Debt Ceiling Farce and Why the US Should Declare Bankruptcy
International Man: The US federal government has raised the so-called debt ceiling 104 times since 1944.
Shouldn’t they call it a debt target instead of a debt ceiling?
Is this whole thing a farce?
Doug Casey: The situation is completely and irredeemably out of control. It’s a farce. Quite laughable, except for the fact it’s so deadly serious.
Can they reduce the debt ceiling or the amount of debt? Or even slow down its growth at this point? No.
The situation is beyond redemption because most US government expenditures go to pay entitlements—Social Security, Medicare, Medicaid, food stamps, and numerous other types of welfare.
Those things will be very hard to cut at this point; breaking the doggy dishes of millions of corrupted Americans would cause unrest. Plus, the so-called “defense” budget, which mostly supports the military/industrial complex while fomenting conflict. It’s actually much larger than disclosed because it should include $50 billion of foreign aid, the cost of running outrageously large embassies over the world, the CIA, and black budgets of all types.
Meanwhile, all US government agencies are bent on expanding themselves. The bureaucrats who run them realize that if they don’t grow the budget every year, they reduce their chances of going from one GS level to the next. Their success is based upon managing more people and spending more money. Naturally, all these agencies grow like cancers.
As a result, the “debt ceiling” is a fiction. It will stay out of control unless there is a total reorganization of the government—which itself would be risky. And that’s not going to happen until we have a financial catastrophe that leaves absolutely no alternative.
International Man: You have previously stated the US government should default on the national debt.
What are the reasons for that?
Doug Casey: I know it sounds outrageous to propose the US government default on its national debt. Of course, they don’t think it will ever be necessary because, as several high-level government officials have pointed out, they can just print money to pay off the debt.
However, I disagree. What are the reasons for doing something as seemingly catastrophic as defaulting on the debt? I’ll give you at least five. Stick with me. Let’s conduct an outrageous but not unreasonable thought experiment.
First, barring default, future generations of Americans will be turned into serfs to pay off the debt. Profligate people have run up the debt, but everybody’s children and grandchildren are stuck with having to pay it off. That’s simply immoral. If you have any care for the future at all, future generations should be saved from becoming serfs to pay it off.
Second, it would punish the enablers who lend the US government money. People who lend the US government money facilitate it by doing all the stupid and destructive things it does. They shouldn’t be rewarded; they should be punished.
Third, official default is better than the alternative. It’s like a hundred-story building that’s about to collapse. If that’s the case, should you wait until it collapses randomly and unpredictably, or should you have a controlled demolition? It’s not a pleasant alternative, but it’s the better alternative.
Fourth, default would make further borrowing on the part of the US government impossible, at least for a while. It would be exposed as an untrustworthy entity, like the Argentine government, which defaults all the time. People would still idiotically lend it more money, but a default might slow down the rate of increase in the US government’s size.
Fifth, it’s almost necessary that the debt goes away to help de-financialize the US economy. The US is tremendously over-financialized. It’s all about buying, selling, creating, and packaging financial instruments. Government debt, with the help of the Fed, is the actual engine of inflation. Defaulting on the national debt would pave the way for the reinstitution of a sound, redeemable, commodity-based money. People would have to concentrate more on real wealth than phony financial wealth, actual engineering, as opposed to financial and social engineering.
Of course, an objection reasonable people would make is: “If you default on the debt, it’s going to be a catastrophe.”
My answer is that just because all the paper debt of the US government goes away doesn’t mean the real wealth in the world will disappear. The farms, factories, technologies, and the skills of the workers, will still exist. But on a sound foundation. And with some new owners.
Furthermore, I’d point out that the US Government isn’t “we the people.” It’s become a discreet entity with its own interests, like a giant corporation. If it declares bankruptcy, it’s a problem for its employees and clients much more than for you, the taxpayer.
Those are some of the arguments I’d make for defaulting on the national debt. But it’s just a rather academic thought experiment. The powers-that-be will prefer to build the current house of cards higher, probably propping it up with FX controls, Central Bank Digital Currencies, a Social Credit System, much higher taxes, more inflation, price controls, and god knows what else in the years to come.
The default will happen, but more gradually, through the subtle fraud of inflation, which is actually the very worst and most dishonest way to default.
International Man: Paul Krugman and other mainstream economists have proposed the US government issue a trillion-dollar coin to buy up the federal debt.
That “serious” people can put forward such a clownish solution illustrates that it’s all a ridiculous charade.
What is your take?
Doug Casey: When you’re using funny money as a substitute for real money, it’s inevitable that soothsayers will come up with ridiculous solutions. Krugman isn’t an economist; he’s a political apologist. And a fool. He doesn’t describe the way the world works, but the way he’d like to make it work—using coercion and fraud, not voluntarism and the market. Every idea he has is so stupid that it’s criminal.
The solution to this problem is to go back to a commodity money. Money should be, once again, just a medium of exchange and a store of value. It could no longer be used as a political football.
And the US government should be cut in size by 50, 75%, or 95%. Who knows how deeply you can cut the size of the US government until you try doing it? But it’s necessary, at least if what’s left of the idea of America is going to survive.
Using commodity money will, itself, greatly downsize the US government. The US State has become a behemoth and a parasite. It’s a far bigger danger to the average American than the Russians, the Chinese, the Iranians, or all of them together. Returning to sound money and a tiny government would make for a more pleasant, prosperous, and safer world– although the process of doing it would be unpleasant for some people.
On the bright side, the only people who will be seriously hurt are the parasites living off the government. I say to hell with the parasites. They should be inconvenienced.
International Man: It’s hard to believe the US government was ever debt-free.
But it happened once—in 1835—thanks to President Andrew Jackson. He was the first and only president to completely pay off the national debt.
Jackson also shut down the Second Bank of the United States, the precursor to the Federal Reserve, the US’s current iteration of a central bank.
It’s unthinkable a modern US president could or would do such things.
Given the practical reality of the world today, where do you see the federal debt going, and what are the implications?
Doug Casey: It was wonderful that Andrew Jackson paid off the national debt, something that Alexander Hamilton, with his warped ideas of economics, sold to the country. But it’s now absolutely impossible to pay off $32 trillion of acknowledged debt, scores of trillions of contingent liabilities, and scores of trillions more of unacknowledged debt.
I’d like to point out that there actually have been previous defaults by the US government. For example, Abraham Lincoln, during the War between the States, defaulted by printing up so-called Greenback currency.
Roosevelt defaulted on the debt by fraudulently devaluing the dollar, raising the price of gold from $20.50 to $35, but only after confiscating it from citizens. That was a default. Then there was Nixon, in 1971, defaulting on the promise to pay foreign governments at $35 gold. Now the dollar is only worth 1/2000th of an ounce of gold.
International Man: Is there any way to turn lemons into lemonade and profit from this situation?
Doug Casey: Let’s not sugarcoat the situation. The real question is how to profit from the collapse of an overextended and corrupt empire.
It makes sense to look at the historical precedent, like the Roman Empire. Was there any way to profit from the collapse of the Roman Empire? Well, some people did, I suppose. But the standard of living collapsed for almost all its residents during the ensuing Dark Ages.
Is there any way to profit from the collapse of Western civilization? That’s so serious that it’s almost like asking whether it’s possible to profit from an asteroid hitting the Earth. The best you can hope to do is insulate yourself as much as possible.
At this point, the best way to be hurt least, or possibly even profit within a very bad scenario, is to own gold, silver, and other commodities. And to improve your skills as a speculator. Remember, most of the real wealth in the world is still going to exist; it’s just going to change ownership.
Reprinted with permission from International Man.
The post Debt Ceiling Farce and Why the US Should Declare Bankruptcy appeared first on LewRockwell.