Though they differ over details, Democrats and Republicans agree that a fiscal stimulus is necessary.
Could it be necessary, but not sufficient?
It will be insufficient if the underlying cause of the present crisis is debt so swollen that it is stifling the economy, as seems likely. Then a stimulus and bank bailouts alone won’t fix what is truly broken: excess debt choking our money and banking system. That system requires ever increasing levels of debt, which cannot grow forever. Lenders must eventually run out of creditable borrowers. When banks could find no new creditable borrowers, they began lending to people who obviously could not pay back their loans. Hence the housing crash that precipitated meltdown of the entire banking system.
The current credit crunch may well be the inevitable end result of a debt buildup that has been going on for hundreds of years. This crisis may seem unprecedented for the simple reason that it is, at least in recent times.
Moses brought down from Mt. Sinai, in addition to the Ten Commandments, other new rules for the Israelites, including a rule calling for widespread debt forgiveness during the Jubilee celebration every 50 years. (See Leviticus in the O.T.)
Why did Moses impose debt forgiveness? Because he noticed that under the prevailing norm (“them that has, gets”), money flows inexorably from the many to the few. Eventually, wealth becomes concentrated in the hands of a very few, and many people are saddled with unpayable debts. Then, economic activity freezes up.
Sound familiar?
As in Biblical times, widespread debt reduction may be needed to get the economy moving again. Nowadays debt can be reduced by one or more of these mechanisms:
· Inflation. (Much higher than we have recently experienced but well below hyperinflation, which of course wipes out all debts.)
- Steeply progressive taxation and redistribution of wealth. (Joe the Plumber opposes this, and Republicans now go to him for advice on matters economic. They used to get identical advice from Phil Gramm, so they find his ideas agreeable.)
- Widespread debt forgiveness. (Be on the lookout in coming months for the word "Jubilee".)
- Revolution. (As in France and Russia.)
Inflation, taxation, debt forgiveness, or revolution. Take your pick.
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