One other way to resolve the global financial crisis that has been advocated by some economists is for central banks to create money and simply give it to people. Everyone gets exactly the same amount. This is sometimes referred to as helicopter money. Steve Keen has proposed a clever variant; recipients first have to use helicopter money to pay off any debts they have. They can only spend what is left over. He calls this a debt jubilee.
The main advantage of this approach is that it will reduce aggregate private sector debt levels very quickly without penalising creditors. It would also be thoroughly fair and democratic. The main danger is that it might, if it is overdone, result in inflation. However, provided it was done carefully and quickly stopped at the first sign of inflation this is easily avoided.
Cuts in VAT have a similar effect but there is a political difference. Tax cuts increase government deficits which scares many people into opposing them. Helicopter drops of central bank created money neatly sidestep this obstacle.
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