
Washington Is Quietly Repudiating Its Debts - helveticaman
http://www.cato.org/pub_display.php?pub_id=9599
======
lacker
This title is pretty misleading. The author claims that inflation is
"implicitly repudiating debt". This is really not how the phrase "repudiating
debt" is used.

Nobody is too surprised when the dollar suffers inflation. But it would be
shocking if the U.S. _actually_ refused to honor T-bills.

Also, the devaluation of the dollar is hardly new. The dollar has been
weakening vs the euro since early 2006.

[http://finance.yahoo.com/currency/convert?from=USD&to=EU...](http://finance.yahoo.com/currency/convert?from=USD&to=EUR&amt=1&t=5y)

Don't get me wrong, inflation is bad, and it hurts the poor who are honestly
trying to save the worst. But it isn't the end of the world. It's not even
nearly as bad as the 70's, inflation-wise. The real danger is in the hard-to-
predict "black swan" disasters that could still happen.

------
ConradHex
Is anyone getting depressed by all this? I'm starting to feel physically sick
whenever I read about the economy. I think maybe I need to stop reading the
news for a while. I felt the same way after 9/11.

~~~
DanielBMarkham
Yes. It is depressing. Just remember 3 things:

1) During an election year, everybody thinks the economy sucks. So there is a
bias there to consider, even though there are honest-to-god issues here.

2) We still _make things people want_ , to put it in hacker terms. Movies,
games, ideas, businesses. Yes, we've moved up from manufacturing to services
and ideas, but we still make a lot of things a lot of people want. That's not
changing.

3) Wall Street "blows up" about every ten years or so. Our system is not a
magic forumula, so there are always loopholes. Smart people will always play
into these loopholes until the system becomes unstable. At this point we fix
the holes and keep going. The trick is to just fix the part that is broken and
not try to outsmart the market, which you can't do. That's tough for
politicians to do.

Long term? We live in a society where politicians get elected making promises
(or wars) that nobody has to pay for. That keeps the voters voting, but it
will cause our credit to self-destruct, probably in our lifetime.

But even then, life goes on. The fundamentals remain sound, ie, we're really
good at making stuff other people will pay us for. As long as the fundamentals
remain sound, and as long as your personal fundamentals remain sound (you are
good at doing something people will pay you for) then we're just going to keep
muddling through it all. The world is not ending.

~~~
lacker
It's not true that "during an election year, everybody thinks the economy
sucks". Recent counterexamples are 2000 and 1996.

------
quasimojo
inside the USA, treasury notes cannot default. by a 1982 law they can just
create an account at a fed member bank and assign it to the payee.

the issue is whether these dollars are worth anything

i would argue that if the US debt hits $25 trillion, its over. the dollar will
die and with it the US govt.

~~~
sgrove
Not to be argumentative, but I would be curious about the the $25 trillion
figure - where does it come from? It seems very big, and very round for me.

I'm far from an economic expert, so I'm interested in hearing about how you
calculated the figure.

~~~
quasimojo
the $25 trillion point is pure speculation. i merely suggest this as a tipping
point

~~~
helveticaman
This is not unreasonable. Adam Smith said that no country had ever paid its
debt after it had exceeded a certain threshold.

