What can be done globally with debt can be done singly with mortgages in the United States; and it is easier to do because we do not have to negotiate with anyone to do it. Within the United States it is just an agreement among ourselves. It can be done quicker than global debt realignment. The mortgage derivative threat is taken away and the threat is reduced by our actions both in America and other countries as well. Other countries can follow suit and realign their mortgages also and should be urged to do so.
Example:
Mr. and Mrs. Jones bought a house for $350,000. They put $50,000 down and have paid the loan for two years. The price of the house has dropped to a present worth of $220,000. They owe more than the house is worth and their mortgage has gone up because of a variable interest mortgage. They are having difficulty paying the debt. Mrs. Jones has lost her job. Mr. Jones's hours have been cut back.
Solution with debt realignment: The loan is rewritten to the present day value of $220,000 at 6% fixed interest at the order of the Federal government. The difference between what is owed on the old loan and the new mortgage is realigned as a credit to the mortgage holder, the bank.
The result: Mr. and Mrs. Jones can stay in their home. They can pay the lower payment. They have a very good chance at making it. The bank has the money to fix its balance sheet and now has money to loan to businesses, other home seekers, consumers, developers. Credit is available. Jobs are produced. Businesses are started. Mrs. Jones has a better chance at finding a job. Prosperity is inhanced. Payments are met. Credit Default Swaps are inconsequential. We progress.
This can be replicated over and over again in every country. Individuals and institutions prosper. This sad chapter in our economic system becomes a distant memory. Over the years we reflect on how it happened and what the new difference is. We progress.