Ending the debt limit crisis: Dear Ben Bernanke ( By Alan Grayson )
Warren Buffett calls the debt ceiling a “nuclear weapon, too horrible to use.” Obama administration official Jason Furman says the consequence of a default on U.S. government debt is “too terrible to think about.” When asked about a default, Wells Fargo strategist James Kochan simply commented, “Holy cripes.”
With this crisis, America is risking financial Armageddon. The default of Lehman Brothers on its $613 billion of debt ignited a chain reaction in the financial system, nearly destroying the U.S. economy. A default by the U.S. government on $17 trillion of debt — debt that has been considered the safest in the world — could be far worse.
But at heart, this is not a debt problem. It is an accounting problem. The Treasury Department issues U.S. debt, and lots of it. So you would think that America is deeply indebted to its bondholders. Yet increasingly, it is the U.S. monetary authority, the Federal Reserve, and not private investors, who buys this debt.
So a simple solution to the impasse is as follows: Federal Reserve Chairman Ben Bernanke should simply cancel the Treasury debt that it owns. The government can just forgive the government’s debt.
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http://blogs.reuters.com/great-debate/2013/10/09/ending-the-debt-limit-crisis-dear-ben-bernanke/
= new reply since forum marked as read
Economics (micro or macro) is so not my forte, to put it mildly. So I cannot possibly intelligently comment on the merits of Grayson's idea proposed in this open letter.
Reading the comments seems to be unanimity that Grayson's idea is flawed.
Don't know who all the commentators doing all push back are, self interested no doubt, but it would be interesting to read/hear other economists reactions to Grayson's idea.
Thanks for posting this piece.. 
