[ExI] Repudiating the national debt/was Re: A Nobel Prize ​winner on Trump

Rafal Smigrodzki rafal.smigrodzki at gmail.com
Wed May 11 23:56:40 UTC 2016

On Wed, May 11, 2016 at 1:57 PM, Dan TheBookMan <danust2012 at gmail.com>

> On May 11, 2016, at 10:41 AM, Rafal Smigrodzki <rafal.smigrodzki at gmail.com>
> wrote:
> On Wed, May 11, 2016 at 1:31 PM, John Clark <johnkclark at gmail.com> wrote:
>> (about Ted Cruz)
>> ​By trying to default on the national debt and collapse the world
>> economy. ​
> ### Another Mother Jones story?
> I'm no fan of Trump, Cruz, or any Republicans (or Democrats or Krugman for
> that matter), but I do not believe repudiating the US (or any other)
> national debt would collapse the world economy. It would definitely shake
> it up and cause a lot of pain, but I believe that would be over quickly --
> depending on what else happens. I'm not being snarky here either. If the
> basic policy were repudiate and don't try to make any further radical
> changes (in the direction of more interventions, that is), I think the pain
> and confusion would be over rather quickly -- maybe in under two years.
> One positive effect such repudiation would have is making lenders more
> wary of lending to nation states in the first place, especially to First
> World ones with massive mercantilist apparatuses.

### There is something to be said in favor of this solution. It would wipe
out a lot of savers, yes, but it's better than some alternatives. For
example, if governments managed to improve the extractive efficiency of
their tax policies, they could service debt but it would mean that private
economic activity would be essentially eliminated. That would be worse than
the disruptions caused by debt repudiation.

Economies don't really collapse for fiscal reasons. They break due to war,
civil war, physical disasters, social capital loss and destructive economic
policies (communism) but fiscal issues tend to have only a temporary effect.

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