Monday, January 28, 2013
Our Ongoing Debt Deflation and What, Broadly, to Do About It
In my immediately preceeding post, I suggested that the question of how best to liquidate our large public debt should be addressed at least partly by reference to the debt's provenance. I then claimed that the principal such provenance is the debt-deflation that we have been undergoing since the crash of 2006-09. Finally, I said that I would say a bit more about how best to address our still ongoing debt-deflation in a manner that will restore growth and employment and thereby enable us to liquidate the public debt.
A broad-outlined but still detailed account of how to do this is The Way Forward, which Dan Alpert, Nouriel Roubini and I put out a bit over a year ago. This paper both thoroughly addresses the source of our present predicament, and offers a three-pillared plan to get out of it. Pillar One involves public infrastructure investment, more on which presently. Pillar Two involves mortgage debt write-downs and other home-finance-related measures, also more on which presently. Finally, Pillar Three involves global currency reform, again more on which presently.
I urge all readers who are interested in how best to discharge our duty of macroeconomic stewardship at least to skim this piece, which received a great deal of favorable attention from legislators and others concerned with macroeconomic policy, and indeed fed into subsequent legislative and related work on which this author is still engaged. More on some of that in due course.