Some form of mutualization of public debt, carried out under stringent rules.

This raises the question of the adequate level of debt relief which would truly allow debtor countries to grow out of their debt problems.

US consumers are shopped out, savings less, and debt burdened.

For one out of four US mortgages, the debt exceeds the home s value.

Many people regard debt relief and socialization of debts as the only way out.

So governments bailed out banks and economies, producing a sovereign debt crisis.

Fifth, debt burdens that cannot be eased by growth, savings, or inflation must be rendered sustainable through orderly debt restructuring, debt reduction, and conversion of debt into equity. This needs to be carried out for insolvent governments, households, and financial institutions alike.

The best way to get rid of debt (short of default) is to grow out of it.

So, although the process of deleveraging has barely started, debt reductions will become necessary if countries cannot grow or save or inflate themselves out of their debt problems.

The limp debt exchange agreed to in July can be thrown out and replaced by one that grants the country meaningful debt relief.

The first is how to navigate out of the current overhang of both private and public debt.

The only way out is for Greece to default on its sovereign debt.

Everyone knows that Greece will be unable to work its way out of crisis without massive debt relief.

Debt write downs and guarantees will inevitably bloat Germany s government debt, as the authorities are forced to bail out German banks (and probably some neighboring countries banks).

If governments that have already tapped out their debt bearing capacity now issued more debt or money or guarantees, they would deal a mortal blow to confidence.

Investors have reacted by trying to get out of the euro and, in particular, steer clear of Greek government debt.

The debt GDP ratio was expected to top out at 150 absent the substantial write down of privately held debt, which was deemed unnecessary, the ratio would have been close to 250 .

Egyptians need only glance north, at the European debt crisis, to understand they should sort out their debt problem now, rather than waiting until it reaches Greek proportions.

It didn t work. Eurozone sovereign debt turned out not to be homogenous with respect to risk.

Today, seven out of ten post secondary students graduate with debt, with the total volume exceeding debt from credit cards and auto loans combined. Moreover, student loans constitute 45 of federally owned financial assets.

American consumers are shopped out, saving less, debt burdened (136 of income, on average), and buffeted by many negative shocks.

The tragedy could have been avoided if Greece had shown unyielding, timely debt discipline. The country would then have been unable to price itself out of the market through an artificial debt financed boom.

But the phrasing in Growth in a Time of Debt also misled European Commissioner Olli Rehn and many others to argue that when government debt reaches 80 90 of GDP, it starts to crowd out activity.

Shopped out, savings less, and debt burdened consumers have been hit by a wealth shock (falling home prices and stock markets), rising debt service ratios, and falling incomes and employment.

nbsp nbsp nbsp nbsp nbsp nbsp nbsp nbsp nbsp nbsp Some form of mutualization of public debt, carried out under stringent rules.

Instead, they focused exclusively on US foreign debt, ignoring household debt (mortgage and consumer debt), public debt, business debt, and financial debt.

As pointed out above, given the uncertainty surrounding that analysis, the treatment of debt reschedulings cannot rely on one single view.

As during the Great Depression and in many debt restructurings, it makes sense in the current contingency to mandate partial debt forgiveness or a debt for equity swap in the financial sector. It is a well tested strategy, and it leaves taxpayers out of the picture.

Everyone knows that Greece will be unable to work its way out of crisis without massive debt relief. The only question is whether the country s debt restructuring will be orderly and controlled or chaotic and contagious.

Because China s government does not owe much debt to the public, the PBC sold out its holdings of government bonds in 2005.

US regulators are strongly hinting that they will allow long term debt to default in a bank failure, while affirming that they will find a way to bail out short term debt.

Unsustainable private debt problems must be resolved by defaults, debt reductions, and conversion of debt into equity.

Central banks and finance ministries are also complicit, since debt gets bailed out far more aggressively than equity does.

Their cash balances are extremely high, interest payments on debt are low, and principal obligations have been termed out.

As recovery continues, this public sector debt will increasingly crowd out private sector, local government and developing country borrowing.

The fact that countries can resort to double digit inflation rates and print their way out of a debt crisis is hardly reassuring.

Debt sustainability and debt relief

The demand for debt repayment confronts the philosophy of debt forgiveness.

Yet there still is a way out of this mess. Greece s debt should be cut sharply, and the country should remain within the eurozone.

Fourth, the re leveraging of the public sector through large fiscal deficits and debt accumulation risks crowding out a recovery in private sector spending.

This period of relative stability and prosperity ended in 1911, when revolution broke out and the country slid once again into disorder and debt.

Regarding debt, the Asian Group welcomed the development related initiatives arising from the recent G8 summit and wished to point out that these had been made possible by UNCTAD's invaluable pioneering policy analysis on debt.

Fifth, debt burdens that cannot be eased by growth, savings, or inflation must be rendered sustainable through orderly debt restructuring, debt reduction, and conversion of debt into equity.

But, while debt forgiveness benefits holders of both equity and debt, debt holders don t voluntarily agree to it for two reasons.

Options for lower debt burdens on Governments of heavily indebted developing countries include debt cancellation and debt swaps for sustainable development.