[ExI] Repudiating the national debt

Dan TheBookMan danust2012 at gmail.com
Thu May 12 01:48:53 UTC 2016

On Wed, May 11, 2016 at 6:08 PM, John Clark <johnkclark at gmail.com> wrote:
> On Wed, May 11, 2016 Rafal Smigrodzki <rafal.smigrodzki at gmail.com> wrote:
>>  reasonably successful businessman
> A better description of Donald Trump would be
> reasonably successful
> trust fund kid. At least he didn't blow all of daddy's money.

I don't disagree with that view of Trump. One thing one might say, though,
is that how many people given his inheritance, go on to make it that much
bigger? (That said, though, again, some of this was gotten by being able to
rely on government -- subsidizing deals via eminent domain takings and
being able to walk away from debts he racked up.)

>> Hey, let's put down some numbers. How likely is a nuclear war if Trump is
>> president? How likely if Clinton is president?
> I can't give specif numbers, but I do know that if Japan, South Korea,
> Germany and Saudi Fucking Arabia have nuclear weapons as Donald Trump
> thinks they should

I'm not sure that follows. How many nuclear wars have happened so far? How
many near nuclear wars? One analyst said, IIRC, that India and Pakistan
having nuclear weapons has lessened the chance of a major war between them.
(And having a nuke seems to be a means of keeping from being coerced by
other powers, no?) I'm not saying I agree with Trump here, though this view
on nuclear proliferation was put forth long before he start flapping his
gums on this issue. (IIRC, Ted Galen Carpenter thought a nuclear armed
South Korea and Japan would be a better security guarantee in Northeast
Asia than having US alliances there.)

> (and Hillary Clinton thinks they should not) then the chances of nuclear
> increase.

A problem here, though, is Clinton stated she wanted to expand NATO to
include the Ukraine and Georgia. Wouldn't this alone increase the chances
of a confrontation with Russia? I'm not sure how to figure the odds there
or how to go from there to reckoning how much this might change the odds of
a nuclear war with Russia.

> Also, we know from his angry tweets that Dumb Donald goes into tantrums
> late at night, so what happens when President Trump reaches for his Red
> Telephone instead of his iPhone at 3am?

I think that's probably why Bryan Caplan agrees more with you here:

"My base rate for war between the United States and another major power is
about 2% per presidential term.  For Trump, I'd up the odds to 5% per term.

See http://econlog.econlib.org/archives/2016/03/myth_of_the_rat_9.html

> And as for defaulting on the national debt ...that too scary to even talk

Let's see. We discuss topics like hostile AI, gray goo, and other
extinction level catastrophes, but this one topic is unthinkable. This
sounds almost like those conservative types who fear Mexicans and Muslims
will overrun their small town in Idaho unless there's a border wall. :)
Instead, consider that were the debt repudiated, yes, there would be
financial shocks. There have been such before. Why would this one be so
severe compared to all others? Why couldn't it be something the world
recovered from in due time? There would be pain, especially for big
institutional lenders, especially for folks whose have a big portfolio in
federal government securities. (Those folks are, naturally, going to want
to make it seem like the worst possible scenario -- even an unthinkable
one. But this is no different than folks heavily invested in oil or airline
stocks want their favored sector to not go down in value.)

By the way, debt repudiation has happened before and not just in foreign
countries, but here in the US. See Rothbard's 01992 piece on this:


Note that Rothbard mentions state -- not federal level -- debt repudiation,
but the same "sky is falling" fears happened back then. Did any of those
states cease to exist? Did their denizens all die of starvation? What
happened? They more or less recovered and their lenders grew more weary of
supporting idiotic debt financing schemes. Was this painless? No, but it
was probably far less painful than continuing to rack up the debt and eat
up more wealth in the process.


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