The 1% Solution to the World’s Economic Problems

The 1% Solution that Harms No One, but Solves the World’s Debt Problems (It’s not what you’re thinking)

The economic problems of the world come down to massive debt burdens.  From third world nations to Greece to the United States, government debt is overwhelming municipalities and people throughout the world.  I have a “1%” solution which is not what you’re thinking.  My answer does not involve taxing anyone any more than current levels — in fact, it will probably cause a world wide tax reduction.  The super rich remain super rich, but “broke” nations and individuals are made whole and allowed to get out from under their crushing debt burdens.  The 1% solution I propose is elegant in its simplicity, and, if carried out, will save the world tremendous communal turmoil that is sure to come if economic imbalances are not rectified soon.

First, it’s important to understand that the problem is so much debt, all over the world, which makes almost everyone in the world, quite frankly, “broke.”  But where did all the money go?  If countries and individuals are buried in debt, who owns that debt?  The answer is: a small number of individuals and nations.  Because these individuals and nations cannot possibly spend all the money that they control, the money that they keep accruing through interest payments on loans made to governments (bonds) or individuals (through individual mortgage, credit card and other loans which go through banks) never makes it fully back into the world economy.  Thus, millions of people are “broke” and entire towns, cities, states and nations are economically “underwater.”

Because of all this debt, governments are being called upon to shrink public sector employment or sell government assets. This is like a bonfire that’s been set, and the suggested solution is to keep throwing everything you own into the fire in an effort to extinguish it.  This will not work.  The fire will only get bigger. Guaranteed.  Still, many people support shrinking governments, in the mistaken belief that if governments quit spending money and taxing its people, the problem will somehow fix itself.  Unfortunately, turning off government  taxing and spending won’t work.  Fortunately,  there is a solution.  A 1% solution. 

The 1% solution is simple and costs those who are rich nothing, but saves everyone and every entity at the same time.  All the world needs to solve the world wide debt problem is a commitment to work together to do it.  HERE’S HOW:

The 1% Solution

Have the United Nations create its own “Super Bank” (I’d call it the World Bank, but that name has already been taken)  This Super Bank would then be authorized to loan money to all countries on a per capita basis (meaning each nation would get a loan proportionate to its population) equal  to the amount of the country with the worst debt burden. The loan provided to these nations would be  at 1% interest.   This would be a one time loan made in  June 2012.  In this way, all government loans with higher interest rates would be paid off, and the world would “reset” its economies.    Those countries with lower debt ratios than the worst offending countries would suddenly have access to large amounts of cash, which could be used for national infrastructure improvements and/or individual debt relief for individuals.  Every country in the world would benefit, proving the adage, “a rising tide lifts all boats.” 

In short, my “1% solution” would effectively be a “jubilee year” that would probably need to occur every 72 years (it would take 72 years for the 1% Super Bank loan to “double” in size.)

The elegance of the solution includes the fact that it is a one time solution for all countries and muncipalities, it will create millions of jobs throughout the world, and the super rich will actually not suffer any financial loss   The 1% solution I propose will ensure that the super rich lose nothing on defaulting government bonds, but will actually be made “whole.”  The only thing the super rich “lose” is “opportunity costs” for money they could have loaned in the future to cash starved nations and individuals.

There is a solution to the world’s debt problems.  It can be done today.  All it takes is the UN’s commitment to creating the “Super Bank” I am proposing and the worldwide 1% loans to all nations on a per capita basis.

PROBLEM SOLVED, TUMULT AVOIDED

BTW: The Super Bank’s bonds would be backed by the “full faith and credit” of the world community.  That is not a tangible asset, but it is something that is required for all of us to survive together.

* I invite comments, and the reproduction and republication of this essay.