Debt write off – a haircut or worse

Here’s another idea to kick-start the American economy – a large write off of consumer debt so that people can start spending again.  If the economic crisis is because our use of resources is unsustainable then this would probably not solve that problem.

Nevertheless,  it is an interesting idea depending upon who would ultimately get the haircut.

Banks and other financial institutions are financial intermediaries in that they act as an in between for people with excess money in their hands and people who need to borrow.  Thus if there were to be a write off of debt it would probably  end up on individual  savers – likely a reduction in pensions and personal savings.

Most of these people are unlikely to willingly see a reduction in their savings and pensions and they have considerable political power.

It is possible many of these people are going to get a haircut or worse, so it might be less painful if it were to be done in an orderly fashion – rather a barber than an executioner.

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