This is my response to the one person who has rendered an opinion.
Your sister told me you thought my plan would cause a global, ten year Depression. I thought about it, and decided you must be concerned about liquidity, about financing for new projects. Obviously eliminating debt does not immediately produce a surplus of investment capital. I have a solution to that: in some form or other, we create a surplus.
For example, we could deposit into the bank accounts of every person in America $10,000, which they could not withdraw for one year. During that year, the banks could lend it out, and the owner of the account would earn interest in the form of a CD. Once the year was out, this would serve as seed money for individual investments.
Or, since we would likely see immediate price inflation once the year was out, we could deposit the money, but require people to treat it as an IRA, only touchable upon retirement. That might be better. This would also take the place of Social Security, which will have to be radically altered one way or another, and which in my view should be abolished entirely, except perhaps for the charitable part of it.
As things stand, banks make money from nothing already, in the form of fractional reserve banking. This system would give them the money to lend, and make them financially bullet proof, as long as the loans they made did not go into mass default. As you likely know, our housing crisis would have been inconceivable without Fannie Mae and Freddie Mac.
In my view, we are going to see liquidity problems in any event. In the recent Basel talks, it was agreed that banks need to increase their reserves. This is necessarily going to constrict the amount of credit they can offer. Effectively, and without calling it that, the Fed and other central banks have raised the Reserve Requirement, which is always a tool of fiscal tightening. This will happen gradually, and at the same time as our national need for cash increases. I cannot see this resulting in anything but increased interest costs for our debt, which will create a feedback loop that will get us in hot water even faster than current predictions.
The situation is unsustainable. It might be fixed if we could fill Congress with true conservatives, but that will take years, and will likely not even be possible.
This plan appeals to people’s natural sense of greed and entitlement. The banks comes out OK, all governments come out OK, consumers with debt come out OK, corporations–large and small–come out OK.
I really do think that if somebody came out saying: I can make all your debt go away, then I can give you a bunch of money, that they would do well.