A Federal Reserve Rescue Operation?
The Federal Reserve Board should have a far greater role than stabilizing the drift in a sinking ship. The United States journey to bankruptcy need not be taken as an end all event.
Instead the FRB should be tasked with the responsibility of assessing the strengths and weaknesses of Debt Restructuring. Debt Restructuring is a mechanism where there is a simultaneous examination of all creditors and reductions are made to maintain the economic presence of the debtor. Debt Restructuring is used in the private sector in the US and in the public sector (governmental agencies) abroad. That said, Debt Restructuring, as defined herein, is much broader than that used in the financial sector in that it borrows mechanisms from a range of disciplines including administrative law and welfare economics.
Not only is Debt Restructuring not used to address the nation’s deficit problem it is seldom-if ever—even mentioned. Those interested in examining the details of Debt Restructuring should review the material on the homepage of the website of the Center for Regulatory Effectiveness.
THE BOTTON LINE IS AS MENTIONED ABOVE: THE FRB SHOULD BE TASKED WITH THE RESPONSIBILITY OF EXAMINING AND PUBLISHING THE STRENGTHS AND WEAKNESSES OF DEBT RESTRUCTURING AS APPLIED TO THE US DEFICITS. This option allows the United States to examine immediately a full range of alternatives, some of which will vanish when the bankruptcy occurs.
A note from one of our followers concludes:
” The problem with “Debt Restructuring” is that it requires pain. Any effort to correct this problem will require significant economic pain. Americans refuse to accept economic pain, and they will vote out any politician that brings them pain, even if it poses well meaning pain aimed at eliminating the massive deficit and Fed balance sheet. This makes getting our fiscal house in order a political non-starter in Congress, where the action must take place. No cuts to Social Security or Medicare for these people. Most Americans would rather kick the can down the road, collect their government checks, and let future generations deal with their mess.”
Editor’s Note: Is there another “Greatest Generation” forthcoming? “The Greatest Generation” is a term used to describe those Americans who grew up during the Great Depression and fought in World War II, or whose labor helped win it.”
