This is the fourth installment — of a hopefully fictitious scenario — of what the global financial system could find itself as a result of the oncoming world-wide economic depression.
Tuesday pre-dawn the US economic team of Lew, Yellen and Fischer would need 45 minutes by helicopter to get back to the Greenbrier for day two of the global financial summit.
Fischer continued to lay out his thoughts on a debt jubilee, “In the Biblical Book of Leviticus, a jubilee year is mentioned to occur every fiftieth year, when slaves and prisoners would be freed, debts would be forgiven and the mercies of God would be particularly manifest.”
“This is the basis of thought. Now I understand that not all debts can be forgiven, but if we say a 50% to 60% haircut on all government debt, I think we get to a better place to be able to service that debt,” Fischer concluded with. “How else will we be able to backstop the banking system, if we don’t have room to issue more debt?”
“Well, what about taking deposits to recapitalize the banks? We have roughly $8.2 trillion in capital to tap,” Lew said.
“What and issue more IOUs to the American people, to save Wall Street? I think that’s a non-starter unless you want rioting in the streets,” President Obama’s economic adviser said.
“Have you looked in the streets today?” counter Lew. “There were another 24,000 deaths Sunday night.”
“Since we are saying anything is possible, what about nationalizing the credit unions?” Yellen finally chimed in. “Their balance sheets are clean and could be a way to get banking back into the system.”
“I have a sense that we will have to do all that and more, like tapping into retirement funds as well,” said Lew. “We’ll need capital, I don’t think we can count on leverage to lift our impact on the system.”
“Are we going with debt jubilee as our way of saving the dollar?” Lew asked the assembled team as the helicopter began its descent to the Greenbrier’s helipad.