Topic: Ron Paul
What If Ron Paul is Right? Can the biggest economy in the world really go bankrupt?by Scotch Moose
(libertarian)
Friday, January 11, 2008
The Fed and the Administration have been talking, and they have apparently decided to spend, borrow, and print money until the economy grows it's way out of the current credit crunch. Ron Paul likes to talk about Austrian Economics and he would tell you that this approach is just going to make our hole deeper. From the primary election results it looks like most Americans think nothing is wrong with enormous debt and imaginary money as long as they still have snack foods, a couch, and a working television.
When an individual defaults on their personal fiinancial obligations they can loose their car, their home, and access to credit. They can be denied a bank account, even employment. If you borrow money, way beyond your ability to repay, and then keep borrowing, very soon the system will cut off your access to credit, take back everything it can and leave you standing on a curb with your dirty laundry in a plastic sack. That cannot happen to an entire country.
When a country defaults on it's fiinancial obligations the World Bank can cut off their credit, but there is no international bankruptcy. In the realm of sovereign nations everything is negotiable. There are quite a few third world nations that took out loans to stimulate economic growth that never happened. At least not to level that would let them pay off their loans. Now their price of trading with the rest of world is eternal loan payments. A tax on their economy, paid to the world bankers, for the foreseeable future.
That can't happen to us. The United States of America is the largest economy in the world. Our currency is the reference currency for the whole world. Since 1971 if the US owes you money you must accept US dollars in repayment. We don't pay out in gold anymore. So is the national debt anything more than just a number? The Fed can just click their mouse on the up arrow and the number of US dollars they have available to loan increases. They don't even need to get all messy with ink and paper anymore.
The problems this creates have begun to show. As the dollar is diluted and looses value foreign creditors buy up our country's industry, real estate, and even our banks. The price of oil, gold, real estate, and consumables are going up. Price inflation is dollar devaluation.
Still we are on our couch, fat and happy, and even a bit annoyed to have that old man in the Republican debates scolding us like we are misbehaving teen-agers. We live beyond our means because it feels good, and we want to. And like a teenager this country will get older and perhaps come to accept responsibility for it's foolish behavior, perhaps not. The consequences span generations and are hard to foresee and even more difficult to forestall. We all want to leave a better world for our grand-children, as long as it doesn't mean giving up the SUV for a bicycle.
Perhaps we will live to see the day when the dollars we could pay to have coal delivered to our power plants don't offer enough value for anyone to undertake the effort. When the lights go out and the televisions go dark, then you just might hear someone say Ron was right. Until then, could you pass the chips?
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The views expressed in this
article are those of Scotch Moose only and do not represent
the views of Nolan Chart, LLC or its affiliates. Scotch Moose is
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employee or otherwise affiliated with Nolan Chart, LLC in his/her role as a columnist.
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