I’ve been thinking again.
When businesses get into trouble then need to quickly get new financing in order to execute their turnaround plan and stay alive. They approach lenders who may buy their plan and provide the money they can get, or they seek to bring new equity into their business. In the process of preparing a turnaround plan they frequently believe that more sales will solve their problem, but with some financial analysis discover that they must address their underlying problems or they will just go broke later with their faulty model.
Government has the luxury of just raising revenues to solve their problem as well as borrowing more money via issuance of bonds. But we are seeing that the debt levels are an increasing problem and may eventually hamper the opportunities for more debt and its cost. Like business, raising revenues my slow the losses, but if they don’t address why they are occurring may not go away. Raisin the “prices” on a select few doesn’t make a lot of sense either, most business would raise prices across the board. That is a tough sell for a business and government as we are seeing.
Maybe he government needs more equity? A bailout?
Paying more taxes for many is like throwing their money down a black hole. But investing it may provide something they would have interest in, especially since they are already “owners” of government and want it to be successful and solvent.
So rather than increase taxes by some percent why don’t we require that they buy US bonds and finance the turnaround like a business?
• That would move some debt to friendly sources, not foreign governments that we don’t want to rely on or be accountable to because of debt
• Set a term of 30 years on the bonds to preserve liquidity for the US
• Set a rate tied to CPI or other measure that would provide some sort of decent return
• Buyers would subordinate their bonds to entities that get a lower rate
• A creditor’s committee could be set up to which Congress would be accountable to for reporting progress in cost cutting and achieving the solvency to eventually repay the bonds
Sound crazy? Well I might be but am very interested in getting our problem solved and I don’t see anything happening except bickering and new tax schemes. Maybe it is time for equity?