Audio Clips

14 August 2011

Slow Motion Default

David Boaz, Executive Vice-President of the Cato Institute and author of Libertarianism: A Primer (one of the best introductions to libertarianism around) wrote a piece recently about the debt and the debasement of the dollar. I've been telling people for years that the easiest way for Congress to pay the debt is to simply print more dollars and hence make the payback cost less than it should have. Of course, it's completely dishonest and steals money from bondholders and gives it to the government. But I can imagine that most politicians lose sleep at night since they're already robbing us on a daily basis. Here is a great excerpt:

The New York Times editorializes that the Federal Reserve should be “more aggressive” in pumping more money into the slow economy. A couple of weeks ago the Times was breathlessly hyping the mythical fear of “default” if the debt ceiling wasn’t promptly raised. With that problem out of the way, the paper now quietly recommends a slow default on the national debt:

A more aggressive strategy would be letting inflation rise above the Fed’s comfort level of 2 percent or so to, say, 4 percent. That could help the economy by easing the repayment of debt.

“Easing the repayment of debt”: that is, paying your creditors less in real terms than they had expected. That’s a slow-mo default.

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