To halt this process we must take the following actions now:
All direct taxes must be scrapped immediately. This means implementation of something like The Fair Tax. I fully understand the political ramifications of thousands of lobbying firms and individuals losing their ability to game tax code, and why this sort of reform is unpopular with the political class. Politics must give way to mathematics; the government must align its revenue with the promulgation of actual business success as measured by actual consumer final demand. In addition such a change, while radical, would cause an immediate rush into America for the world's business headquarter locations, and with those businesses would come high-paying executive, administrative and manufacturing jobs. This proposal is an actual bill (HR. 25 / S. 296) which means it can be moved and passed. We just need the political will to do so.
ALL government support for insoluble debt must be removed. This means restoring mark-to-market, barring all off-balance-sheet activities and deeming that loans such as HELOCs behind underwater, non-performing firsts be written to recovery value (which in most cases is in fact zero.) I understand that this will expose the existing insolvency of some very large financial institutions. I also understand this is very politically unpopular for obvious reasons. It does not matter; this has to be done.
Banks must be required to hold Capital Reserves equal to 10% of their outstanding assets that are secured and 100% against all unsecured loans. This will cause even more insolvencies, but it will instantly clean up the banking system. Provide a six month time period for all institutions to come into compliance with (2) and (3), with no extensions, and mandate that any firm that does business in the US must comply - no exceptions. Going forward the 10% capitalization level (for secured assets) must be monitored and maintained as a "warning level" and firms must be liquidated at 6%. This will guarantee in the future that the FDIC will never a take a loss on the deposit insurance fund.
Treasury must then use the existing authority under The Constitution to issue non-debt-backed dollars. This does not require new legislative authority - all existing coins are in fact not debt-backed! Treasury can thus issue fiat, non-debt-backed currency under existing authority - it has simply refused to do so! This use should be restricted to funding FDIC pay-out requirements for the firms that become insolvent under this reform process. This issuance - if limited to FDIC payout coverage - will not be inflationary as it will exactly balance the deflationary force of default on the debt caused by those insolvencies.
An expedited, one-time bankruptcy provision must be made available to consumers so they can enter and process against an expedited Chapter 7 liquidation. It is essential that we permit consumers to de-leverage back to sustainable levels. Points #2-4 will insure that banks that fail as a consequence will have their depositors covered.
Credit-Default Swaps - or any other form of derivative - must be forbidden unless exchange-traded with a central clearing and margining counterparty that exposes all information to the market, including bid, offer, size and open interest. That counterparty must be the buyer for all sellers and the seller for all buyers, as is done today by the CFTC and OCC. Those firms that cannot post cash margin against their open, underwater positions must tear them up within 180 days. Speculation is fine - provided you can prove you can clear the trade! Again, any firm that wishes to do business in The United States must comply in all markets, or be barred from our markets. Once again this may produce insolvencies but point #4 will (again) guarantee that all depositor guarantees are covered.
Government is enacting "health care reform" today not to reform health care, not to provide health care, but rather to impose an immediate tax on all Americans to attempt to pull up even harder on the monetary stick.
You can betcha the idea was to glom onto that revenue right away. It will be p*ssed away, not stored up to prime the elf care system.
Denniger is right.
Too bad no one is listening.