This is the third installment — of a hopefully fictious scenario — of what the global financial system could find itself as a result of the oncoming world-wide economic depression.
At Monday night meetings in DC, the Obama Administration knew they would have to come up with a bold plan since most of the world economic ministers were dead-set to end the dollar dominance in a new world monetary system.
As Treasury Secretary Jack Lew, Federal Reserve chiefs Janet Yellen and Stanley Fischer and Jason Furman, the chairman of the Council of Economic Advisers, burned the midnight oil to get the dollar back into the game.
“The problem afflicting markets is zero growth and growing debt, which is choking the system,” Fischer told the meeting.
He had broader monetary experience than anyone in the room since prior to the Fed post, Fischer was the Israeli central banker. Fischer knew a world where you are not pigeon-holed by dollar hegemony.
Fischer reached back into his faith to come up with a plan as old as the Old Testament.
“What if we look at declaring a jubilee?” Fischer said, referencing the ancient custom of forgiving debt every seven years.
“This would allow for a reset, without losing our dollar position. We could perhaps sell it as a temporary fix and then when we are working through it, no country will want to rework the entire monetary system while this is being implemented,” Fischer concluded.
“Can we talk it through? What would a debt forgiveness mean? At what level would it be?” Lew quizzed Fischer, despite Lew being an Orthodox Jew raised the issue hanging on everyone’s tongue.
“I really need to think it through, I don’t have the answers and may be that’s a good thing. It will allow others to become invested in the solution,” Fischer said as they agreed to meet in the morning before leaving again for the summit at the Greenbrier.