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Old May 9th, 2016, 09:17 AM   #1
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Why Not Repudiate the National Debt?

So what can be done now? The current federal debt is $3.5 trillion. Approximately $1.4 trillion, or 40 percent, is owned by one or another agency of the federal government. It is ridiculous for a citizen to be taxed by one arm of the federal government (the IRS) to pay interest and principal on debt owned by another agency of the federal government. It would save the taxpayer a great deal of money, and spare savings from further waste, to simply cancel that debt outright. The alleged debt is simply an accounting fiction that provides a mask over reality and furnishes a convenient means for mulcting the taxpayer. Thus, most people think that the Social Security Administration takes their premiums and accumulates it, perhaps by sound investment, and then "pays back" the "insured" citizen when he turns 65. Nothing could be further from the truth. There is no insurance and there is no "fund," as there indeed must be in any system of private insurance. The federal government simply takes the Social Security "premiums" (taxes) of the young person, spends them in the general expenditures of the Treasury, and then, when the person turns 65, taxes someone else to pay the "insurance benefit." Social Security, perhaps the most revered institution in the American polity, is also the greatest single racket. It's simply a giant Ponzi scheme controlled by the federal government. But this reality is masked by the Social Security Administration's purchase of government bonds, the Treasury then spending these funds on whatever it wishes. But the fact that the SSA has government bonds in its portfolio, and collects interest and payment from the American taxpayer, allows it to masquerade as a legitimate insurance business.

Canceling federal agency-held bonds, then, reduces the federal debt by 40 percent. I would advocate going on to repudiate the entire debt outright, and let the chips fall where they may. The glorious result would be an immediate drop of $200 billion in federal expenditures, with at least the fighting chance of an equivalent cut in taxes.

But if this scheme is considered too draconian, why not treat the federal government as any private bankrupt is treated (forgetting about Chapter 11)? The government is an organization, so why not liquidate the assets of that organization and pay the creditors (the government bondholders) a pro-rata share of those assets? This solution would cost the taxpayer nothing, and, once again, relieve him of $200 billion in annual interest payments. The United States government should be forced to disgorge its assets, sell them at auction, and then pay off the creditors accordingly. What government assets? There are a great deal of assets, from TVA to the national lands to various structures such as the Post Office. The massive CIA headquarters at Langley, Virginia, should raise a pretty penny for enough condominium housing for the entire work force inside the Beltway. Perhaps we could eject the United Nations from the United States, reclaim the land and buildings, and sell them for luxury housing for the East Side gliterati. Another serendipity out of this process would be a massive privatization of the socialized land of the western United States and of the rest of America as well. This combination of repudiation and privatization would go a long way to reducing the tax burden, establishing fiscal soundness, and desocializing the United States.

In order to go this route, however, we first have to rid ourselves of the fallacious mindset that conflates public and private, and that treats government debt as if it were a productive contract between two legitimate property owners.

https://mises.org/blog/why-not-repudiate-national-debt
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Old May 9th, 2016, 09:38 AM   #2
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Seems the author is trying to confuse rather than clarify the issue.
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Old May 9th, 2016, 09:40 AM   #3
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The cavalier way the author says "let the chips fall as they may" says it all.

The consequences could be severe.
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Old May 9th, 2016, 09:59 AM   #4
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The cavalier way the author says "let the chips fall as they may" says it all.

The consequences could be severe.
The consequences of allowing the Federal Reserve to operate a century so far has been that the banksters have skimmed off more than 3/4 of the nation's wealth.
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Old May 9th, 2016, 10:03 AM   #5
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Quote:
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The cavalier way the author says "let the chips fall as they may" says it all.

The consequences could be severe.
Exactly. It's easy for anyone to let the chips fall where they may, when they can afford to not be the one suffering because of it.

It's the same people that want other peoples kids fighting their wars for them.

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Old May 9th, 2016, 10:54 AM   #6
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Of Course the US Government Will Default on Its Debt

https://mises.org/blog/course-us-gov...fault-its-debt



Of course the irony here is that many of the same pundits attacking Trump for his comments today are those who have encouraged on the fiscally reckless policies that have led us to this point. For example, The Weekly Standard described Trump’s comments as “Plan to Destroy the U.S. Economy”, highlighting the pain that Americans would feel from such a move. Of course, this publication was perhaps the loudest cheerleader for the Afghanistan and Iraq Wars, which could end up costing taxpayers over 6 trillion dollars, and continues to campaign for further expansion of America’s military presence that currently costs over $700 billion a year. Meanwhile, conservative estimates of the cost of bailing out Wall Street — actions that would still be defended today by most of the mainstream financial class - weighs in at over $3 trillion dollars.

These expenditures, added on to firmly implanted and growing welfare state managed by a political class lacking the courage required to make serious attempts at debt reduction, has always made default, in some form, inevitable. As Congressman Ron Paul (who was discussing the reality of US insolvency during his last presidential campaign in 2012) was always fond of pointing out, government spending is itself a form of taxation. So while the Weekly Standard is correct that a debt default will hurt the pocketbook of American families, this is an inevitable consequence of the spending it advocated — an insidious form of tax collection, the consequence of electing politicians who followed the publications own advice.

So the real question about an American default has always been less a matter of if, and more a matter of how and when.

While it is still popular to claim that the United States has never defaulted on its debt, this is a myth. The US has been forced to default a couple of times throughout history, the last of which being when Richard Nixon’s closed the gold window. By cutting the ability of foreign governments to redeem US dollars for gold, America was allowed to pay back past debt with devalued fiat money. This form of default has long been a popular option for governments with debt obligations it can’t or won’t honor.

https://mises.org/blog/course-us-gov...fault-its-debt
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Old May 9th, 2016, 11:50 AM   #7
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JP Morgan loaned the US money to keep from defaulting in the early 20th century. Imagine that, the US borrowing money from a private citizen to honor its debt. Then WW1 started and JP Morgan got all of his money back plus usury interest.
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Old May 9th, 2016, 07:33 PM   #8
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Originally Posted by Sabcat View Post
Of Course the US Government Will Default on Its Debt

https://mises.org/blog/course-us-gov...fault-its-debt



Of course the irony here is that many of the same pundits attacking Trump for his comments today are those who have encouraged on the fiscally reckless policies that have led us to this point. For example, The Weekly Standard described Trump’s comments as “Plan to Destroy the U.S. Economy”, highlighting the pain that Americans would feel from such a move. Of course, this publication was perhaps the loudest cheerleader for the Afghanistan and Iraq Wars, which could end up costing taxpayers over 6 trillion dollars, and continues to campaign for further expansion of America’s military presence that currently costs over $700 billion a year. Meanwhile, conservative estimates of the cost of bailing out Wall Street — actions that would still be defended today by most of the mainstream financial class - weighs in at over $3 trillion dollars.

These expenditures, added on to firmly implanted and growing welfare state managed by a political class lacking the courage required to make serious attempts at debt reduction, has always made default, in some form, inevitable. As Congressman Ron Paul (who was discussing the reality of US insolvency during his last presidential campaign in 2012) was always fond of pointing out, government spending is itself a form of taxation. So while the Weekly Standard is correct that a debt default will hurt the pocketbook of American families, this is an inevitable consequence of the spending it advocated — an insidious form of tax collection, the consequence of electing politicians who followed the publications own advice.

So the real question about an American default has always been less a matter of if, and more a matter of how and when.

While it is still popular to claim that the United States has never defaulted on its debt, this is a myth. The US has been forced to default a couple of times throughout history, the last of which being when Richard Nixon’s closed the gold window. By cutting the ability of foreign governments to redeem US dollars for gold, America was allowed to pay back past debt with devalued fiat money. This form of default has long been a popular option for governments with debt obligations it can’t or won’t honor.

https://mises.org/blog/course-us-gov...fault-its-debt
The "pundits" who attack tax plans that have less revenue fail to realize that it will reduce the size of government therefore reducing the cost of government for everyone. The "experts" can not fathom a smaller cheaper ran government therefore all they can see is how to increase revenue to the fed, never reduce.
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