Barack Obama moments ago proclaimed that no one is advocating for default.
San Jose State University Assoc. Professor Jeffrey Rogers Hummel calls for exactly such a default:
But my major disagreement with Tyler [Cowen] and Arnold [Kling] is that I believe that a U.S. government default, rather than being “the end of the world,” could possibly be a good thing. I even advocated repudiating the national debt in a 1981 issue of CALIBER (the newsletter of the California Libertarian Party), long before predicting a default. My arguments were moral, economic, and political, and I would only soften them slightly today.
The moral argument for repudiation is easiest to follow although by itself says nothing about the practical results. Treasury securities represent a stream of future tax revenues, and investors have no more just claim to those returns than to any investment in a criminal enterprise. I favor total repudiation of all government debt for the same reason I favor abolition of slavery without compensation to slaveholders.
The economic argument depends on whether Ricardian Equivalence holds. Repudiating government debt eliminates future tax liabilities. To the extent that people correctly anticipate those liabilities, the value of private assets (including human capital) should rise over the long run by the same amount that the value of government securities falls. Thus, people will gain or lose depending how closely their wealth is associated with the State. If on the other hand, people underestimate their future tax liabilities, they suffer from a fiscal or “bond illusion” in which Treasury securities make them feel wealthier than they actually are. Debt repudiation will bring their expectations into closer alignment with reality, which should increase saving.
LVMI’s own Bob Murphy has made the same point:
Gary North has stated default will come, and that the vast majority of the people of the United States will benefit from it:
Liberty will receive a shot in the arm when this phrase provokes universal laughter: “The full faith and credit of the United States.” That day is fast approaching. The credit rating of the United States government will be marked down from AAA to AA. It will then be marked down to A. For every notch down that it falls, the national day of deliverance draws closer. American liberty is measured inversely to the credit rating of the United States government.
The President should hear from these voices and this rationale. I highly doubt he has even considered these arguments and would greatly benefit from a week at Mises University.
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When elites say “no one” or “nobody” they mean “no one or nobody of importance”.
Face facts. The USA is a failed state, or else the option (or non-option) of default would not be mentioned, not even to deny that it is being considered.
Also, if the president of a country tells you that something is not being considered (presumably he means by his cabinet and advisers) then you can bet that it is being discussed. Obama’s entire life, education and career are lies … why would he stop lying when trillions of dollars depend on him continuing to lie?
Why are we so certain our government will move to repudiate its debt? Why would it not simply print the dollar into obscurity to honor, in word if not in spirit, its obligations? To my mind, this seems more likely than destroying their capacity to borrow outright—one last hurrah before drawing the curtains on this sad fracas. If they choose Weimer inflation over repudiation, they’ll wipe out all savings or contracts denominated in greenbacks. Not to say I’m in favor of leaving in place the existing non-commodity-backed system of fiduciary media. However, repudiation destroys only the credit of the United States government, not necessarily the value of the USD. Or am I misreading this all?
I am not certain that official repudiation will occur, but I am certain that the USA is on the brink of becoming what most people would call a failed state.
It is necessary to define terms a bit more precisely however. All states are failures, in that they fail to serve their citizens but succeed in serving the elites who control them. That is the fundamental reason why almost all states are created in the first place. But at some point a state will begin to fail to serve even the interests of its rulers. This point always coincides with some combination of debt repudiation, rapid currency devaluation, flight of capital and loss of jobs, emigration of the rich and powerful, police repression, secession and civil war.
Evidently, repudiation has been discussed by Obameister or by someone he knows, or he wouldn’t have blurted out that nobody is considering it. The currency depreciation which has been occurring since 1913 appears to be accelerating at the moment. The prospects for halting inflation by cutting deficits and raising interest rates appear to be slim to none, and Slim just got told that his company is moving to Singapore and his services will no longer be needed. That takes care of flight of capital, loss of jobs and emigration of the wealthy. Police repression I won’t mention, because I currently have a TSA goon’s hand in my pants and I don’t want to give him any sudden starts. Secession is percolating in a few places, like New Hampshire, California (La Raza), Alaska and who knows where else. Civil war? Don’t know, thank god that part is optional.
Agreed, Obama in desperate need of sound economic schooling. But so too the rest of DC, right. My humble take on the government’s fiscal plight while politicians make their speeches…
http://blogs.forbes.com/michaelpollaro/2011/06/16/u-s-governments-fiscal-state-worsens-dc-politicians-fiddle/
Implied in “credit worthy” is trustworthiness. Since when are counterfeiters and murderers and thieves and extortionists trustworthy, hence “credit worthiness” is an absurdity, a lie, and part of the propaganda of the State.
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