Ron Paul Proposed A Fed Masterstroke That Can End The Debt Ceiling Crisis At Once!Submitted by bobbyw24 on Mon, 10/14/2013 - 13:26
While the fight on the debt ceiling continues with the White House unwilling to give in to what they see as extortion (which could set a bad precedent for future negotiations) and the Republicans unwilling to walk away with this without at least some concessions, is there any way out of this?
Well, apart from an epic back-down on either side, there actually is, and it's something we've suggested earlier (albeit not within the context of these debt ceiling negotiations). Central banks can simply cancel part of the debt. Up until the part it has accumulated as a result of QE1, 2 & 3, or roughly $2 trillion.
That sounds like a very easy way out, and indeed it is. With a stroke of a pen, there would be roughly $2 trillion less public debt outstanding, so the debt ceiling would be out of reach for years.
But isn't this debt monetization, stuff that would trigger hyperinflation like it did in the Weimar Republic and Zimbabwe? Well, yes, but here's the thing. The monetization already happened, the Fed already bought those government bonds in exchange for money, and inflation hasn't taken off (in fact, despite many dire predictions, it is still very subdued, and that's no accident, see below).