The first premise of our proposed economic recovery plan is that we must understand money.

Money, many think, is cash. It is not. "Money" is an electronic system where computers add and subtract balances from accounts. There is no real "cash" associated with this.

What is associated with "money" are beliefs.

These beliefs include:

-- that the same amount of "money" tomorrow will have the same purchasing power as today.

--that we will all have access to "money" via our paychecks tomorrow like we did last week.

--that as a consequence of having access to "money"...whether by selling our stocks or receiving a paycheck, we will be able to pay all our bills.

--that if we put our "money" in a bank, it will be there tomorrow if we need it.

The core problem in today's financial crisis is that our beliefs about "money" have been shattered. We have lost faith in our "money". We woke up one morning and realized "money" wasn't real at all. It was just gone.

Since "money" is essentially a belief system, to solve our problem we need to recreate that belief system.

Our proposal starts with a concept of starting all over as though nothing happened in the past.

This is very important because the more time and energy we spend blaming someone for what's happened, that time and energy is wasted in going forward into the future. Sure, there were bad people. And bad policy. If we had a time machine we could back in fix the stupid or criminal decisions. Problem is we don't have a time machine.

The next step is the Clean Slate new start.

This Clean Slate includes the following:

--all debt would be wiped out. Whatever any of us...personal or corporate...would be wiped clean. None of us owes anyone anything. Our mortgages are paid off. Our business debts are paid off.

--and everyone owed money would be paid off. 100% face value, (no prepayment penalties allowed).

How do we do this outrageous thing? you ask.

Simple, we all agree to believe that the government, which invents money, can invent enough money to pay all debt off with "new" money.

The second step of the Clean Slate is every adult (over age 18)  in the country is given $100,000 of the "new" money. To do whatever he or she wants to do with that "new" money.

The third step is to establish a very tight system of financial regulation based on truth. Anyone who lies or schemes to suck money away from someone else to accumulate more while someone has less, is subject to the death penalty. Lets increase the risk premium for manipulating money at other people's expense. Whether the culprit be a con man or a wall street banker, they commit fraud to steal your money, they die. Bernie Madoff should be the first one shot.

The fourth step is to weed out of our system greed. A reasonable rate of return is fine, but excess profits just so some shareholders get fat dividends while other people lose their way. Say a cap at 20%.

The fifth step is to completely revise the tax system so its fair. Fair means no deductions or loopholes. Everyone pays 5% on their income, however they earn it. We can no longer afford the corrosive belief that some people get way without paying taxes because they can afford lobbyists. Our tax system should simply collect money to pay for government functions, not to induce behavior or investment in someone's pet schemes.

The sixth step is to regulate the credit market. Put usury laws back on the books. Oversee the risk assessment system to make sure lenders tie their loans and rates to appropriate risk levels. 18% interest max.

The seventh step is to regulate the debt and bond and stock rating systems. He who rates insures the outcome if people rely on the rating.

The eigth step is a serious effort at energy independence and development of renewable energy. If Brazil can eliminate the importation of foreign oil, we can to. And we don't have to wreck our environment to do this.

But this all comes down to believing it can work.

Of course people will note that vastly increasing the money supply will set off inflation. That is a belief itself. Why would everyone suddenly want to buy everything and push prices up?

Elimination all debt lifts an enormous burden off the  economy. Everyone is free and clear. Income is now available to invest, to build, or to save.

Will this work? In the short run, sure. In the long run, we're probably going to go back to our old, foolish, greedy ways believing that some people are more entitled to money than others, that a sucker is born every minute, that government is evil and should not mess with the free market, that there's no such thing as excess profits, that shareholders are more important than working people...and if that's the case our economy and system deserves to die.

But think about what is going to be like when you lose your job, and can't buy food or pay for your electricity. Because all the "money" evaporated and no one could pay their bills or their wages.

Would you like to eat the squirrels living in the trees near your house?

Let us all get together and believe in some new form of money, and start over.

Copyright 2009 by Hugh A. Holub