U.S. Debt Repudiation

John P. Cochran writes on Zero Hedge about Murray Rothbard’s propsal that the government default on its debt:

Rothbard’s recommendation: “I propose, then, a seemingly drastic but actually far less destructive way of paying off the public debt at a single blow: outright debt repudiation.” Repudiation is not only a sound economic solution to our fiscal crisis, but it is also the morally correct solution.

Their debt, we keep reminding everyone, is your money. Their default, therefore, will wipe out your money, along with the money of the banks, insurers, pension funds, annuities, employers, etc. This is not economically sound, this is the worst-case disaster conceivable. Let’s not let ideology blind us to the harsh reality.

Nor is it the morally correct solution. The article presents a false alternative: either keep the status quo of ever more borrowing to fund ever more welfare programs, or default. The former is clearly immoral, and so is the latter. The government is the duly authorized and elected government of the people, by the people, and for the people. They cannot elect a government to enact certain policies and then on convenience attempt to evade the consequences.

Clearly, something must be done. We cannot go on borrowing to spend. Like a badly addicted drug abuser, the doctor should examine the patient’s body completely and prescribe a treatment that will not kill him.

We propose gold bonds as the only way out.