This might sound crazy and would create may questions (especially on feasibility), BUT consider this plan in it's entirety and ask if we'd be better off in 5-10 years from now or worse off...
1. Have the Fed stop the bailouts of the banks, and their "liquidity" programs, and just buy at distressed prices the massive (not smaller) RE, CRE, credit card, student, etc loans off the books of the big and smaller banks and households. Basically, we take the loss on these debts and experience some real short-term pain, but eventually will relieve the consumer/household, corporate and banking sector of bad loans so that they can lend and businesses can borrow again.
2. Send $10,000 to each household as a stimulus and allow them to spend it how they want: save it, invest it, buy a new car, go to Tahiti, whatever.
3. Break up at least the big 5 bank's - separate their trading division from their retail business. Require that all loans they make must stay with the bank.
4. Extinguish, without penalty to either side of the trade a vast majority of credit derivatives out there. Declare them null and void. Not take them on the gov't books or guarantee them as the counterparty (as the gov't is doing now).
5. Declare CDS, Swaps, OTC options, and other such derivatives unenforceable UNTIL exchanges are formally set up to clear them (like futures).
Now, on how to help pay for the above and lay the groundwork for the future:
6. Cut the Federal Government (including defense spending) in HALF - cut the government in half, which includes no more social security after year 2015, disband over 200 non-essential agencies, no health care bill, remove our troops from Afghan and Iraq, remove a few bases in various "friendly" countries, and reduce Medicare.
7. Offer tax breaks to private insurance companies who provide medical services to the elderly and children.
8. Make it law (or even in the constitution) tor require that each year, the Executive office must have a surplus of at least x% of GDP (this will cap urges to expand government) and pay down x% of older federal debt. T
9. Then, declare that the dollar will be at least 2% backed by gold (we own massive amounts of the metal and can purchase more).
10. Lastly, dissolve the Fed's power to bailout and control monetary policy, i.e., make the markets realize there will be no more bailouts no matter how big you are, as this would be the best risk management regulation they could devise.
Not many countries would have the power to do such a thing, but I imagine it would be accepted by the international market place, would stimulate growth and entrepreneurs, and help reverse the years of damage brought on by horrible regulations, government, corporate, and individual fiscal decisions.
Crazy, radical, and a crude sketch above with many variable to be worked out (including political will), but this could be a wash fiscally and a fresh start for America and the world... especially a new world without bailouts.
You think this is crazy idea? Perhaps what we've been doing for the last few decades has been a crazier idea.
1. Have the Fed stop the bailouts of the banks, and their "liquidity" programs, and just buy at distressed prices the massive (not smaller) RE, CRE, credit card, student, etc loans off the books of the big and smaller banks and households. Basically, we take the loss on these debts and experience some real short-term pain, but eventually will relieve the consumer/household, corporate and banking sector of bad loans so that they can lend and businesses can borrow again.
2. Send $10,000 to each household as a stimulus and allow them to spend it how they want: save it, invest it, buy a new car, go to Tahiti, whatever.
3. Break up at least the big 5 bank's - separate their trading division from their retail business. Require that all loans they make must stay with the bank.
4. Extinguish, without penalty to either side of the trade a vast majority of credit derivatives out there. Declare them null and void. Not take them on the gov't books or guarantee them as the counterparty (as the gov't is doing now).
5. Declare CDS, Swaps, OTC options, and other such derivatives unenforceable UNTIL exchanges are formally set up to clear them (like futures).
Now, on how to help pay for the above and lay the groundwork for the future:
6. Cut the Federal Government (including defense spending) in HALF - cut the government in half, which includes no more social security after year 2015, disband over 200 non-essential agencies, no health care bill, remove our troops from Afghan and Iraq, remove a few bases in various "friendly" countries, and reduce Medicare.
7. Offer tax breaks to private insurance companies who provide medical services to the elderly and children.
8. Make it law (or even in the constitution) tor require that each year, the Executive office must have a surplus of at least x% of GDP (this will cap urges to expand government) and pay down x% of older federal debt. T
9. Then, declare that the dollar will be at least 2% backed by gold (we own massive amounts of the metal and can purchase more).
10. Lastly, dissolve the Fed's power to bailout and control monetary policy, i.e., make the markets realize there will be no more bailouts no matter how big you are, as this would be the best risk management regulation they could devise.
Not many countries would have the power to do such a thing, but I imagine it would be accepted by the international market place, would stimulate growth and entrepreneurs, and help reverse the years of damage brought on by horrible regulations, government, corporate, and individual fiscal decisions.
Crazy, radical, and a crude sketch above with many variable to be worked out (including political will), but this could be a wash fiscally and a fresh start for America and the world... especially a new world without bailouts.
You think this is crazy idea? Perhaps what we've been doing for the last few decades has been a crazier idea.
