Will Defaulting on the National Debt Necessarily Be a Catastrophe?

The statist Uniparty and its media are in a blind panic about defaulting on the national debt. Maybe we shouldn’t believe them that defaulting on the debt would be such an unmitigated catastrophe. It might be for THEM. Why? Because they rely on the idea of fiat currency — “funny money” — that can be “created” at will, so they can spend in literally unlimited amounts. On a gold standard, which the U.S. once had, such unconscionable debt was not possible. Only once the U.S. Federal Reserve and the government freed itself from any market-based, objective standard in the 20th Century did politicians get free rein to spend like there’s no tomorrow.

I’m not saying there will be no economic repercussions if the debt is “defaulted” on tomorrow. I am saying we don’t honestly know for sure. If there are problems, the blame would be on the politicians for turning our currency into fiat currency in the first place, and unhinging money from any kind of market-based, objective standard. When you pursue such a policy, sooner or later you have to pay the consequences.

It might be a GOOD thing if the federal government lost all fiscal credibility officially. It might mean we’d have to do what will soon have to be done anyway — start over.

As Joseph Solis-Mullen wrote at the economics think tank Mises Institute,

“The good news, at least for ordinary Americans, is that we personally just don’t hold very much of the debt. Fully two-thirds is held between the Fed, various other US government entities, and foreign governments. A US government default wouldn’t be the first time the latter have taken a haircut (Alexander Hamilton and Richard Nixon both undertook such necessary actions), and our own government has spent the money so poorly that no coherent argument can be made that justifies paying them back. They would just continue in their profligate ways. As for Wall Street, they’ve lived on corporate welfare long enough to justify their taking a one-time bath.

Apart from not paying perpetual interest on ever-increasing debt, another benefit of default, rarely mentioned but arguably one of the most important from the antiwar libertarian perspective, is that it would essentially end Washington’s ability to practice unbridled military Keynesianism. Slapping pointless wars and military buildups on the credit card has become Congress’s standard operating procedure. It is not a coincidence that our annual trillion-dollar deficits are approximately equal to the trillion dollars dumped into the the military-industrial complex black hole each year.”

When you hear the shrieking of the people who fear “defaulting” on the national debt, remember that the government defaulted on economics the minute it went outside the boundaries of the Constitution and unhinged us from a gold standard. The people with the most to lose are the least deserving.



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