Two things here, first, the $500/per month reduced debt overhead continues for thirty years and second the proposal has the recipients of the package, not being able to re-indebt themselves for some time.

It was the purchasing power side of the balance that collapsed as the advanced credit stream ceased while the debt service load continued. Reducing the cost of that debt load contributes that much back to the buy side of the imbalance. Until there are gains in real productivity, the new equilibrium would be at a lower GDP then before.

We would however, if the re-fi’s reached all of the presumed 50 million households, have freed from debt service, existing earnings equal to 6% GDP. That, when applied to the current decline of 4%, would have a new equilibrium of 2% above where we were when it went negative.

I suspect that growth is only essential to a degree that somehow relates to systemic debt load. That, however, is something to be determined by mysterious statistics compiled by ‘certified’ economists. 

It sounds like we’re just postponing the day of reckoning. We can, of course, re-try the same thing from 4.5% to 2.5% but, at some point the equlibrium becomes liquid capitol against borrowing. Then what?

Or am I missing something…