[ExI] Repudiating the national debt

Dan TheBookMan danust2012 at gmail.com
Wed May 18 02:47:33 UTC 2016

On Tue, May 17, 2016 at 1:58 PM, spike <spike66 at att.net> wrote:
>>>… Ja, this already happened, on 12 Jan 2016: Iran seized two US Navy
vessels and crews.
>>…That was in the context of those vessels traveling in Iranian waters
uninvited, no?
> Invited? We have no legitimate official diplomatic relations with Iran,
the country
> which attacked our embassy.

That's not really the point, but if you want to go there, it's not "our
embassy," but the US embassy that was attacked. There's also a backstory
there, one having to do with the 1953 coup and how the British embassy was
involved in an earlier coup attempt and then the US embassy was involved in
a successful one. Some argue that that played a big role in some Iranians
not seeing embassies as sacrosanct.

> We don’t know where those sailors were located when they were captured.
> sailors are not being allowed to testify.  I heard one skipper has been

All right. That's not the story I've read in the news. So we have a basic
disagreement on what are the facts of the matter. Do you agree that the US
Navy boats entered Iranian waters and that, whatever happened, no US
sailors died?

> >I never watch SOTU in real time…
> Nor do I, even later.  I read the transcripts.  The last one I could
stand to endure
> in real time was Ronald Reagan.

Why him? See:


>>…what would have happened had Iranian vessels had engine trouble and
>> into US waters…
> Engine trouble, hmmm.  Dan the BookMan, what kind of engines do you
> those Navy boats as having?  Hint:  Diesel fuel is much easier to
transport and
> much more forgiving than gasoline.  Furthermore, any Diesel motor hit
with a
> terrific EMP would not even notice: they have gravity fed fuel with a
hand pump
> backup, standard aspiration with turbos, etc.  That engine has no need for
> electronics, and would survive any electrical pulse which would take out
> gasoline engine.

So you believe that the report of mechanical issues was fabricated? What's
your basis for believing this?

> Were the boats lost?  Did their compasses point the wrong way?  Did the
> have GPS jammers?  And did the sailors have no alternate multi-frequency
> navigation while sailing hostile waters?

It's starting to sound like you believe the Iranian navy has weapons and
technology well in advance of the West and of the US in particular. What's
the evidence for this?

> And did two vessels have engine trouble simultaneously?

Wasn't the official story that one broke down and the other stayed with it?

> That engine-trouble flim-flam was a cover story and a contemptuous one at
> more transparent than the yoga routines, the internet video and that
> business.  Our own government is so dismissive of its citizens as to not
> bother attempting a believable cover story.

Okay, if you put it that way, it's possible and governments, especially the
US one, do routinely lie. But the way to examine this is to ask questions
like: What's the base rate of mechanical problems for these boats? Yes,
diesel engines might be very reliable, but not only do they break down, but
other things can go wrong with a patrol boat. We'd have to look at these
probabilities and then see if this incident was wildly improbable.

>>…What do you think would be likely to happen if the US national debt were
>> repudiated? What are likely good and bad outcomes? Do you think John's
>> sort of meltdown scenario is likely?
> Defaulting on the national debt is a bad thing.

Why is it bad?

> I am surprised at how many think we have any choice in the matter however.
> A former presidential candidate pointed out that current government policy
> would eventually lead to default, but not by choice.  That candidate was
> Ross Perot, in 1992.  In retrospect, his comments on government spending
> were right on the money.  Al Gore repeated some of it in 2000, but
> a solution which likely would not have worked.  Now, we pretend to be
> surprised as we see the Federal government debt double in one
> in peace time.
> What a shock!

Since those in charge of spending really have little incentive to not
spend, it's hardly surprising. It's also been noted before. And the recent
run up is really no different than the last several decades of profligacy,
save that now foreign debt is a big source of financing.

> I see default as coming eventually (15-ish yrs) but not by choice.  I
also see
> it as a soft default: Social Security pensioners will continue to get
> but a fraction of a percent a year, as real inflation is perhaps 10 times
> raise.  Medicare will pretend to pay, Medicare doctors will pretend to
> All Federal level subsidies of O-care will dwindle to nothing, not by
> but because the Fed cannot pay.  This will be bad.  We will not choose
> path willingly.  This path was chosen for us, by us, previously.

That's not really a default. The creditors might still be getting paid
under that scenario. A default to me means the debt won't be paid, that the
creditors simply get a deadweight loss. Let me try a scenario with you.
Let's say I borrow $1 million from you and I promise, say, a thousand
people here that I will give them gifts of $10,000 each and I have no other
money and I'm not earning interest or anything. I start handing out the
gifts, but then I notice just how bad I was at math. After a hundred people
get their gift of cash from me, there will be nothing left. I could try to
borrow more, of course, because I love to play Santa Claus and all that,
but I find I can't get anymore because others have done the math. I still
owe you $1 million plus whatever interest is due. Me defaulting here would
be what? Not giving the other 900 people their gifts of cash? To me, it
would be me not paying you back. Then I've defaulted on the loan. That's
what folks mean when they're talking about default -- not cutting the gifts
or spending.

(Maybe calling it a soft default makes it seem different here. To me, a
soft default might be something like partially defaulting on the creditors
-- maybe restructuring the debt or, say, telling them there's no way to pay
the interest or even canceling part of the debt. With default, anyway, my
question is always going to be: What happens to the creditors? And don't
take this is a moral claim. It's a semantic one. It can be argued on moral
grounds that those loaning to any state really don't have much of a just
claim -- just like loaning money to a mobster doesn't entail one to a just
claim to be repaid tout court.)


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