Rather than erode debt obligations through inflation, the debt could be repudiated through bankruptcy proceedings. Like individual bankruptcy cases, the United States government would admit that it is unable to pay off existing debts. The repudiation would force future politicians to credibly commit to sounder economic policies and, perhaps, would help to avoid future cycles of deficits, debt, and debasement.
That's Scott Beaulier and Pete Boettke. Jeff Hummel has predicted a US government default. Scary times, since there's no JP Morgan to bail them out this time.
I've recently read "Bankrupt Britain", a report by Malcom Offord for The Centre of Social Justice, which is the closest I've seen anyone come to actually calculate the level of indebtedness of the British state. One of the remedies for this situation I've previously suggested is to set up government for tender:
why not force political parties to submit spending plans prior to an election, and make them cover shortfalls or miscalcultions from their own party funds?
I'm acutely aware that most of the recent papers I've been reading are pessimistic, and this might purely be confirming my own biases. The fact that the state hasn't collapsed yet, is evidence that the doomsayers have gotten it wrong in the past. At some point it's hard to continually argue that an even bigger crisis is round the corner.
HOWEVER, few people deny that the unfunded liabilities of the state are big enough to question whether they can ever be paid. We're relying on something, be it widespread immigration or unforeseeable technological advances to happen. As things stand, we know that people being born today will not be able to draw a pension from the state.
Maybe it's the dissenting anarchist in me that thinks repudiation is the only way forward. I have little ethical qualms with refusing to meet gilt payments. So why not just face facts and get on with it?
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