< meta name="DC.Date.Valid.End" content="20050825"> Amendment Nine: National Treasure

Wednesday, December 08, 2004

National Treasure

Sifting through the inbox here and I see that still, a great many people reject the notion of consumer debt reform as impractical. The majority of these people use some variation of the following argument: banks charge rates based on risk; decreasing the rate will cause banks to decrease the risk; therefore they will stop issuing credit.

This argument is naive and flawed. Needless to say, these arguers don't make their living in debt restructuring. But that argument, and the more professional counterpart: there is no negotiating leverage, are both parts of a broader argument... taking debt off the table is impractical.

Notso my friends. First, why would reducing debt be any more impractical than reducing taxes? The latter was done at the expense of the national debt. We propse the former be done at the expense of national taxes.

Second, one should not think about debt in terms of private agreements, one should think about debt in terms of private rights. If you are a debtor, you have rights. One important right is to seek protection under the bankruptcy laws. Should the government decide to collect this right, the leverage would be quite effective on the banks, and would bring about real debt relief that Americans need to encourage savings... national savings is afterall, a national treasure.