"The Economics of Liberty." Sigh. Why are all the good economics sites out there with writers who make such observations about seigniorage and economic development, Medicare Part A, or Russia 1998, or point out that the US CDS contract is traded in euros, libertarian sites? Where is the left wing equivalent of "the economics of liberty"? I see that the author is a professor of economics at San Jose State. There goes the notion that all academics, particularly academics at California institutions, are left wing.
On the topic at hand, it should be rather obvious that either monetization or default lies down the road, and I think the author makes a convincing case that it will be default rather than monetization.
But the really useful part of this is not for Americans to know, but for America's creditors to know. After all, who is hurt the most by a U.S. default? The Chinese. They are the ones with the most to fear. And it is for them to know that they cannot continue to force-feed the American pig and accumulate Treasury securities for much longer without risk losing their investments-- they must allow the US to depreciate its currency. That will allow them to unwind their bets as the price mechanism puts more Americans to work allows us to earn out way out; not only of our debt to them but our debts to each other. It also, incidentally, benefits us for precisely those reasons.
Haha, right wing claptrap. All that is needed is increases in the top tax rate. Totally phoney 'crisis'.
What is convincing about the argument is that it stands on its own empirically, not ideologically. The basis of the argument is that politically, the public will not accept the taxes required to balance the books. One does not need to be left wing or right wing or socialist or libertarian to believe this. It is purely a meditation on the nature of Western democracy. Everything that I have seen as a follower of American politics tells me that he is absolutely correct.
