Hyperinflation Is Not Inevitable (Default Is)

[Draggingtree]

Ludwig von Mises Institute:

 

Hyperinflation Is Not Inevitable (Default Is)

Mises Daily:Monday, August 20, 2012 by Gary North

Consider the biggest debtor of all: the US government. It has borrowed money out of the Medicare trust fund and the Social Security trust fund from the beginning. The government has issued nonmarketable IOUs to both of the trust funds. These IOUs are good for decades. They are not short-term IOUs.

The government is in a position to repay only short-term bonds bought by the public. It is not allowed to repay holders of long-term bonds before the date that the bond terminates and the monies are to be repaid.

This places the US government at a significant disadvantage with respect to creditors. While it is possible for issuers of corporate bonds to repay the creditors at any time, this is not possible for the US government. Furthermore, the largest of its debts are related to two programs: Social Security and especially Medicare. These debts cannot be repaid with fiat money, because to do so would involve paying off long-term debts early. This is not possible for the federal government, unless the federal government changes the law. If it does this, it would be an admission of total defeat. It will be open default. read more http://mises.org/daily/6159/Hyperinflation-Is-Not-Inevitable-Default-Is

[Valin]

@Draggingtree

 

Listen, I'm not that smart, and I really don't know that much about this stuff...but

 

In other words, the default will be much more open. The government is going to have to renege on promises made to the vast majority of people who are now dependent on the federal government for their retirement income, and it will also default on the workers who are still in the workforce, who are paying each payday into Social Security and Medicare.

 

I consider this a more viable option than hyperinflation. What may happen is the government saying you're not going to get your full benefits, but only a portion.