Thursday, June 24, 2010

World Wide Debt Forgiveness

Now, I am a Libertarian, and a fiscal consevative. I pay my bills and I don't have a whole lot of sympathy for anyone who spends more than they bring in, even my extended family. That being said, we have a massive problem internationally that needs to be addressed.
The Global Debt burden is going to crash 1st world nation economies and stymie any growth from 2nd and 3rd world nations for generations. We have let dictators, elected thugs and non-governmental entities drive us to the brink of global economic collapse.
Now don't get me wrong. When this occurs I don't personally belive that zombies will rise from the dead or that the majority of the human population will die off, I have enough faith in the human race to know we'll find a new way to keep on moving. It will however cause a short term interruption in everything. Everything. That interruption could be days, weeks, months or even a few years. I'm talking food supplies, transportation, medicine delivery, schools, social programs, health care, etc etc etc. Think I'm kidding? Hospitals in California right now can't get companies to ship them band-aids b/c they are millions in arrears. African countries can't get the food they need, even the food they have paid to import, b/c shipping companies are going bankrupt and the ships just aren't available. Open your eyes, we're approaching an economic tipping point.

There is a way out.

A simple (notice I didnt say pain free) way to avoid what will surely be a rather nasty and brutish global economic experience will be to;
A: require all countries to sign a global treaty requiring their national budgets be balanced every year, much like all 50 of the United States have in their constitutions. No deficit spending, no borrowing sums you can only afford to pay the interest on, none of it. You can only spend what you have. Automatic and draconian sanctions against any country that does not live up to this treaty. I think the treaty should require World Bank monitoring and a constitutional amendment in every single country.

B: Forgive all international and NATIONAL debt. All of it. Tabula Rasa. Every country starts from square one, using their revenue from taxes, goods, tariffs, etc to finance their government. Every single US Saving Bond would become null and void. Greek bonds? Gone. Borrowing money from tomorrow to pay for todays government? Gone as well.

This is where the pain comes in. This means everyone who owns national bonds will now own nothing. There are persons and agencies that will falter or crash without their vast sums of now worthless paper. Sucks to be them. Nothing we can do for them.  A handout or "bailout" is possible from the country they live in, but only if said country can do it without going into debt itself and feels like they want to. Within the confines of the new treaty, it's their choice how they run their country.

The world will reset governmental debt and will start a new age of fiscal responsibility and an awareness that we are all in this mess together. We will save ourselves from economic ruin and have the grace to say, hey look, we're heading towards a cliff, lets work toegther to stop this runaway train.

This won't fix everything. Countries like the US and UK that have enormous liabilities for retirees, and other EU countries that have cradle to the grave welfare for their citizens will be hard pressed to continue those programs, even with burgeoning debt being erased. They will have to sit down with their citizens and explain that the rules have changed and they now have to live within budgets. It will be tough and it will be hard to get re-elected after this, but its the right thing to do. We've seen some of what could happen by looking at the Greek people's response to a very mild reduction in social welfare to help with their debt. The United States will no longer be able to afford 100 foreign military bases or 11 nuclear aircraft carrier groups. Shit happens, but we will get through this scenario far better than a global Great Depression II. On the plus side, Zimbabwe and Haiti might actually improve considerably.

 (wakes from dream)
Fat chance, I know.

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