Comment: Think carefully about what

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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.