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Beowolf
08-28-2009, 04:43 PM
The flood of debt (http://www.businessinsider.com/hummel-the-us-will-default-on-its-debt-2009-8#) that the US is taking on in its efforts rescue to economy will combine with huge social insurance obligations--Medicare, MedicaidSocial Security--to create an unsustainable level of public indebtedness, economist Jeffrey Rogers Hummel argues in at length here (http://www.econlib.org/library/Columns/y2009/Hummeltbills.html). Faced with this mountain of debt, policy makers will have just two choices: repudiate the debt or engage in hyper inflation to monetize it, Hummel writes. And faced with that choice the Treasury will likely protect the currency (http://www.businessinsider.com/hummel-the-us-will-default-on-its-debt-2009-8#) and default on Treasuries.
Here's the scary conclusion:
It is not literally impossible that the Federal Reserve could unleash the Zimbabwe option and repudiate the national debt indirectly through hyperinflation, rather than have the Treasury repudiate it directly. But my guess is that, faced with the alternatives of seeing both the dollar and the debt become worthless or defaulting on the debt while saving the dollar, the U.S. government will choose the latter. Treasury securities (http://www.businessinsider.com/hummel-the-us-will-default-on-its-debt-2009-8#) are second-order claims to central-bank-issued dollars. Although both may be ultimately backed by the power of taxation, that in no way prevents government from discriminating between the priority of the claims. After the American Revolution, the United States repudiated its paper money and yet successfully honored its debt (in gold). It is true that fiat money, as opposed to a gold standard, makes it harder to separate the fate of a government's money from that of its debt. But Russia in 1998 is just one recent example of a government choosing partial debt repudiation over a complete collapse of its fiat currency.
A more likely outcome, it seems to us, is that the US will make good on Treasury debt but repudiate soft obligations like Social Security and Medicare. That way the US would continue to be able to borrow in the future. And all it would require would be a Congressional vote lowering the outlays for these programs.
But maybe all this is unnecessary doomsaying. AIG (http://www.businessinsider.com/hummel-the-us-will-default-on-its-debt-2009-8#) is up HUGE, so we're sure everything will be just fine.
http://www.businessinsider.com/hummel-the-us-will-default-on-its-debt-2009-8

Whoa Hoss! Hold the damn phone! What's all this about "fiat currency?" You're telling me that our monetary system is based on piss-poor Italian cars? Damn, I knew we were in rough shape, but this is over the edge! So how much could I sell my home for? A few 500's and a mid-seventies Spider? (Just like that one in Fletch!) How about lunch? Does it take a whole Fiat to buy lunch? Drive it to Wendy's then walk home with a Spicy Chicken Combo w/ a Dr. Pepper?

Or is this something far more sinister? Is this all tied to the government takeover of Chrysler and its sale to Fiat? Is the US planning on pulling itself out of debt by forcing people to deal in this new fandangled "Fiat currency?" Yes, I get it now. Sure pal, you can buy a Lexus, but it's gonna cost you a few Fiats. Bam, the US reaps the benefits of the production of three or four Fiats. Genius.

And why would we be concerned about the collapse of the Fiat? It seems that collapsible Fiats would be far more useful than the standard model. Maybe they could be made to collapse so that you could fit several onto a flatbed trailer so that you could buy something like a plasma TV without having to make two dozen trips to Best Buy to pay for it.

So, if I've got this right, the US and Italy have forged a secret alliance that will deliver both of them from economic ruin and most likely put everyone on the planet in a Fiat. Oh. And it seems Russia's in on this too.

Hmmm....so much to think about....

jack grebe
08-28-2009, 04:47 PM
I didn't even miss the tread, and here ya are draggin it
up again...........
THANKS BUDDY:rolleyes:

Beowolf
08-28-2009, 04:53 PM
It's not that often that I bother to poke the bear, so when I take the time to find a stick, I expect the bear to still be there when I return. :-D

Yeadon
08-28-2009, 04:58 PM
That was not a bear that you saw.

Tylerdurden
08-28-2009, 05:10 PM
Yeah three days of reasoned discussion without 90% of the usual crap. There was some good inputs from every side.
Sucks.

MiddleAgesMan
08-28-2009, 05:38 PM
Why did it go poof?

David G
08-28-2009, 05:41 PM
Was it my deoderant?

I thought we had a rudimentary form of actual discussion bubbling. <sigh>

Beowolf
08-28-2009, 05:50 PM
O.k. so my next question:

I clicked on the link at the bottom of the post. And sure enough, Hummel does make mention of "fiat currency" But for some reason, some of the words that double as links (I assume they link to previous articles, studies, or definitions) have changed.

Weird.

skuthorp
08-28-2009, 06:03 PM
Well the theory of capitalist economic collapse was a central tennet of Marxism too, but I imagine it was the mutual slanging between Mark and Bigfella that got the thread scotted. But thanks for re-posting the links Beowulf.

skuthorp
08-28-2009, 06:25 PM
It's a pity he can't keep his mouth buttoned, I like some of his stuff. He comes up with some wild links.

Tylerdurden
08-28-2009, 07:11 PM
Jesus Ian you will take any opportunity to make it about you.

It wasn't it was my response to Jack over the Kat and Paul thread.

Well I have a date so I will let Ian get back to smearing me as much as he can. For such an important person one would think I would be the least of his worry's.

I guess its self importance.