Robert C. Hockett, professor of financial and monetary law at Cornell University Law School, argues that debate surrounding the United State’s ongoing financial and macroeconomic difficulties focuses on the wrong debt. It is private, not public debt that now matters.
Hockett says:
“Most public discussion of the nation’s continuing financial and macroeconomic troubles focuses rightly on debt. It focuses wrongly, however, on public debt. The true source of the nation’s ills is private debt overhang among millions of American households below the top of the wealth distribution.
“Private debt must be massively restructured and largely forgiven, on a scale commensurate with those asset-price plummets that themselves were the crash of 2008. This is, virtually by definition, the only sustainable way to eliminate our now crippling private debt overhang and end the slump that it underwrites.”
NOTE: Hockett’s argument is outlined in a white paper published by the Global Interdependence Center at the Federal Reserve Bank of Philadelphia, “Debt, Deflation and Debacle: Of Private Debt Write-Down and Public Recovery.”
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