Default Now

It is too bad that idiots don’t warn people before they do something really stupid.  Perhaps someone of sound mind could intercept them and redirect their misguided intentions. Instead they seem to attract other kindreds…where they thrash about with self-reinforcing laughter like a pack of wild hyenas.

Take one Philip A. Contos of Parish, NY. Last Sunday he met up with a group of his friends for a helmetless protest ride.  He was, no doubt, contemplating the absurdity of helmet laws and the liberation of helmetless riding with the rider next to him when his Harley Davidson motorcycle fishtailed, sending him over the handlebars and to his death.

According to troopers, Contos would have likely survived if only he had been wearing a helmet.  Poor Contos… He didn’t stand a chance.  He was an idiot.  What’s more, all his friends were idiots too.

But in no way was Contos’ death a waste.  It proved a valuable point…you can’t legislate away stupidity.  So why bother with helmet laws to begin with?  Of course, this lesson will be far too complex for blockhead legislators to comprehend.  They’re now likely hard at it – drafting a new law banning helmetless protest rides against helmet laws.

Here at the Economic Prism we highlight this terrible tale not for amusement or enjoyment…rather to make an important distinction.  There are senseless idiots and nonsensical idiots.  Contos was the former.  The burden of today’s letter falls on the latter.

Unconstitutional Money

Nowhere in the history of the world has the collection of nonsensical idiots reached anywhere near the fever pitch that it has in today’s U.S. Government.  And no discussion within the Capitol building has ever come close to the idiot proportions than today’s debt limit debate.  Here’s what we mean…

“Law professors, Democratic senators and liberal commentators have recently raised a tantalizing possibility for ending the congressional wrangling over raising the federal limit on borrowing,” explained Zachary A. Goldfarb in Wednesday’s Washington Post.

“President Obama could simply declare the debt ceiling unconstitutional and be done with it.

“Advocates of this approach cite the 14th Amendment of the Constitution, which states that “[t]he validity of the public debt of the United States … shall not be questioned.”

Obviously, these advocates are nonsensical idiots.  They fail to question the validity of the Constitution.  From our observation the Constitution was invalidated long ago.

For example, Article I, Section 8 of the Constitution empowers Congress – not the Federal Reserve – to coin money…and Article I, Section 10, specifies that money be coined of gold and silver and not bills of credit.  If the constitution is still valid, then the unbacked paper Federal Reserve Notes that are used as money are, in fact, unconstitutional.  Yet no one in Congress cares.

Default Now

Regardless, the 14th Amendment argument is merely conceit.  Do you think foreign investors of U.S. debt give a rip if the Constitution says “the validity of the public debt of the United States … shall not be questioned?”

When it comes down to it, further increases of the debt limit do just that…they bring into question the validity of the U.S. public debt and the government’s future ability to pay it back.  It doesn’t matter that the 14th Amendment says not to question it.

Besides, Congress wrecked the nation’s finances long ago.  The first debt limit that we are aware of was established in 1917.  Before that Congress had to approve every issuance of public debt.  Setting a debt limit merely gave the Treasury Secretary the ability to issue debt within the confines of the debt limit without Congressional approval.

The problem is that the debt limit has always really just been a glass ceiling.  Over the last 94 years it has been raised 102 times.  And over the last 30 years things have gone especially haywire.  In 1982 the national debt first hit $1 trillion dollars.  Today it is pushing up against a $14.3 trillion ceiling.  In 1982 the debt to GDP ratio was about 31 percent.  Today the debt to GDP ratio is nearly 100 percent.  In short, the government has borrowed its way to hell and unborn citizens will be left to pick up the tab.

Our leaders make the solution seem real difficult.  It’s not.  In fact, the solution’s real simple.  Spend less money than the revenue generated by tax receipts.  Stop borrowing money.  Use the budget surplus to pay down the debt.

But the U.S. government will never do this.  In all practicality, there really is no way the public debt will honestly ever be repaid.  So why keep on with all the pretense?

Default now.  Get it over with.  You’ll relieve your grandkids of paying your debts.  And the lessons of your mistakes, as the debt pile burns in fire sale liquidation, will bequeath three generations of sound money and honest banking.


MN Gordon
for Economic Prism

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