Cut wut?

Simon Johnson of The Baseline Scenario thinks we need to cut the size of our finance industry in half, from 8% of GDP down to 4%. I like Johnson's idea, because it matches up well with what I say in the 12 pages:

A reasonable goal would be to make it so that each dollar of money-money has to support about $20 of credit-money, rather than $35 or $40.

Cut debt by half. That's my plan.

Cut finance by half, that's Simon Johnson's scenario. He's the economist. I'm just a hobbyist. Let's go with his plan. All right then, the Johnson scenario: cut finance by half. Now... Financial products include investment, insurance, and lending.

What shall we cut?

There's nothing we can cut. We need investment. We need insurance. And we need to use credit. So how are we gonna cut our use of financial products in half?

I have a thought: We need the investment, the insurance, the new uses of credit. But we don't need the accumulation of old debt.

We need new debt. We need it for growth. Economic expansion depends on new uses of credit (and using credit creates new debt). But we don't need old debt. Old debt is a burden. It's a drag on the economy. And the more debt we're "managing," the bigger the drag on the economy.

Distinguishing between new uses of credit and old accumulations of debt makes the situation clear. New uses of credit help the economy grow. That's good. Old accumulations of debt create a cost that hinders economic growth. That's bad.

Cut debt by half; that's the plan. Cut old debt; that's the key.