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"Walking across the Boston Common this morning, I came to realize that the unpalatable (to me) option of some debt forgiveness on mortgages looks increasingly to be necessary as well as tax changes" he discussed in his report.
"To go further, if we mean to prosper long term, I am sure we need to act to make debt less attractive to everybody: it really is a snare and a delusion" to think otherwise.
Calling America's Congress "dysfunctional," he said it has to decide between two bad choices:
-- austerity to kill demand when the economy is on its knees; or
-- do nothing, risk default, compromise the integrity of the dollar and send "a powerful signal to the world that the US, at least for now," is past its prime.
In fact, growing numbers acknowledge that reality. "Come to think of it," said Grantham, "the choice was between a technical default and looking like a Banana Republic (or) technical blackmail and looking" like the same thing. "Just different bananas perhaps."
Overall he sees hard times, "lean years." Any pretense otherwise "is beyond wishful thinking or weak math skills. It is either childish or gross and cynical politics: that is to say, even worse politics than usual."
With balanced budgets mathematically impossible without major politically unpalatable policy changes, the alternative is "kicking an enormous can down the road" for even greater predictable disaster.
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