How to Solve the Debt Problem

The following is an advertisement for rational economics in the Debt Debate.

We have all seen the angry shouting from the trading pits about "Too much debt." The over covered rebuttal has been a movement to mint a coin. There is a much easier and historically quite common way to address the debt, default on it. Start defaulting on the securities already at the Fed.

The Coiners are correct in saying that the debt ceiling is really a debate about whether we will pay our already incurred bills or not. Balancing out government power has muddied the structure to the point that spending is permitted but funding it isn't.

The Debt-haters have the advantage of populist outrage and simple thinking. The argument goes like this: There's a lot of debt, that must be bad. Stop spending and the debt will go away. The fundamental difference between the "debt" and the "budget deficit" escapes them.

Here's the problemo- Every US government issue should - but does not - have a disclaimer on it that reads: "Payment of this note to be secured by issuance of like security." And that is why the debt ceiling debate/crisis/kerfuffle is so sophomoronic. The addition to the disclaimer could only be, "Unless we hit the debt ceiling, in which case you get Jack Squat."

We call our approach the Eric Stratton 3rd Way, to the bond holders, "You fucked up, you trusted us." We now return you to your regularly scheduled lunacy.

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