Saturday, March 07, 2009

What we need is a strong government with a deep faith in capitalism

Choose a number -- say $250,000 -- and then let each person convert up to that number from the old currency to the new currency.

There is a mad shuffle, plenty of black market opportunities -- assets switch hands and as many people as possible get the full subsidy.

However, once the currency revaluation is over, you have effectively taxed all wealth over a certain sum. Like a jubilee, but a little less frequent.

With the whiff of a currency revaluation in the air, the prices of real assets skyrocket (because, of course, they are being paid for with soon-to-be-worthless money). That should at least resuscitate the real estate market.

Once money has been reestablished and equitably distributed and the future can be clearly assessed, capitalism will do its magic -- people will organize, et cetera. Foreign countries might be marginally less willing to export to us -- but we have been very forgiving of their currency revaluations, so fairness demands that they should give us at least one pass -- and we will be forced to come up with innovative domestic solutions if they are really such sore losers to boycott us. Win win.

So why is everyone so upset about all the trillions of dollars being spent to "save" the financial system? When we fail, we will need a currency revaluation, anyway.

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