Document Type


Publication Date



Deflation, Mortgage markets, Debt restructuring, Currency reform


Law and Economics


We argue that the U.S. economy is presently mired in a particularly tenacious, Fisher-style debt-deflation rooted in long term secular trends in the domestic and global economies. Global productive capacity has steadily outpaced global absorptive capacity for several decades now, and the latter will not catch up with the former for a good many years to come -- if ever. In order to avert long-term Japanese-style stagnation at home and quite possibly slowdown and slump worldwide, the U.S. will have both (a) to eliminate private sector debt-overhang from 'both sides' of the same, and (b) to act in concert with other nations to reverse and eliminate persistent trade imbalances once and for all. We accordingly describe and prescribe a detailed economic recovery program comprising three 'pillars.' The first is a robust public infrastructure investment plan to compensate for retrenchment-rooted lags in consumer demand. The second is a comprehensive mortgage debt restructuring plan including bridge loan assistance, principal reduction, and 'rent to own' components for mortgage debtors facing three distinct kinds of distress. The third includes medium and long term fiscal and currency policy reforms designed first to recycle trade surpluses into demand stimulus where presently needed, and ultimately to prevent any recurrence in future of imbalances such as have characterized global trade over the past several decades.

Publication Citation

Published by New America Foundation, October 2011.