To the editor.

Author:Bailey, Norman
Position:Off the News - Letter to the editor

Your trip down memory lane to the Dolder Grand in the Spring 2015 TIE reminded me of several incidents while I was chief economist of the National Security Council. My time was dominated by two issues: developing the economic part of the strategic plan that won the Cold War (my book on the matter will be published this year) and the LDC debt crisis.

The crisis didn't begin in Latin America, but later it became centered there. It was very clear to me that more liquidity must make matters worse, like trying to put out a fire with gasoline. In this, I was supported by several in the Reagan Administration, notably Council of Economic Advisers chair Marty Feldstein. Marty set up a meeting with the president and I attended to give the national security aspect of collapsing economies around the world. The president, as always, listened carefully and asked good questions, but the Treasury Department predictably pooh-poohed the whole matter. Now Europe is making the same mistake with Greece, validating the old saying, "No one learns anything from history except that no one learns anything from history."

I and two colleagues, authorized by the National Security Advisor, presented a plan for debt relief to a CSIS meeting in 1982. The plan involved a new instrument which we called "exchange participation notes." The idea became widely discussed, and The Economist mentioned it in an article entitled "Bailey bonds." Later, David Mulford, then assistant Treasury secretary for international affairs, mentioned the concept to Secretary Nicholas Brady, who adopted something similar, and the rest is...

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