Tags: Yale | economics professor | Robert Shiller | government security | based | equity | debt

Shiller: Sell Shares in the U.S., Not Just Its Debt

Thursday, 31 Dec 2009 09:09 AM

Yale economics professor Robert Shiller says a new kind of government security is needed, one based on equity instead of debt.

“Corporations raise money by issuing both debt and equity, the latter giving investors an implicit share in future profits,” Shiller writes in The New York Times.

“Governments should do something like this, too, and not just rely on debt," he says.

"We would sell shares in America instead of just debt of the American government."

Shiller even suggests a name for the new security, which would be based on Gross Domestic Product: a "trill," because it would represent one-trillionth of annual GDP.

Though GDP numbers still are subject to periodic revisions, “the basic problem has been largely solved,” Shiller says.

“Such securities might help assuage doubts that governments can sustain the deficit spending required to keep sagging economies stimulated and protected from the threat of a truly serious recession.”

If substantial markets could be established for them, Shiller notes, trills would be a major new source of government funding, issued with the full faith and credit of the respective governments — which means investors could trust that governments would pay out shares as promised, or buy back the trills at market prices.

“What the average citizen doesn’t explicitly understand is that a significant part of the government’s plan to repair the financial system and the economy is to pay savers nothing and allow damaged financial institutions to earn a nice, guaranteed spread,” Bill Gross, co-CIO of Pimco, told The New York Times.

“It’s capitalism, I guess, but it’s not to be applauded.”

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Yale economics professor Robert Shiller says a new kind of government security is needed, one based on equity instead of debt. Corporations raise money by issuing both debt and equity, the latter giving investors an implicit share in future profits, Shiller writes in The...
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Thursday, 31 Dec 2009 09:09 AM
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