5 votes

Why isn't defaulting on the debt part of the debate? Can we shift the parameters debate so it is?

à la "Overton Window"

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Think carefully about what

Think carefully about what defaulting on the debt means. Do you have any savings in a money market account? The bank pays you the tiny interest it does by investing your money in short term treasury bonds. Are you or anyone you know lucky enough to be getting a pension? You can be sure that a significant amount of the pension assets are invested in treasury bonds. Do you hope to receive any part of the social security you were promised and have been paying into for decades? All money the government has set aside for social security has been invested in treasury bonds. 100% of it. (Yes, social security is currently in deficit, but in the years it was in surplus the surplus was invested in treasury bonds.) A significant fraction of our debt is held by foreigners. Chinese had to work long and hard to earn enough money to buy our bonds.

So, do you want to stiff all these people? Do you want to see your money market account wiped out? Pensions destroyed? Social security not merely in deficit, but bankrupt? Do you want to wipe out the savings of foreigners who had to work long hours at meager wages to have the modest savings that they do?

Now there is one big exception to all this. The Federal Reserve. It owns a large fraction of the federal debt. Unlike you or I, or some guy in China, the Federal Reserve does not have to work long and hard to earn the money to buy a treasury bond. The Federal Reserve buys bonds by the billions by creating money out of thin air.

So Ron Paul has proposed that we default on that part of the debt held by the Federal Reserve. They bought the bonds with counterfeit money. That kind of default I can agree with.

Cancel Debts Owed to Fed-Rsv.

+1 for fairness. you wrote = ""So Ron Paul has proposed that we default on that part of the debt held by the Federal Reserve. They bought the bonds with counterfeit money. That kind of default I can agree with.""

Innocent savers must not suffer for the misdeeds of the Feds. To be on the safe side savers should keep only minimum sums with banks, rest should stay out of this slippery slope.

they have not set aside any

they have not set aside any money at all

Wrong. Up to December, 2011

Wrong. Up to December, 2011 the assets held in the social security trust fund was $2.6 trillion, all of it in treasury bonds. However, with the cut in the payroll tax social security is now in deficit so assets have declined a bit in 2012.

Complicating matters is that congress has consistently raided the trust fund, borrowing against its assets and leaving worthless IOUs.

No I pulled out a long time ago.

Life savings are in gold and silver I couldn't be happier. My girlfriend on the other hand still has a 401k she thinks shes sitting pretty just wait until the next recession, total wipeout!

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    I don't consider stiffing the

    I don't consider stiffing the people who left their money in the bank to be a moral thing to do. If I thought that cheating people out of their hard earned money was a good thing to do I'd be a Democrat.

    Stiff those who were immoral and lent money to

    the government (to fund it's criminal activities). I'd rather stiff them, then stiff us in the present with higher taxes.