A long time ago, I was in Burma, my friends and I were working for the local government. They were trying to buy the loyalty of tribal leaders by bribing them with precious stones. But their caravans were being raided in a forest north of Rangoon by a bandit. So we went looking for the stones. But in six months, we never found anyone who traded with him. One day I saw a child playing with a ruby the size of a tangerine. The bandit had been throwing them away.
Megan McCardle says that folks who follow the bond market are starting to worry about a US debt default.
On the one hand, I acknowledge that the first debt default in 220 years would be as close to Armageddon as one can achieve without nuclear or biological weapons.
On the other hand, I think it would likely usher in an era of outrage against government, a balanced budget amendment, a good chance of a flat (or flatter) tax, lower government spending, and maybe – if the stars are aligned – a few politicians hanging from lampposts.
So I am, cautiously, in favor of the US government abrogating a few trillion dollars in promises. Those promises are illegitimate anyway, as they are prefixed on the assumption of continuing theft.
Buying government bonds is just as immoral as buying mafia bonds financed by continuing to threaten the owner of the corner convenience store.
Actually, I take back the “just as”.
They are identical, and not only is it OK if purchasers of “mafia bonds” get burned, it is actively desirable.
(subject line hattip)
November 4th, 2009 at 7:42 am
I don’t understand – are you Alfred Pennyworth burning down the Jungle, or the Bandit who wants to watch the world burn? Wait… I see. Together you are a wacky government fighting duo.
But there is the spectre of ends justifying the means whose cold shadow seems to hang over this whole discussion.
November 4th, 2009 at 9:40 am
The mafia honors its debts. When they sell you protection, you get protection.
By any reasonable standard the mafia does less harm than the current government of the USA.
November 4th, 2009 at 9:41 am
I’d pay good money to see Travis in a superhero costume.
With a sidekick.
And shark repellent spray.
November 4th, 2009 at 10:09 am
What counts as “good money” these days? Gold? Germanium? (ducks)
November 4th, 2009 at 10:40 am
All we need is a 60 year re-set. If you look back, the immense rise and taxes and government spending, at all levels of government, come from the disastrous New Deal.
Unfortunately, it probably wouldn’t be nearly as game changing as people think.
Personally, I don’t think the government will de jure default, they’ll do it by other means, LIKE THEY HAVE BEFORE. For instance, when we yanked the gold in FDR’s time, or when we left Bretton Woods. We’ll probably just screw with our currency.
As John Connally said in the 70s to the Euros: “Our currency, your problem”
Frankly, I think Bernake and Summers plan on just inflating their way out of this mess. The only problem is that there is still so much credit contraction to go the deflationary winds have left them peeing in the wrong direction.
It’ll get interesting. Watch debt exposure, especially anything not fixed.
November 4th, 2009 at 11:54 am
I’ve seen a lot of people saying 1) with the massive government spending and piling on of government debt Obama et al have been doing recently, we’re in for a massive amount of inflation before long, and 2) Bernanke is going to inflate away the debt.
I think both propositions are wrong.
Re Item One. Coyote has been talking as if it’s a forgone conclusion, that massive deficit spending must lead to massive inflation. But that’s not true. Inflation is always and everywhere a monetary phenomenon and is entirely under the Fed’s control. Not perfectly – they have to respond to external conditions, and it’s more like steering a supertanker than a jet-ski, but still: if they want inflation to be between 1 and 2 percent rather than between 10 and 15 percent, then that’s what it’s going to be, no matter how much debt the government has racked up.
Re Item Two: Bernanke is an inflation hawk. Whereas Greenspan paid lip service to the Fed’s mandate of “promoting full employment” while essentially following a de-facto inflation stabilizing policy, Bernanke has come right out and advocated what Greenspan was merely doing on the quiet. Bernanke views, correctly, the Fed’s role as stabilizing prices rather than farting around trying to “do something” about unemployment or economic output or housing bubbles or what have you. His views have been published and well known since before he was made Chairman and haven’t significantly changed since then.
Bernanke isn’t going to inflate away anything.
November 4th, 2009 at 11:55 am
[quote comment="226714"]I’d pay good money to see Travis in a superhero costume.
With a sidekick.
And shark repellent spray.[/quote]
Na-na na-na na-na na-na ROPEMAN!!!
November 4th, 2009 at 12:00 pm
I don’t get this past election. Cincinnati voters passed all tax levies and amended the constitution to the let the state issue bonds to pay for welfare.
November 5th, 2009 at 7:24 am
[quote comment="226727"][quote comment="226714"]I’d pay good money to see Travis in a superhero costume.
With a sidekick.
And shark repellent spray.[/quote]
Na-na na-na na-na na-na ROPEMAN!!![/quote]
TJIC’s FBI file just got a new unofficial code name. LOL.