A Model for Federal Equity, not Debt

Given that the stock market appears to finally be taking a pause after a decade long run, this may seem like a terrible time to talk about subtleties like debt versus equity or how to finance federal debt. Yet this is exactly the time when something like what is proposed here would be useful for the government and investors alike.

Our national debt is financed through a complex system with fixed interest and market trading which is cumbersome and difficult. Worse, it ties the government down to fixed costs which are currently taking up 329B$ per year in interest payments, nearly $3,000 per household.

In short, there has to be a better way to manage the 21T$ or so of debt. Step one would be not creating more, but here is a plan for managing the potentially crippling debt we already have.

Continue reading

Advertisements

Cold Currency War

In the Cold War, the foundation of diplomacy was mutual fear and hatred.  With that behind us, interdependence  has introduced a new system which includes much closer relationships – and something more like angst and loathing.  So has our relationship with China evolved.

As China has awakened, the GDP has grown by a factor of ten since 1990.   The population went from 22% urban to 52%.  All of this came at the expense, and mutual support, of hungry US consumers, corporations, and our nearly limitless need to finance our debt.  It was too much, too quickly, and wise investors saw that it was a bubble ready to pop – or at least relax the insane pace.

That day is coming very soon.

Continue reading