01 October 2010

Fixing the Country's Debt Problem: Nuclear Solutions

Fixing the Country's debt problems is proving to be no easy task.  Just yesterday, the Central Bank of Mexico went all in and pushed $600 million worth of dollar options.  Basically, Mexico just decided to become the next player in the global currency war in an effort to devalue the Peso to sustain their exports.  Well, I guess we should consider that they did it to sustain their legal exports, as I’m sure the drug trade has been thriving during this downturn as people need every ounce of delusion that they can get; especially those at the SEC or Federal Reserve.

Currently, this means that nearly ever central bank in the world is doing their best to pay tribute to Gutenberg, as they steam full forward towards the iceberg of inflation.  Of course, to those who run the asylum, this old parlor trick that has never worked is sure to work with just the right people pulling the levers and turning the knobs right?  Better hold on to our hats, as they may become worth more than our paper dollars in about a year’s time.  

I know dear reader that I have been a bit behind in my postings, so I tell you the above to show you this article.  Behold!  Our solution to the mountain of debt is before us!  (Or it is at least one author’s solution to the problem).  The "Smoking Ruin Solution.”  

While the “smoking ruin solution” is effectively a nuclear option, it would be the quickest solution to our problems.  Using a “if it doesn’t kill the patient" approach, it would put us ahead of the entire world on the path to default, which is really a path to finding out what things are really worth.  Forcing our creditors (China, Japan, Oil Sheiks, et al) to accept dimes on the dollar will certainly ruffle a few feathers, but to me and the author (David Galland) it seems like a real solution instead of the “let us pretend we’re solvent” Keynesian solution.  

Obviously, forcing a debt restructuring of the world’s sovereign obligations doesn’t come without costs, but the costs aren’t all bad.  A removal of the “weight of oblivion” that is the Federal Government would quickly free the economy to purge its bad debts, and thus start real wealth creation.  Advocating for stricter meddle-proof currency, Galland believes that the dollar may even be able to retain its reserve status, which will help capital inflows to rebuild the “smoking ruin” back into the greatest economic engine that man has ever known.  Destroying the national debt through default rather than inflationary burn would also destroy the bureaucracies that accompany our sovereign obligations.   This would force a natural reordering of labor and would potentially send our illegal immigrant problem packing!  What’s not to like!  

Well, as simple as Galland said, it is too simple and too painful for the average Joe or government politician to like.  Thus, we’ll continue to add a few more zeros to the notes that we use as our medium of exchange.  Maybe Helo-Ben has a green magic marker he’ll lend me that I can use to add the zeros to my stash of C-notes.  Don’t bother robbing me readers, they aren’t worth anything anyways. 

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