Hyperinflation Redux

Adam Smith; engraving
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My recent post on the US Hyperinflation Coming ties in nicely with the note provided below by Chris Coyne. He quotes Beaulier and Boettke who argue (along with Adam Smith) that facing up to our debt problems now is the proper course. In effect, they argue for the Zimbabwe solution now as opposed to waiting until things get much worse. However they are economists and not seated politicians. It is highly unlikely that such an approach will be taken, given the spineless, whining wimps that pass for legislators. Certainly not before the end becomes obvious to the mass citizenry. Until then, the pols will use smoke and mirrors to claim that all is well. When the obvious becomes so obvious, inflation will be well along, probably having an insurmountable lead over what the Fed will then be able to do. .

Time for the U.S. to Declare Bankruptcy?

|Chris Coyne|

Scott Beaulier and Pete Boettke answer this question in their in the East Valley Tribune.

Drawing on Adam Smith’s discussion of the debt, they conclude that:

Rather than erode debt obligations through inflation, the debt could be repudiated through bankruptcy proceedings. Like individual bankruptcy cases, the United States government would admit that it is unable to pay off existing debts. The repudiation would force future politicians to credibly commit to sounder economic policies and, perhaps, would help to avoid future cycles of deficits, debt, and debasement.
Of course, our call for debt repudiation is not a new one. Like many good ideas in economics, Adam Smith was there long before us. “When it becomes necessary for a state to declare itself bankrupt … a fair, open, and avowed bankruptcy … is both least dishonourable to the debtor, and least hurtful to the creditor,” he argued. In other words, when the financial storm arrives — and it will — the juggling tricks must stop.

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