"Chairman Greenspan has asked me to thank you for your letter and enclosure 'Solving World and NationaI Economic Woes: Empowering a New Economy." Jennifer J. Johnson, Associate Secretary of the Board, Federal Reserve System, November 1992.
"Your recent communication to the International Monetary Fund has been received and duly noted." Bruno J. Mauprivez, Public Affairs Officer, International Monetary Fund, November 1992.
"New ideas are always welcomed and some help to develop new policies and programs." Finance Minister of France, November 1992.
"Your comments are most interesting." Jacques Attali, European Bank for Reconstruction and Development, November 1992.
In 1992 this writer contacted all the major central banks in the world with an idea. It was proposed that debt realignment be accomplished globally. This idea is needed now more than ever. A global solution is needed for a global problem Presently, each country of the world suffering from financial instability has similiar problems with housing price decreases, loans that are defaulting, lending institutions failing, and a crisis of confidence among the institutions themselves and the populace. The world's economy is intertwined in the capital markets and in psychology. Addressing each country's financial crisis separately will not suffice. It is not efficient. A unified approach is needed.
Debt realignment is distinguished from debt relief and debt forgiveness in that with debt realignment no entity loses. This is the core of the concept: With debt realignment no entity suffers, in fact each participant gains. Debt realignment does not burden the taxpayer with the debt that institutions carry while it alleviates the debt from the institutions. Instead of transferring the debt to someone else, the debt is realigned. Instead of governments being burdened with the debt, the debt is realigned. This can be done with all debt.
Debt realignment frees up resources, reestablishes credit and liquidity, and provides the means for vast global job creation. Debt realignment is comprehensive. It can be done nationally and globally. We were told we needed something "quick and clean" to remedy the financial breakdown in the United States. Yet the bailout passed by the Congress of the United States is not quick and is not clean. It is not quick in that the ripples from the bailout if pursued as written will be felt for years with many more banks failing and credit lagging. The economy suffers, progress is halted, the standard of living is decreased. It may take years to recover. It is not clean because it is predicated on buying up "toxic" debt. Instead the debt should be realigned. The debt is eliminated, the weak financial instruments and derivatives are secured, and the economy is strengthened. This is quick and this is clean. This can all be accomplised in the first quarter of 2009. It will be over.
The New York Times reported on 9/21/08 that: "What left so many lawmakers and economists frustrated was the sense that no one had a better idea." But many had a better idea. One must wonder about other challenges if the Congress of the United States did not believe anyone else had a better idea. Taking on $700,000,000,000, or more, in dubious debt is not the best idea. Raising the debt ceiling over 11.3 trillion dollars is not a good idea. And it is not a good idea to assume we must experience a recession, that it is inevitable, that there is nothing we can do. A deepening recession is not inevitable. The economies of the separate countries of the world, and the world economy itself, can be turned around if the proper actions are taken.
If we just proceed as we have been globally we will see more banks fail. We still will see further credit problems. Housing prices will still drop. Businesses will still have difficulty getting loans. Jobs will dry up further. We still will have problems, because the core problem will not be solved. It would take years to overcome. Debt realignment is the better idea.
There is one major obstacle to overcome for debt realignment to become a reality. It takes "out of the box" thinking and understanding to accomplish. It takes vision. Sometimes it is most difficult to see what is right in front of us. Debt realignment is simple. Yet, debt realignment, because it is such an unorthodox approach, may not be easy for some to embrace. It takes thoughtful consideration to understand. Humankind tends to make everything more complex than it needs to be. Sometimes we have an opportunity to do something, to turn it all upside-down, and create a new beginning. Such out of the box thinking is difficult for most people, particularly for people who have rigid ideas about how things should work. It may be that it is particularly difficult for financial types. Balance sheets, "rules," and regulations -- many bent or discarded anyway -- are always popping up in a person's mind. But when things are not working the way they should and an expedient means is at hand, an innovative idea, a bold move into the future, we should take it to put things back in order. All participants should reflect and ask: "What if we did this, what would be the results?" Some will be taken back at the simplicity of debt realignment. In one of our past presidential elections we heard: "Its the economy, stupid." Today, we must remember in dealing with the economy of the world and separate countries to "Keep it simple, stupid."
The world financial and economic systems are out of order. Debt realignmemt reorders the financial and economic systems. Debt realignment does not do away with sound economic and financial principles. It strengthens them Debt realignment is an intercession strategy that is designed for an emergency, done only once, is accomplised quickly, and produces positive results.
President George W. Bush has stated regarding the bailout that: "It is a big package, because it's a big problem." We do not need a big package, we need a big idea. Debt realignment is that big idea. It was too big an idea in 1992. It is hoped it is not too big for 2008. Alan Greenspan has stated that what we are witnessing is "a 100 year event." We need something that is so far reaching, so comprehensive, so big that it should be used now and not again by law, if ever, for 100 years. We need debt realignment.
What the Federal Reserve, the Treasury of the United States, and other central banks have accomplished in shoring up the immediate difficulties is commendable, but we must go further without harming anyone. We must get out in front of the problem and solve it -- nationally and globally. If we remember what happened post the Savings & Loan debacle we see the solution was followed by a recession. It did not really solve the problem, it repackaged it with negative impacts felt for years. And what if the present bailouts in the United States and the world do not work? We already see the markets do not like them. Debt realignment solves the problem, symptomatically and causally. The world markets will more than like debt realignment, they will love it. They will rally beyond imagination. It may be that controls will be necessary to keep things from overheating in the months following global debt realignment.
Debt realignment does more than any other idea because it solves several problems at once. It not only addresses the current crisis, it addresses the world debt and national debt, and it does it quickly. The current plan Congress passed does not address the debt, and, it is not guaranteed to work. The current plan adds to the debt. Debt realignment addresses all the economic and financial problems and is guaranteed to work because it is based on irrevocable realities. The less debt the more credit that will be available. Zero debt allows the markets to function at the optimum. This is a prime driver.
America's national debt is now over 10 trillion dollars, with some 40 trillion off-book debt. Should the United States take on another trillion dollars? There is an estimated 55 to 78 trillion dollar issuance of Credit Default Swaps out there -- depending on who you listen to. We do not know the exact number or where they are. These must not be called in. If we got to that point the ballgame would be over. We must solve the core problem, the mortgage meltdown. But there is more beneath the surface. We must get a handle on the debt without harming ourselves or others. Where does it end if we just keep borrowing, taking on more debt, particularly "toxic" debt that was run up not by the public, but by speculators and esoteric financial instruments? Debt realignment addresses all of this.
In times of danger there is opportunity as the Chinese character for "danger" suggests. But if the opportunity is not taken, only the danger remains.
In these dangerous financial times, the world has the opportunity for a financial footing that can propel humankind forward in ways we presently do not imagine. We just need to think things through and utilize the tools we have at hand. The “innovative” financial instruments that were causal to the present difficulties must be met with an equally innovative idea. We must put out the smoldering fires around the world quickly and we must rebuild better, stronger, surer.
America and the world is not out of ideas. But we must be open to see those ideas and we must be bold enough to use them. For the United States to buy “toxic” financial instruments and add them to the National Debt is not a good idea. It is not a good idea for any country to do so. Even with oversight, a bad plan is still a bad plan. America and the world need a positive way forward, a sound plan that finalizes this crisis. That solution, that plan, is Global Debt Realignment.
"There has never been a moment as serious as this one." Senator Christopher Dodd, September 2008