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Coexistence is a strategy for maintaining a viable private economy alongside a sovereign government that can no longer restore long-term fiscal solvency through conventional economic, fiscal, or monetary measures. The applicability of the term “Coexistence” to an Insoluble Insolvency state was first used by the Center for Regulatory Effectiveness.

Under the concept of Insoluble Insolvency, the federal government’s fiscal condition need not dictate the economic fate of the entire nation.

The central proposition is:

The United States government can be insolubly insolvent without the United States economy becoming insolubly insolvent.

1. The objectives of a Coexistence Strategy

A Coexistence Strategy would pursue five principal objectives:

1. Preserve the private sector. Maintain the ability of businesses to invest, employ workers, produce goods, and accumulate capital despite federal fiscal difficulties.

2. Maintain essential government functions. Protect national defense, public safety, the judicial system, and essential public infrastructure.

3. Protect private wealth and savings. Develop mechanisms to reduce exposure to inflation, currency instability, and possible restructuring of government obligations.

4. Develop alternative financial institutions. Explore private payment networks, digital currencies, and international financial arrangements that could operate alongside existing federal monetary institutions.

5. Avoid economic collapse. Replace an exclusive emphasis on restoring conventional sovereign solvency with an additional emphasis on preserving economic continuity.

2. The distinction between Insoluble Insolvency and Coexistence

The two concepts are therefore complementary.

Insoluble Insolvency identifies the problem. Coexistence identifies a possible means of living with the problem.

3. Implementation of a Coexistence Strategy

I would propose three stages.

Stage One: Recognition and preparation

Establish objective criteria for determining whether conventional fiscal remedies remain capable of restoring long-term sovereign solvency. Begin evaluating the implications for financial institutions, federal regulation, private investment, and public obligations.

Stage Two: Institutional adaptation

Develop financial and regulatory mechanisms that permit continued private economic activity despite sovereign fiscal constraints. Potential measures include alternative payment systems, diversified stores of value, and regulatory policies designed to preserve private capital formation.

Stage Three: Long-term Coexistence

Establish a durable relationship between a fiscally constrained federal government and a productive private economy, with institutions capable of supporting commerce, investment, and essential public services over an extended period.

Importantly, Coexistence would not require abolishing the federal government, abandoning the dollar, or replacing existing financial institutions. Alternative arrangements could develop incrementally.

4. The central challenge

Coexistence cannot eliminate the economic consequences of sovereign insolvency.

Government debt is held by private investors, pension funds, banks, and other institutions. Inflation, taxation, debt restructuring, and financial instability can therefore transmit sovereign fiscal difficulties throughout the private economy.

Consequently, the principal challenge is not simply demonstrating that the private economy can survive.

It is designing institutions that limit the transmission of sovereign fiscal distress into private economic activity.

This would require substantial research, particularly concerning financial stability, legal authority, monetary arrangements, and international coordination.

5. A proposed statement for CRE

The Coexistence Strategy

The recognition of Insoluble Insolvency does not necessitate the conclusion that the national economy must become insolvent.

A sovereign government may experience a fiscal condition that cannot be remedied through conventional measures while a substantial portion of its private economy remains economically viable.

Coexistence is a strategy designed to preserve and strengthen that private economy through the development of alternative financial, monetary, regulatory, and institutional arrangements.

The objective is not necessarily to restore the sovereign to its former fiscal condition, but to establish an enduring economic structure within which a fiscally constrained government and a productive private sector can continue to function.

Accordingly, Insoluble Insolvency should be viewed not only as a fiscal diagnosis but also as the starting point for the development of a Coexistence Strategy.

6. Assessment

The most significant potential contribution of Coexistence is that it changes the fundamental question facing policymakers.

Instead of asking exclusively:

How can the federal government restore fiscal solvency?

It introduces a second question:

How can the American economy remain productive and prosperous if conventional remedies cannot restore federal fiscal solvency?

This is a potentially important conceptual distinction. However, it remains a proposed framework rather than a demonstrated solution. Its credibility would depend on showing which institutions could preserve economic activity, how they would operate legally, and whether they could withstand a prolonged sovereign fiscal crisis.

One question deserves particular attention: Should Coexistence be presented as a strategy to be implemented only after the United States enters Insoluble Insolvency, or as a strategy that should begin before that condition is formally established?

We favor the latter because developing alternative institutions before a fiscal crisis would provide considerably more flexibility.