The Fed hangs onto a few trillion of government bonds, under current rules. When Congress goes to borrowing too much, the Fed does a bond burning, which is an effective writing off the interest rate subsidy to Congress, which gets a de facto cut in the seigniorage. Direct inflation, which is the cost of Congress default on its promise to the Fed. Then folks can bring out a real inflation risk onto their balance sheet.
But we need the one time reform, large state agencies should keep an account at the Fed for defensive purposes. We can do both deals at once, liberate state accounts and contract out a default of 8 trillion over 15 years. Condition the double entry accounting framework to include real inflation risk, make the S/L balances closer to linear, make it easier to measure the size of a Walmart door.
The other plot
A one time transfer of net 6% to the kids from the parents. 3% drop in payroll taxes, 3% cut in entitlements (and cuts everywhere), plus 3% tax increase from progressivity.
This was part two in the last cycle, early 80s, I think, when we adjused SS. But my plot moves this event up, and even out of order if need be. I envision the meeting of the elders, and my four part plan is before them. They will fold. My plan is very close to Euler plus correction, adaptive Euler.
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