We hear so much horse dung today about what kind of “solutions can be orchestrated to resolve the debt crisis”.
It is dead simple: we let the bad loans go bust, we let the investors who made bad bets take losses, and we start over with new much lower limits on the level of debt and leverage people, companies and institutions are allowed to take on. We also ban outright “off-balance sheet accounting”, “special purpose vehicles” and all the other euphemisms we have developed to gloss over the devastating practice of allowing borrowers to lie about their debts. This is why the system has gone bust: we allowed “financial engineering” to hide truth about how much debt every person, city, county, state, government, financial institution and company ALL OVER THE PLANET held.
Now the truth must be finally acknowledged, zeros written off and bad accounting gimmicks outlawed. Enough already.
This interview with Jim Rogers is on point. It is such a huge relief to hear sanity call bullshit on the great debt pyramid that so many are still trying to extend and pretend:
“In America, we’ve had states go bankrupt, cities, counties. This has happened before. It didn’t end America, didn’t end the US Dollar. You let entities collapse, go bankrupt. This happens all the time. This happened throughout history. That’s all you have to do, let them go bankrupt, let the people who made the bad loans take their losses and start over from a sounder base. But just pushing into the future and letting debt go higher and higher will mean it’s going to end very, very badly and then you know, five years from now, you may have a complete collapse of the Euro, the EU and for that matter, all the Western world.”
Watch Rogers on Reuters here.