My friend Dr. Jeff wrote in response to one of my articles:
Look, Jeff, I feel the same way, I hate being merely a critic. That is one reason that I submitted many of my policy ideas to the Obama administration. Given the limitations of their website, though, I can’t easily point to what I submitted.
Aside from China, the competitive fringe in Asia is doing better. Aside from that, other countries are a tie at best.
But what I would propose as a solution to our current crisis is this:
If I were offered the opportunity to fix things, I would take it, and:
- Create a new RTC for the small stuff
- Create a new chapter in the bankruptcy code for Too Big To Fail institutions
- Create a means of resolving home foreclosure issues in a manner similar to Chapter 11, which would lead to more compromises.
- Institute true tax reform that eliminates the sheltering of income, and eliminates all tax preferences.
- Wind down the Fed’s current “solutions”
- Begin inflating the currency to force up the value of collateral relative to nominal debt levels
The last one I like the least, but I’m afraid it would have to be done. Phase two would be:
- Move to a currency that is gold-backed.
- Replace the Fed with a currency board.
- Create a new unified regulator of all depositary institutions.
- Slowly raise bank capital requirements, and make them countercyclical.
- Bring all agreements onto the balance sheet with full disclosure.
- Enforce a strict separation between regulated and non-regulated financials. No cross-ownership, no cross-lending, no derivative agreements between them.
- Bar investment banks from being publicly traded, and if regulated, with strict leverage/risk-based capital limits.
- Move back to balanced budgets, and prepare for the pensions/entitlements crisis.
That is my proposal, and it is better thought out than the politically driven drivel that occupies DC today. I am thinking longer term than most politicians do, and aiming for a society that can work in the long run.