Will the US Government Repudiate Its Debt?

Of course we already do that through inflation, however Gerald P. O’Discoll, former adviser to the Fed, writes in the Wall Street Journal that we’re at a tipping point:

As Milton Friedman long ago taught us, government spending is the ultimate tax on the economy: It extracts real resources from productive, private use and puts them to unproductive, public use. And there is the rub.

Not even a President Obama and a Congress controlled by House Speaker Pelosi and Senate Majority Leader Reid is going to hike taxes enough to pay for all their spending. Indeed, they have shown themselves quite unwilling to engage in honest budgeting. The best example is saddling Fannie Mae and Freddie Mac with $500 million of new (off-budget) obligations to fund cheap housing at a time when the two companies were already on the ropes. Is it any wonder the stock prices of these two companies are imploding?

The markets have long assessed the debt of Fannie and Freddie at AAA because of the Treasury’s guarantee, now explicit. But no one has ever seriously assessed the Treasury’s creditworthiness with Fannie and Freddie on its books. The public guarantee is entirely open-ended and unbounded. The appetite of the two companies to balloon their balance sheets and take on risk has not been curtailed. Meanwhile, Congress spends apace with new programs for constituents in an election year.

We are at a Smithian moment, in which the temptation for the Fed to spend its last dime of credibility may prove irresistible. Investors are already being taxed by inflation and can rationally expect that tax rate (the inflation rate) to be raised going forward. Wages are not keeping up. Main Street is being taxed to fund Wall Street excess. Anyone who works, saves and invests is exposed to confiscation of his capital and earnings through inflation.

If the Fed maintained its independence of action and said no to the inflationary finance of Congress’s profligacy, we wouldn’t have reached this point. But the Fed has forsaken that independence amid an absence of leadership.

By the way, as recently as February McCain said he wanted more inflation.

21 Responses to “Will the US Government Repudiate Its Debt?”

  1. Daniel Says:

    McCain said he wants MORE inflation?!

  2. Mike Says:

    The Fed is run by International greedy bankers. Rothschilds,being the largest. Thats why the Revolution was fought to win our dependence from the Bank of London and other foreign bankers. The Federal Reserve Act of 1913 put us back in the same boat we were in before 1776. Congress can still buy back the Federal Reserve for 450 million and control our own monetary policy. The Fed is the main reason we have a 9 trillion dollar debt. Every bill printed has debt attached to it that we, the taxpayers, have to pay to the Federal Reserve. Remember the Kennedy dollar? No debt was attached to those bills printed. “U S Note” is printed on the top of the bill. Kennedy defied the unconstitutional Federal Reserve and paid the ultimate price. If Ron Paul would have gotten nominated I would have voted for him. He is the only logical choice to lead this country back to our constitutional roots.

  3. Fred Says:

    The national debt is mostly driven by Democrat socialist vote-buying schemes. The Republicans are too weak to vote against it because the free traders drive tens of millions of voters away from the Republican Party.


  4. craig Says:


  5. Lacy Nwakanma Says:

    Very well written information. It will be helpful to anybody who utilizes it, as well as yours truly :). Keep doing what you are doing - i will definitely read more posts.

  6. Chandra Schmatz Says:

    Very efficiently written post. It will be valuable to everyone who employess it, as well as myself. Keep doing what you are doing - for sure i will check out more posts.

  7. make your own soda water Says:

    I together with my friends have been analyzing the great helpful tips on the blog then instantly I had a terrible suspicion I had not thanked the website owner for them. The young boys became certainly thrilled to read them and have now clearly been using these things. Many thanks for actually being considerably kind and for getting variety of extraordinary tips millions of individuals are really desperate to discover. My personal honest regret for not saying thanks to you earlier.

  8. Jayson Mccawley Says:

    I have discovered that expenses for internet degree experts tend to be an incredible value. Like a full 4-year college Degree in Communication from The University of Phoenix Online consists of Sixty credits from $515/credit or $30,900. Also American Intercontinental University Online comes with a Bachelors of Business Administration with a entire school requirement of 180 units and a worth of $30,560. Online degree learning has made getting your college degree so much easier because you can easily earn your current degree from the comfort of your dwelling place and when you finish from office. Thanks for all the tips I’ve learned through the web site.

  9. Balenciaga bag Says:

    Case what I was looking for. I was not really anticipating that we’d get a lot away from reading through the write up! An individual’ve merely gained yourself a going back customer

  10. Aurelio Dekle Says:


  11. John Crass Says:

    I put a WordPress blog on my website a few days ago, and I was just curious about how it works. So I just want to know if all the posts are saved into a single file or if they are separate for each post. Then I also want to know where they can be found on my server. Thanks.

  12. ford fiesta review Says:

    Nice post!

  13. Blair Says:

    It absolutely was good to read through your article. I really appreciated the short while which i put in reading through it and wished to leave a comment to express that….Cheers

  14. Braden Says:

    This is just the detail I was hunting for. I wish I’d have discovered your web site sooner.

  15. intressant artikel Says:

    Your current writing is okay and gives food for believed. I am hoping that I will have more time and energy to read your articles. Bye. If only you that you simply frequently submit new text messaging and request you to accepted me

  16. Kristofer Says:

    You’re so interesting! I do not think I’ve truly read through
    anything like this before. So nice to find another person
    with original thoughts on this issue. Seriously.. thank
    you for starting this up. This site is something that is needed
    on the internet, someone with some originality!

  17. law of motor accident claims & compensation pdf Says:

    Yet this convenient thing could also be cause for fatalities.
    Common symptoms of Carpal Tunnel Syndrome
    include tingling, loss of feeling in fingers, pain
    in the hand and a loss of grip strength. Nevertheless, it does mean the tour operator must ensure:-.

  18. Salina Says:

    t worry about not being able to write about any prior work experience.
    One of the most essential elements that can help you get a job is your resume.
    Show an interest in the post and the organization, and say why you
    are planning to work with them.

  19. Renee Says:

    I think this is among the most significant info for me.
    And i’m glad reading your article. But wawnt tto remark on few general things, The web siute style iis ideal, the articles is reaply nice : D.
    Good job,cheers

  20. fashionable dresses Says:

    - Swap your second hand clothing at a swishing party or on a
    clothes swapping website. If you have a longer necklace, use it as
    a waist-defining belt over a hip-length sweater.
    fashion jewellery is also known as costume jewelry, junk jewelry, artificial jewelry or fake jewelry.

    Feel free to surf to my web page :: fashionable dresses

  21. Micheal Says:

    The Massachusetts College of Art and Design’s fashion (Micheal)
    program focuses on both creativity and practicality.
    These ten tips, tidbits and ideas are just a tip of the iceberg.
    Fashion cannot be for one day and has to be a routine.

Leave a Reply