[ExI] Repudiating the national debt

[Dan TheBookMan]

On Mon, May 16, 2016 at 2:05 PM, John Clark <johnkclark at gmail.com> wrote:
> On Mon, May 16, 2016  Dan TheBookMan <danust2012 at gmail.com> wrote:
>> I'd like to get back to considering what one person here believes is
>> unthinkable: national debt repudiation.
>
> Yes, suddenly making 20 thousand billion dollars worth of debt that had
been
> considered the safest in the world worthless is unthinkable.

Why should it be unthinkable? Again, we discuss things here that sound like
they would likely have far worse downside risks. Why is this single out?
And, once more, discussing it here is more just a tiny minority of smart
folks armchairing an idea. Why are you so afraid of even discussing the
matter?

> Or at least it should be unthinkable, but unfortunately Donald Trump
thought
> about it.

Trump didn't originate the idea. Not only have others discussed long before
"The Donald" drooled over national TV about it, but it's actually happened
many times before in history. That actually gives us more to go on in
forecasting possible outcomes than if it never ever happened before --
unlike many of the other forecasts we've discussed here. (Looking to your
comments further on, we can also look at currency collapses and
devaluations too -- and not just the worst of the worst -- to see what
likely effects they might have today. Or we can panic and say it's
"unthinkable.")

> A dollar is only valuable because the government promises to stand
> behind it and people trust them to keep that promise, but if that trust
proves
> to be unjustified then a dollar is just a piece of paper with some green
printing
> on it, the dollar collapses and the world economy with it.

Okay, now there's some substance to your rant. Your view is repudiating the
national debt would not just get rid of the debt, be a deadweight loss to
[mostly big] lenders, and likely curtail future national borrowing, but it
would collapse the dollar. That's the big downside risk for you, right? The
dollar drops -- even drops to zero?

>> Recall I offered that there might be a sunny day outcome: the debt gets
repudiated,
>> lots of immediate pain especially for large lenders who hold most of
this debt,
>
> And pain for anyone who has stocks or bounds, or a mutual fund, or a
insurance
> policy, or has a bank account,
> or is on Social Security, or is receiving a annuity, or a pension or...

Again, this is because you see the national debt as shoring up the dollar.
If that weren't so -- if the debt wasn't tightly coupled to the value of
the dollar -- then this wouldn't be such an "unthinkable" scenario for you,
no?

>> and the national government finding it hard to borrow money for some time
>
> It wouldn't be
> hard to borrow money
> it would be impossible to borrow money. If it's now legal for the USA to
renege
> on its promise to repay what it owes it must be OK for corporations to do
so
> too, and individuals. If even the safest debt in the world, US government
treasury
> bonds, are worthless then no debt is safe and nobody in their right mind
would
> loan anything to anybody under any circumstances.

This doesn't make sense to me. Sure, I can see the largest debtor
defaulting causing many to be much more careful lending -- even maybe for
there being a period where most new lending stops. I don't see that as a
permanent thing.

>>  John Clark believes it would 'collapse the world economy,' presumably
in a
>> fashion that would set everything back decades or more. I'm not sure if
he
>> means a replay of something like the Great Depression or something far
worse.
>
> Something far worse.
> The Great Depression
> was caused by a series of stupid decisions but it was stupidity within
normal
> parameters. Repudiating the national debt
> would be an entirely different type of type of stupid, it would be
paranormal
> stupidity the like of which this country has never seen before.

Again, because? From your above statements, it's really about the collapse
of the dollar, right? If it's not true that the dollar collapsing would be
a likely outcome of debt repudiation, then you would admit that it's not as
bad as you believe, correct?

And I'd still like to know how likely you think national debt repudiation
is -- Trump or no -- and, if it should come to pass, what you suggest
doing? Moving to Tasmania or perhaps jumping off the nearest tall building?
:) No, seriously, what should a reasonable do if it happens? What's the
likelihood so that a reasonable person might start making plans now just in
case? (My guess it's very unlikely -- and not because of what you fear,
though I'm sure many share your fears. It's rather unlikely because
financial elites are the big lenders here, so they certainly don't want to
lose their share of your money. They also don't want to move from having
$10 million mansions to merely having $1 million homes.)

Thanks for your response.

Regards,

Dan
  Sample my Kindle books via:
http://author.to/DanUst
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