Web Letters: Is This the Big One?

The real logical solutions for the economy would be to bail out of Iraq, stop dishonest and predatory housing lenders from granting loans to those with "bad" credit, and stop pork barrel and earmark spending.

Even though they seem logical, congress and the White House is deadlocked on virtually everything on solving economic, et al. problems, because George W. Bush is the least progressive president of all time!

Nick Rosen

Great Falls, VA

There are several 800-pound gorillas in the room, the ones Mr. Faux mentions and the $9.5 Trillion U.S. National Debt; with at least $3.5 Trillion of debt interest payments per decade. We need only count the decades of interest payments which don't dent the principal. This is a Sisyphean mortgage.

American invention in the public sphere has been a casualty of politics, predominately "counterfeit conservative" politics, over the past 30 years. Schrinking government down to the size that it can be drowned in the bathtub without reducing the peoples' representatives' burgeoning obligations - i.e. Social Security, Medicare, infrastructure investment, defense spending etc. Invention today warrants taking a proper inventory of American real assets, monetizing them and eliminating or harnessing the U.S. National Debt. I would think given the present and future mess that experts are open to some fresh advice.

For example, in 1790, the nascent French regime inherited a similar debt dilemma, France's public debt was 4.262 Billion Louis d'Or, conservatively $380 Billion U.S. [1 Louis d'Or = $90.00 U.S.], requiring 262 million Louis d'Or a year in interest. In response, Church lands were expropriated throughout France and paper currency (assignats), based not on gold or silver, but on the security of Church lands, was issued for several billions. Domestic and international creditors accepted the new currency as legitimate payment. Thus, the new currency was initially used to successfully retire a significant portion of the public debt.

Amortizing the U.S. National Debt requires a special paper currency also, but in this case one secured by American public lands, approximately 700 million acres; with attendant mineral and other natural resources. There is no need for an expropriation since the land is already public. There is a need, however for a Land valuation. The U.S Treasury would redeem this currency in dollars for the sole purpose of retiring the National Debt.** This public land-secured money would be prohibited from serving as fiat or irredeemable currency in general circulation. Additional monetary and fiscal policy adjustments may be required but this method of eliminating the U.S. National Debt, removes the need for additional borrowing and tax increases.

A second approach would harness the U.S. National Debt on behalf of the nation. Save for the Social Security Trust Fund and Federal Reserve Bank holdings, the American Public becomes the sole creditor of the U.S. National Debt. If the American public had a custodial account, an American Endowment Fund, if you will, making them the sole creditor of the National Debt, debt interest payments would become disposable income to be used to a) supplement tax revenues: b) tax reduction; c) public investment; d) national debt reduction; e) universal healthcare; f) bolster social security; g) all of the above.

In conclusion, the National Debt is approaching $9.6 Trillion. In 2004, the annual national debt interest payment was $322 Billion, in 2005, $352 Billion, 2006, $420 Billion.. This decade America will pay, as was said previously, over $3.5 Trillion on debt interest payments alone. On the current course, the nation will pay at least $35 Trillion in ten decades without denting the principal. This is all relative, so they say, though few elite families or institutions would conduct their affairs in this way. On the other hand, America’s domestic and international creditors, consider this arrangement quite comfortable. After all there is no safer investment than U.S Treasury notes secured by the labor and productivity of American taxpayers.

Amortization or purchase of the U.S. National Debt represents responsible 21st Century governance. The present status quo of massive tax reductions and increased public spending, a starve the government beast, scorched earth policy, has created a serious imbalance in the American political economy. An American Endowment Fund or complete amortization of the Debt, restores balance, fiscally and socially, and enables the nation to develop and maintain the very best human and physical capital, like its elite institutions. As a nation we should be opting for optimal public performance not the mediocrity that has been provided for over a generation. This is real change.

Sioan Stephen Bethel

Brooklyn, NY

There is a faux pas in Faux's otherwise illuminating article.

He echoes rumors about the possible collapse of two financial institutions in the United States and names said institutions.

One hopes that Faux's worst fears will not materialize and that, in any event, he won't have contributed to instances of financial panic. I am sure he is well aware that there is a psychology that is bidirectionally linked with economic downturns.

Alex Pienknagura

Hollywood, Florida

Maybe a depression is exactly what we need. It may give us more real change than electing Obama would.

Norman Ravitch

Savannah, Georgia

Hello, Disaster Capitalism !

Here we go folks, the people that brought you this current catasrophy, the privately owned and operated Federal Reserve controlled by it owners, the member banks, are about to control our entire regulatory structure of the financial system.

Hank Paulson will unveil a plan to give the private bankers at the Federal Reserve the power to regulate most of not all of our financial system by passing Congress altogether... That's right: privatization of our entire financial regulatory system.

Michael McKinlay

Hercules, CA

At this point, the mechanics of how the current financial crisis has come to pass are a publicly documented history.

What really needs to be asked is the question of consequences. In any economic crisis, it is clear that those who are not rich will suffer real consequences. However, what of those who made enormous sums of money off the junk financial instruments that underpin the current crisis? The figures who leveraged and re-leveraged and sold and bought and sold again the toxic waste securities, paper etc.?

Without consequences for this group of people, they will not know to be too afraid of consequences to allow something like this to happen again.

Why, for example, is the Federal Reserve including the salaries of Bear-Stearns upper management figures in the bailout loan it arranged? Why are the people at the top being bailed out?

Seymour Friendly

Seattle, WA

I think we are looking at the "big one" in the form of a depression. It will not only be felt in the United States but worldwide. Other nations have put all their eggs in the US basket, instead of spreading the trade risks among many nations. A globalized economy means globalized failure.

The basic lesson is to develop your own internal market before venturing into international trade. Do not, and I repeat, do not rely on external markets for essential supplies for the general welfare of your people or for national defense. Impose tariffs behind which you can develop or, in our case, redevelop, an industrial base to suit your individual needs. Tariffs also provide a tax base for running the national government. There is no such thing as an independent nation if it does not control its own economy.

These are some of the lessons Alexander Hamilton learned acting as Washington's Chief of Staff during the American Revolution. Hamilton also started a business career at the age of ten, and was running a trading company as a teenager when the owner fell ill. He understood the uncertainties of international trade.

Barney Frank is on the right track about regulating big business and Wall Street. We also need some of the Keynesian stimulation that was mentioned in the current issue of The Nation. Stimulus or not, our roads, bridges, levees and dams are long overdue for repair.

Also, 70 percent of the economy was dependent on consumer spending. "Free trade" is designed to lower wages, which reduces disposable income that supports the economy. Also, interest rates need to be high enough to encourage savings and provide loans to businesses or individuals, for example, to buy homes. We may also have to go to the bottom before we can rise again. This, no doubt, influenced housing speculation that inflated the value of homes.

It is going to be a rough ride, but we can rise again if we follow traditional American methods of economics and development. No theory is involved in these comments. It is part of our historical record as a nation!

Pervis J. Casey

Riverside, CA