Debasement side-steps heavy taxation and a market crash obviously caused by loathed Government policy. Plus, debt service and repayment grows in a deflationary environment. Inflation empowers Government to screw its creditors and feign plausible deniability because most taxpayers aren't sophisticated enough to understand the link between prices and debasement. Its politically expedient, even though the Country goes down the shitter right after the dollar. The system needs a good 10 years of hard credit contraction, then a total monetary overhaul to put the economy back on sound footing. That or a revolutionary technological breakthrough commensurate to the computer, steam engine etc. There's just no way any Congress will raise taxes by 30% across the board, and get re-elected. Even if one Congress passes it, they'll get voted out and the hike repealed 2 years later. The dollar is toast, imo.
Misthos, I just read your last post... With all due respect, I disagree with you. Unfortunately, I can't respond properly, as I am very busy. I may not be able to converse as actively going fwd, either. I do apologize. I mean no disrespect.
Dear Market Participants... The Us can not go default... Owning without interrest okay... but still owning. I mean this money was spend. The People who lent this money to the Us did trust you... You know if you breach the trust you will be the shame of the market place... Usa is prouder than that no ? Please weakup your head and fine a cool solution!! A solution that the world will dream about... that every one will want to use not because you use it but because it's the best way out of the debt... While still honoring the right that as the creditor as visavis his debitor. No a single personn forced the USA to take so much loans... it was all done freely... A solution that your children will be proud to use if this Errors happen some time in the future... The solution is easy... the Oil industry has to be sacrified or evolve to provide the cheaper, cleaner energy of tomorrow. To do that they want special Intellectual proprety right... They have the knowhow to change our world... they just need the knowledge and the will to change our world. I think that the company that can provide free energy cheaply, cheaper than anything that we know will need a longer IP right to absorb the cost of leaving all the installations in place necessary for Oil extraction... Win-Win... I am sure that this small step forward can change the game forever and ensure that the Us are ready to pay their debt, the interrest and never fall again in such a trap !
There may be plenty of clueless taxpayers who would fall for this, but what about the creditors? Are they clueless, too? Maybe I am too simplistic in my understanding, but what is the difference between never getting your money back and getting paid back with worthless paper? Isn't it in everyone's best interest to protect the currency (especially the reserve currency)? Doing the right thing might be a long, hard road, but doing the "easy" thing seems like suicide. (or maybe I should say, 'genocide.')
Great post. Whether the bond market sells off first and we see a dollar collapse (hyper-inflation scenario), or dive straight into the relentless attrition of unsupportable asset prices from wage arbitrage (outsourcing) and automization of labor, remains to be seen. The nature of bubbles also plays a huge role, as well. Debt accumulation/repayment being the ultimate driver of the business cycle in our new consumption economy, puts us on shaky footing with every Bubble. When consumers get buried in inflated debt, it takes years - perhaps, decades - to pay down. That puts a huge squeeze on the broader economy, Federal and State Governments to balance their budgets, and, ultimately, more pressure to monetize. Conservative lending is really just a symptom of recapitalization. Once US balance sheets are healthy, we could see renewed lending on par with pre-2007 except with a doubled monetary base. Whether consumer credit is ravenous enough to absorb that, right now ? No. A few years down the road? Yes. Throw in interest payments on the Federal and State debt refinanced at 200-400 basis points higher than current, and the only option is to print. The US Government can't afford to service its debt at reasonable levels. Hence, all the talk of low rates for extended period. When the consumer is done paying for the last bubble, commodities, assets and the market will explode from renewed borrowing. That puts pressure on bonds/dollar and would serve as the catalyst. Even US Monetary Authorities called for the end of Dollar hegemony. China/Japan/France are openly plotting the end of Dollar-denominated commodity transactions. lol Beyond the economics of it all, this is a political take-down of the Greenback, and Nation-proper.
US Monetary Officials have repeatedly called for the end of Dollar hegemony. America's largest trading partners are openly plotting to end US-denominated commodity transactions (crude oil etc) with nary a whimper of protest from Geitner. Economics aside, there's a huge push from Washington to kill USD reserve status. You say its genocide to inflate our debts away? Many people in high places admit they WANT USD genocide. No, the Japanese and Chinese aren't clueless. Which is why they're transitioning only to short-dated maturities and will pull the moment the dollar looks untenable. That alone will cause a dollar panic and trigger the hyper-inflation scenario. Best interest? International trade dried up after the housing collapse because American consumers had to pay down their McMansions. The aftermath of the next bubble will leave even less bread on the table to buy overseas bobbles and trinkets. The Chinese and Japanese know that too. So why tie themselves to a sinking ship, if they'll lose regardless? The West is at the end of its 40 year credit binge. Our debt-to-income is maxed out. There's no real credit growth left, except for what we pay down via economic recession. China and Japan know that , too.
Folks, it's the damn changes to the accounting rules that's at the heart of this problem. What good are the rules when you keep breaking them? Every time this country runs into a brick wall, it tries to dodge the bullet by changing the accounting rules rather than fixing the problem. I wonder who said you can paint a lipstick on the damn pig and it's still the same ol' Miss Piggy? When Reagan incurred and left a massive debt to his forebears, didn't they revised the methods (I'm sure there was more than one) used to calculate the debt in their favor? When the Wall Street idiots were caught with their pants down while banging their dumb Main Street brethren, wasn't the Mark-to-Market rule repealed? I think I could go an all-nighter on this but you get my point. I wonder who said you can shit in your Armani and it's still the same stinking Armani?