Just a reminder of what I was saying back in June of 2012. Inevitably we are where we are.
This was in response to a Paul Krugman article "Catastrophic Credibility"
Authorities have three choices:
1- Go through many years of austerity and or growth enhancing policies to reduce both deficits and debt to sustainable levels a very long process of perseverance.
2-Central banks abandon their narrow mindedness and allow inflationary EXPECTATIONS (it is this variable expectations, that is important to trigger demand side incentives)
3-Even more importantly design a process to redistribute wealth to households by increasing mortgage debt forgiveness and thus wealth, allowing for increased final demand as net worth and prosperity values rise.
In summary, it is a function of transferring wealth from creditors to debtors. If this process is not accelerated then it will be imposed by market forces and or political and ultimately social repercussions. This effectively, is what is currently happening in Greece.
It goes without saying that a combination of all is also another desirable mix.
I speak of mortgage debt forgiveness as my answer was directed to the US economy where the biggest part of household debt were mortgages. It may or may not apply to Greece I do not have the statistics handy.
And for good order's sake the socially financed gains to save the World financial system have created the current inequality in the developed economies with the QE programs and excessive liquidity directing investment to stock and bond markets. Isn't it high time for a more equitable distribution?