Fault Lines: Chile rising

"Chilean students have taken over schools and city streets

 in the largest protests the country has seen in decades."

"These actions are causing a political crisis

 for the country's billionaire President, Sebastian Piñera."

"The students are demanding free education, and an end to the privatization of their schools and universities. The free-market based approach to education was implemented by the military dictator Augusto Pinochet in his last days in power."

Unfettered Capitalism: Chris Hedges & Michael Moore

"I think it comes from being an imperial power...
and all imperial societies end as we end."
"The tyranny they impose on others 
they finally impose on themselves."

Mike Konczal on the Submerged StateSurrounding Student Debt

"One of the Occupy movement’s major objectives is combating the privatization of public higher education and its replacement with a debt-fueled economy of indenture."

"This is an example of what Suzanne Mettler calls “the submerged state,” a pattern where the government has, as she says, “shunned the outright disbursing of benefits to individuals and families and favored instead less visible and more indirect incentives and subsidies, from tax breaks to payments for services to private companies. These submerged policies…obscure the role of government and exaggerate that of the market.” Instead of directly providing public options, we subsidize the purchasing of private goods, often using the tax code."

"Let’s take the case of student debt and the tax code. How much would it cost to make public colleges and universities free? Rough estimates (quoting Jeffrey Sach’s latest book) put the price of free public higher education at $15-$30 billion, which fits other estimates I’ve seen.

"$22.75 billion we are paying through the tax code to make college tuition and student debt more manageable. This amount is in the middle the range of the cost of just making public high education free. Now these aren’t equivalent — much of what is spent through the tax code will be biased more towards private and professional schools, which are more expensive. But this also isn’t anywhere near the full extent we subsidize student debt (a government creation from 1965)."

"But there is a choice in how to provide mass higher education. We can either use resources to reduce the price of the good upfront — make college free — or to subsidize the purchase of the good — here through the numerous hoops of the tax code. The amount of money we take from the tax code to try and make student debts and runaway tuition more bearable could be used instead to just provide free public colleges."

"There are winners and losers in each case. When we subsidize through the tax code, people who are well off and pay more taxes benefit more. People who can afford support staff, such as accountants and lawyers, are also more likely to understand how to take maximum advantage of these benefits. These subsidies benefit private educational institutions over public ones, as they’ll make private education feel more “natural” while obscuring the role of the government in setting up these markets. They give public college a nudge towards corporatization and privatization."

"Much of these subsidies are likely captured either by the higher education institutions themselves or the debt lenders. These subsidies will make tuition and debt easier to deal with, but providing colleges free as a public option would likely do far more to contain costs (also here)."

"Most importantly, it breaks the link between citizenship and education. The subsidy approach replaces the claim of a citizen to a necessary good to be full, participating person in our market economy with the claim of a consumer, whose claim is ultimately one of willingness to pay either through wealth or debt, with a “nudge” from the government. The first kind is the place where progressives have the stronger argument about freedom, as opposed to those who see the market as the only source of freedom available."

Chile: Student Protests Spread Throughout Region

"José Barrera, a civil engineering student at the Catholic University, said that what is happening in Chile "is an example of what education is like when it's privatised, when it is no longer defended as a right of everyone.""

"An education law enacted by the 1973-1990 dictatorship of General Augusto Pinochet set off a process of decentralisation and privatisation that gave private schools free rein to pursue profit and use entrance exams to select their students. The Chilean system is not just divided into paid private education and tuition-free public education, but is split into three: municipal schools run by local governments, which are publicly funded and free, state-subsidised private schools, and private schools that charge tuition. Within the sphere of state-subsidised private education, students get free tuition at some schools, while at others families pay monthly fees, an arrangement known as "shared financing.""

"The protest movement is calling for an end to the freedom of private schools receiving state subsidies to levy fees at will. Instead of the current system, under which administrators of these institutions rack up profits, the demonstrators want school fees to be invested in under-funded public schools."

"They also want public primary and secondary schools to be directly managed by the Education Ministry, instead of by local governments, because the decentralisation accentuated the inequality in education quality between rich and poor districts."

"Countries that see the Chilean model as an example, and that are moving towards privatisation, have to realise how harmful this kind of system can be for education in general," he argued."

"Capitalism is profits, business, buying and selling, and that is not what educators are about," said Garrido. He added that the movement in which teachers and students have come together is demanding a "social transformation.""

"[T]he student protests have become a broader social movement that will continue to fight for structural changes above and beyond the educational system, such as reforms to the free-market, neoliberal economic system inherited from the dictatorship."

"We need a more democratic country, where the voices of society are really heard. It can't just be the same old political class reaching decisions between four walls."

George Carlin on American Owners and Education

"I'll you what they don't want... They don't want a population of citizens capable of critical thinking... Well-informed, well-educated people capable of critical thinking... that's against their interests."

Richard Wolff on the Euro Crisis with Thom Hartmann

"Professor Richard Wolff, New School University NYC joins Thom Hartmann. The Eurozone is creeping closer and closer to spiraling into an economic abyss. And the biggest economy in Europe has reservations about riding in on a white horse to save the day."

EU summit: tales of fiscal union and financial adulteryby Jérôme E. Roos

"On Friday morning, a crucial EU summit — touted as the last opportunity to save the euro from collapse — ended in a dramatic split between the UK and the rest of Europe... The break-up marks yet another tectonic shift in European history. But it also reveals the extent to which financial interests have corrupted the minds of our leaders and soured their mutual relations."

"This was never a clash over the European interest versus the British interest, as both continental cosmopolitans and British euroskeptics like to portray it. Behind the veil of ideology lurk powerful financial interests dictating the choices of our double-crossing elites."

"More specifically, Cameron demanded that: (1) “any transfer of power from a national regulator to an EU regulator on financial services would be subject to a veto”; (2) “the European Banking Authority should remain in London”; (3) “banks should face a higher capital requirement”; and (4) “the European Central Bank be rebuffed in its attempts to rule that euro-denominated transactions take place within the eurozone.” Sarkozy rejected Cameron’s demands outright."

"The reasons for this are really quite simple: (1) Sarkozy doesn’t want UK-based banks to get a competitive advantage by dodging the European-wide financial transaction tax; (2) he wants the European Banking Authority to move to Paris; (3) he knows French banks are in a much weaker position than their UK counterparts; and (4) he wants euro-denominated transactions to take place within the eurozone so they will be routed via La Défense instead of the City."

"The bottomline is that this is a battle of banks; a clash of capital — it has nothing to do with the general European or British interest. If the eurozone were to break up, many German and French banks would collapse, hence the Franco-German push for fiscal union. Yet such a fiscal union would impose continental-style regulations on the free-for-all City of London. Fearing its competitive position vis-à-vis New York, the UK therefore strongly opposed participation."

"So whenever they tell you “there is no alternative”, don’t believe them — it’s a lie. As a European Central Bank official recently told Reuters, “what I think is important at the moment is not showing politicians that there might be an alternative, because in their mind that might be less costly than the options they have.” The attempt to naturalize and depoliticize this crisis is an ideological smokescreen meant to keep us firmly in a state of financial prostitution."

"The task is upon us to disseminate the truth and get organized. Another Europe is possible!"

Steve Keen on BBC: "We're already in a Great Depression"

"Sarah Montague talks to Steve Keen, one of the few economists to have predicted the global financial crisis, about the possibility of another Great Depression, and how to avoid it."

"'Another Great Depression is all but inevitable' - that's the view of Steve Keen. He's been called the 'Merchant of Gloom', but he's one of the few economists to have predicted the global financial crisis. While he used to be a lone voice in challenging the economic consensus, more and more people are now listening to him. His way of avoiding depression? Write off the debt, bankrupt the banks, nationalise the financial system, and start all over again."

Euro unwinding fast: Max Keiser interviews Yanis Varoufakis

The Euro Crisis by the numbers

"Slowly, painfully, the world is coming to grips with the realization that the Euro, as we know it, is entering its last days, and what consequences we are likely to see."

"Many people, especially those that trade stocks, have been having trouble believing that the Euro will die. After all, just a few years ago the Euro was considered the alternative reserve currency of the world. So much work and money has been spent on this unproven endeavor, not to mention the complete lack of a "Plan B", that few could picture its demise. Yet, just like the inability of so many to foresee the end of the housing bubble, reality is intruding again. The farther we get down the road of failure, the more clear the picture becomes."

"European banks have found themselves in the same position that Wall Street banks were in back in the fall of 2007 - with Trillion of assets that no one wants. Just like Bear Stearns, Wachovia, and Washington Mutual before them, European banks can't price their assets to what the markets will bear because it will mean instant insolvency if they did. So they "mark-to-myth" instead, hoping against hope that the asset markets will turn around before they are forced to declare bankruptcy."

"Probably the most disturbing event of the past week happened at the core of Europe. Germany's bond auction was an outright failure. To put this into perspective, recall how so many policy-makers and economists are calling for Germany to "save" the Euro. Germany is the most credit-worthy member of the union. So if Germany can't find enough investors to buy its own debt, how could it possibly borrow enough to save the rest of Europe? The answer is obviously: it can't."

"I got news for you: credit is already freezing in western Europe. Eastern Europe depends on western Europe for credit, and Austrian banks are already pulling back from the region by order of the Austrian government."

"That's just Europe. What do we have to worry about in America, right?"

"Well, consider that the derivatives market (Remember the derivatives market? That thing that caused AIG to fail, not to mention Enron and LTCM. That huge market that Congress refused to regulated after the 2008 economic shock. Remember that?) is between $250 Trillion and $707 Trillion in size (depending on who is counting)."

"Those numbers hopelessly dwarfed the GDP's of Europe and the United States combined."

"Consider that 94.4% of that $250 Trillion in derivative contracts were sold by just four banks: JPM with $78.1 trillion in exposure, Citi with $56 trillion, Bank of America with $53 trillion and Goldman with $48 trillion. Those are Trillions with a T. Their exposure to the derivatives market increased $5.3 Trillion in just the first quarter of this year. The overall derivatives market increased a record $107 Trillion in the first half of the year - more than the GDP of the entire world."

"You read that right: $107 Trillion in just 6 months."

"The bankers are absolutely bat-sh*t insane! In the face of an economic crisis they've doubled down their bets. They've gambled the entire world's economy for bigger bonuses, as if their bonuses will be worth anything if they crash the world's economy and bring down the Euro."

"Because this is as much a political crisis as an economic one, it is impossible to make accurate long-term predictions. The size of the problem is almost beyond comprehension. After all, we are talking about multiple countries going bankrupt and the failure of the second-largest currency in the world. To think that the problem could be even larger than the 2008 crisis, when the only sector of the economy that has recovered is corporate profits, leaves one thinking "This can't be true. They can't have done this to us again." And yet the numbers speak for themselves."

The $1 Trillion Student Loan Rip-Off by Alex Pareene

"Some people have noticed that “student loan debt” comes up a lot among the Wall Street Occupiers and the members of the 99 percent movement. Often, older people, who either attended school when tuition was reasonable, or who didn’t attend college at all in an era when a high school diploma was enough of a qualification for a stable, middle-class career, tend to think this is all the entitled whining of spoiled kids. They don’t understand that these kids accepted a home mortgage worth of debt before they ever even had a regular income, based on phony promises, and that the debt is inescapable, regardless of life circumstances or ability to pay."

"The impossibility of escaping student loan debt is why an industry sprang upto foist useless, overpriced degrees on vulnerable people. It’s a scam, but a profitable one, and respectable enough for major establishment players to feel comfortable making a killing on it."

"So we have incredibly rich and powerful elite institutions joining forces to bleed youths and minorities and poor people dry. And people wonder why there’s marching in the streets."

Occupy Wall Street and the cultural politics of the class struggle by Kristin Lawler

"You can learn a lot about a movement by listening to its opponents... As the movement spreads like wildfire, so does elite fear. Both concession and repression are testament to the way that formally, elite/mass power relations have been reshaped radically in just a few short months. Both signal raw movement power."

"And although there’s certainly a segment of the movement that’s agitating for the kind of Keynesian policies that would relieve the widespread stress and scarcity under which so many Americans live today and allow for a relatively comfortable life of quiet desperation, the truth is, it’s more than hard work and fair pay that the Occupy movement may ultimately be demanding."

"The OWS protests began with a critique of economic and political inequality (which has, nearly everyone now agrees, become ridiculous) and of the simple injustice (“banks got bailed out, we got sold out”) of the “99%” being made to bear the downside of the ever more highly leveraged risks taken by finance capital. But protest discourse very quickly saw the terms “unfairness” and “injustice” replaced with “austerity,” a change that explicitly links the movement with anti-austerity struggles around the world and throughout American history... Perhaps this anti-austerity history helps to explain why the “jobs and fairness” line doesn’t inspire quite the way that the more revolutionary “another world is possible” strain of movement discourse does."

"And like its predecessors a generation ago, this OWS statement rejects the elite discourse of scarcity that says there just isn’t enough for people to enjoy their beaches without oil spills, their mountains without clear-cutting, and their time without the stress of an increasingly heavy daily grind. It’s a vision of human entitlement to a good life on earth rather than a vision of a fairly paid and thus happy worker. It’s a vision of real democracy, not just a better market."

"Here then, is what movement opponents call “class warfare”—the creation of a counterculturally oriented space and the utopian vision that it inspires. An Occupation is a place where people (uselessly and inefficiently) converse, enjoy one another’s company, make their voices heard, eat food, play and listen to music, connect, engage in the experimental practice of radical democracy, and generally contribute nothing whatsoever to the production of profit."

"Mounting a lived critique of austerity— of capital’s relentless instrumentalization of time and space and of the myth of material scarcity that says it’s simply not realistic to expect from advanced industrial society the decent standard of living that it makes technologically possible with a minimum of toil— the protesters are indeed slackers. They are also class warriors, struggling against the capitalist imperative (which struck back, hard, beginning in the early 1970s) that everything and everyone be a tool for making profit and for the human one—for the freedom to constitute time on one’s own terms, for friendship and laughter and conviviality and “useless” thinking and pleasure."

"When the right attacks OWS as a bunch of countercultural slackers and as the vanguard of class warfare, they very presciently apprehend the significance of a moment in which the capitalist work ethic and the artificially perpetuated scarcity it’s predicated on are being roundly rejected. One in which the utopian demand for cultural freedom joins the labor movement’s push for a more robust share of the spoils of capitalism."

NYT: Killing the Euro by Paul Krugman

"Can the euro be saved? ... Even optimists now see Europe as headed for recession, while pessimists warn that the euro may become the epicenter of another global financial crisis."

"How did things go so wrong? The answer you hear all the time is that the euro crisis was caused by fiscal irresponsibility. But the truth is nearly the opposite. Although Europe’s leaders continue to insist that the problem is too much spending in debtor nations, the real problem is too little spending in Europe as a whole. And their efforts to fix matters by demanding ever harsher austerity have played a major role in making the situation worse."

"During the years of easy money, wages and prices in southern Europe rose substantially faster than in northern Europe. This divergence now needs to be reversed, either through falling prices in the south or through rising prices in the north. And it matters which: If southern Europe is forced to deflate its way to competitiveness, it will both pay a heavy price in employment and worsen its debt problems. The chances of success would be much greater if the gap were closed via rising prices in the north."

"But to close the gap through rising prices in the north, policy makers would have to accept temporarily higher inflation for the euro area as a whole. And they’ve made it clear that they won’t. Last April, in fact, the European Central Bank began raising interest rates, even though it was obvious to most observers that underlying inflation was, if anything, too low."

"The combination of austerity-for-all and a central bank morbidly obsessed with inflation makes it essentially impossible for indebted countries to escape from their debt trap and is, therefore, a recipe for widespread debt defaults, bank runs and general financial collapse."

"I hope, for our sake as well as theirs, that the Europeans will change course before it’s too late. But, to be honest, I don’t believe they will. In fact, what’s much more likely is that we will follow them down the path to ruin."

"For in America, as in Europe, the economy is being dragged down by troubled debtors — in our case, mainly homeowners. And here, too, we desperately need expansionary fiscal and monetary policies to support the economy as these debtors struggle back to financial health. Yet, as in Europe, public discourse [in the US] is dominated by deficit scolds and inflation obsessives."

Wall Street's Pitch to Profit on Federal Student Loans by Jason Delisle

(Oct. 12, 2011) "The investment banking industry – and its friends in Congress – have cooked up a scheme they are pitching to the “supercommittee” that they say would reduce the federal debt and cut federal spending. Supposedly, the plan would take the government’s $555 billion direct student loan holdings off of its books. In reality, the plan, which would allow the bankers to earn fees on a $555 billion deal, plus $100 billion more every year, would not reduce the debt or cut spending. But that hasn’t stopped Wall Street from trying."

"A proposal that could only have been be cooked up by investment bankers is circulating on Capitol Hill. It would refinance the $555 billion direct student loan portfolio with new debt backed 100 percent by the federal government. But this new debt would not be called U.S. Treasury debt, despite the 100 percent guarantee, and therefore not counted as part of the national debt. In other words, the new debt would be used to pay off the old debt (Treasury bonds) that the government issues to finance direct student loans. To be sure, the mechanics of the proposal are more complicated than that, but the effect of the proposal would be to move all outstanding and future student loans from bonds backed 100 percent by taxpayers to another set of bonds backed 100 percent by taxpayers but not counted as part of the national debt."

FT: The coming firesale of student loan ABS

This Financial Times article dated July 22, 2011, prior to the summer resolution of the US debt ceiling charade, shows the continuing vulnerability of bonds based on student loans, despite decades of legal and monetary support by the government:

"The coming firesale of student loan ABS"

"Posted by John McDermott on Jul 22 19:24."

"The potential contents of a firesale if there is a downgrade of the US’s AAA rating are receiving a fair bit of attention, as investment funds weigh up what they can and should do in the event."

"Defeased or prefunded securities are uniquely vulnerable and, according to a note out Thursday by Citigroup’s securitised products team, so are the $250bn of asset backed securities linked to the Federal Family Education Loan Program (FFELP)."

"FFELP was a federally-guaranteed student loan scheme used by three-quarters of US colleges. Technically, it’s not a guarantee but the federal government does provide 97 per cent (according to S&P) reinsurance on the outstanding loans. Thus there’s a direct link between the AAA sovereign and the AAA FFELP ABS. (21 Srabble points, if you’re wondering.) Moody’s listed these securities as a related risk when it placed the US on review for possible downgrade and now Citi reckons they’re the main form of ABS to worry about:"

Al Jazeera: Meltdown, The men who crashed the world

"Meltdown is a four-part investigation into a world of greed and recklessness that brought down the financial world. The show begins with the 2008 crash that pushed 30 million people into unemployment, brought countries to the edge of insolvency and turned the clock back to 1929."

"But how did it all go so wrong? Lack of government regulation; easy lending in the US housing market meant anyone could qualify for a home loan with no government regulations in place. Also, London was competing with New York as the banking capital of the world. Gordon Brown, the British finance minister at the time, introduced "light touch regulation" - giving bankers a free hand in the marketplace."

"Meltdown moves on to examine the epidemic of fear that caused the world's banks to stop lending and how the people began their fight back. Finally, it asks how the world can prepare for the next crisis even as it recognises that this one is far from over."

"We hear about the sheikh who says the crash never happened; a Wall Street king charged with fraud; a congresswoman who wants to jail the bankers; and the world leaders who want a re-think of capitalism."

Global rebellion: The coming chaos? by William Robinson

"As the crisis of global capitalism spirals out of control, the powers that be in the global system appear to be adrift and unable to proposal viable solutions... Simply put, the immense structural inequalities of the global political economy can no longer be contained through consensual mechanisms of social control. The ruling classes have lost legitimacy; we are witnessing a breakdown of ruling-class hegemony on a world scale."

"We need to see the big picture in historic and structural context."

"First, this crisis shares a number of aspects with earlier structural crises of the 1930s and the 1970s, but there are also several features unique to the present: The system is fast reaching the ecological limits of its reproduction. We face the real spectre of resource depletion and environmental catastrophes that threaten a system collapse."

"Second, global elites are unable to come up with solutions. They appear to be politically bankrupt and impotent to steer the course of events unfolding before them."

"Third, there will be no quick outcome of the mounting global chaos. We are in for a period of major conflicts and great upheavals. As I mentioned above, one danger is a neo-fascist response to contain the crisis."

"Fourth, popular forces worldwide have moved quicker than anyone could imagine from the defensive to the offensive. The initiative clearly passed this year, 2011, from the transnational elite to popular forces from below."

"The global revolt underway has shifted the whole political landscape and the terms of the discourse. Global elites are confused, reactive, and sinking into the quagmire of their own making. It is noteworthy that those struggling around the world have been shown a strong sense of solidarity and are in communications across whole continents... On the other hand, the "empire of global capital" is definitely not a "paper tiger". As global elites regroup and assess the new conjuncture and the threat of mass global revolution, they will - and have already begun to - organise coordinated mass repression, new wars and interventions, and mechanisms and projects of co-optation in their efforts to restore hegemony."

"In my view, the only viable solution to the crisis of global capitalism is a massive redistribution of wealth and power downward towards the poor majority of humanity along the lines of a 21st-century democratic socialism in which humanity is no longer at war with itself and with nature."

It’s not my future at risk, it’s everybody’s by Darren Patrick

"Today I signed the pledge to refuse student debt repayments i.e. to participate in a debt strike. I have been very hesitant to sign onto this new campaign, which calls for a mass withholding of payments when 1,000,000 people have signed. It also calls for mass expressions of support from faculty and non-debtors. There are existing campaigns, such as the campaign to forgive student loan debt, which deal with many of the same issues in less radical terms. I still support the latter movements, but I also see the discourse promoted by the debt strike campaign as vital to moving beyond President Obama’s inadequate action toward a more radical agenda against long term debt slavery and austerity."

"So why did I sign the pledge and why might you sign it?

1. It focuses on the existing crisis

2. Even if the pledge does not reach 1,000,000 signatories, it creates a political space for organizing which combats the isolation, shame, and embarrassment that is often associated with being a student loan debtor. We live in a society that individualizes problems that must be addressed through collective action. This is a strategy which is meant to silence us and it must be resisted.

3. We have nothing to lose by signing the pledge and everything to gain. Signing the pledge encourages cooperation, expansion of support, and knowledge of options and alternatives. Additionally, it helps me to confront the reality that, whether or not I sign, there is a strong chance that I will be at risk of default at some point in my life.

4. Like the broader #OWS movement, the #OccupyStudentDebt movement is not a singular solution (there is no “one demand”), it is part of a radical struggle against widespread injustice in a particular form. It articulates our struggle with the struggle of people facing austerity at the hands of ‘their’ governments. It is not the ‘laziness’ of the Greek worker or the ‘complacency’ of the Italian student which is to blame for the crisis. Debt is a strategy for accumulation by the rich, whether that debt is 'sovereign' or 'student'.

We must reject the notion that profit should be individual and loss, suffering, and pain collective. We deserve more and we must fight for more. Yes, we need the efforts of more ‘moderate’ organizations and efforts to continue. This is not an either/or moment, it is both / and.

The point is to shift my consciousness and to envision the world differently. Some have already been driven to suicide because of debt. Refuse this grave injustice."

Writing on the Wall by Vijay Prashad

"One of the most difficult elements of advanced capitalism and modern society is that it is hard to identify the culprit for one's sorrows. In feudal days, there was always the baron's castle or the moneylender's office; they could be located, and the peasantry could convert their agricultural implements into weapons as they rushed to these sites. No such ease in our times.

"Abstract social domination makes it harder to point precisely to the cause of one's distress. Banks often stand in for the problem, being the front lines of financial capital – it is banks, after all, that foreclose on houses and deny credit. But the banks are only a cog in a complex system that is built upon the simple premise that only a few people are able to wield power and property for their betterment, whereas the vast mass of people have only the illusion of property and the hopes for power."

"The banks stand in for the system in general."

"Events in the U.S. are linked closely to the convulsions in the rim of southern Europe, from Greece to Spain via Italy. The root cause of the older crisis and the more recent one is the same, as pointed out by the Greek economist Yanis Varoufakis in his new book, The Global Minotaur: The True Origins of the Financial Crisis and the Future of the World Economy (2011): it has to do with the failure of the world economic system to have a surplus recycling mechanism that would redistribute accumulated surpluses across the world."

"Rather than have such a mechanism, the mandarins of the world order in the 1970s and 1980s preferred to allow vast surpluses to get sucked into the world of finance (with New York's Wall Street as its centre). This institutional failure was the cause of the new culture of greed (and not the other way around). That the political class in the Atlantic world prefers to see the solution in austerity policies against the ordinary people rather than in terms of institutional failures (let alone the system's failure) demonstrates the vacuity of its leadership. Since it offers no new political and economic project to earn the trust of the population, it must resort to the baton."

"The baton offers no solutions. The writing for the Street is on the wall."

Reuters Special Report: A "great haircut" to kick-start growth

"More than three years after the financial crisis struck, the economy remains stuck in a consumer debt trap. It's a situation that could take years to correct itself. That's why some economists are calling for a radical step: massive debt relief."

"Tens of millions of citizens remain burdened with mortgages they can no longer afford, in addition to soaring credit card bills and sky high student loans. Trillions of dollars in outstanding consumer debt is stifling demand for goods and services and that's one reason economists say cash-rich U.S. companies are reluctant to hire and unemployment remains stubbornly high."

"The notion of a Debt Jubilee dates back to biblical Israel where debts were forgiven every 50 years or so. In an August appearance on CNBC, Stephen Roach said debt forgiveness would help consumers get through "the pain of deleveraging sooner rather than later."

"But it's not just the liberal economists and doom-and-gloom financial analysts calling for a great haircut. Even some institutional investors, who might suffer some of the impact of debt reductions on their portfolios, are seeing a need for a creative solution to the mess."

"The fear of some economists is that the economy may be going into a double dip recession. That means precious time is being lost if a negotiated approach to debt reduction isn't taken now."

"Indeed, it has been two years since the notion of a "Debt Jubilee" made it into the popular culture when Trey Parker and Matt Stone used it for an episode of the politically incorrect cartoon "South Park." In the episode aired in March 2009, one of the characters used an unlimited credit card to pay off all the debts of the residents of South Park to spur the economy."

"Still, there are still plenty of economists who say the concern about consumer debt is overdone and that doing anything radical now would only make things worse. One of those is Mark Zandi, chief economist of Moody's Analytics, who says a forced write-down or haircut of debt "would only result in a much higher cost of capital going forward and result in much less credit to more risky investments."