown the extent to which the market manipulators can profit from pension fund monies at the expense of the funds, so....

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri Apr 16th, 2010 at 06:59:51 AM EST
[ Parent ]
This is ownership of US Treasuries, so there is no trash there. I expect that most of that intragovernmental amount is the SS accumulated surplus, so that's actually debt to ordinary Americans.

Wind power
by Jerome a Paris (etg@eurotrib.com) on Sun Apr 18th, 2010 at 05:59:22 AM EST
[ Parent ]
None of the Maiden Lane "facilities" have any Treasuries. I am not certain if or where the GSEs would appear on that pie chart.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sun Apr 18th, 2010 at 11:11:13 AM EST
[ Parent ]
That chart is about ownership of US Treasuries (who owns them), not about what the public financial institutions own (US Treasuries and other stuff).

Wind power
by Jerome a Paris (etg@eurotrib.com) on Sun Apr 18th, 2010 at 03:13:17 PM EST
[ Parent ]
Funny what your mind will omit!

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sun Apr 18th, 2010 at 03:37:33 PM EST
[ Parent ]

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