The Ethics of Repudiation | Mises Daily

… In summary, as a taxpayer, you did not borrow the funds, you did not spend the funds, and you have no moral obligation to repay the funds.

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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. Rothbard’s more detailed proposal, which was a “combination of repudiation and privatization,” should be considered a blueprint for an effective debt-reduction plan. As Rothbard argued, such a plan “would go a long way to reducing the tax burden, establishing fiscal soundness, and desocializing the United States.” As an added bonus, default would be as effective, if not more effective, than a balanced budget amendment, in reducing the likelihood of a future re-occurrence of the problem.

But “[i]n order to go this route, however, we first have to rid ourselves of the fallacious mindset that conflates public and private, and that treats government debt as if it were a productive contract between two legitimate property owners.” The commentary by Hummel and Henderson are evidence that some are seriously addressing this issue, alas, after over a 20 year lag….

via Mises Daily.

3 thoughts on “The Ethics of Repudiation | Mises Daily

  1. aurorawatcherak 03/03/2013 / 12:35 AM

    So, in essence this would be like bankruptcy. The United States taxpayers would simply default, our credit rating would go to zero and we’d be unable to borrow funds or issue bonds for the foreseeable future.

    What prevents those we owe from coming to take back what we owe directly from the people?

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    • The Grey Enigma 03/03/2013 / 10:07 AM

      Hmmm… Well carrying the personal / corporate bankruptcy analogy forward, the ability to borrow funds and issue bonds is what got the nation screwed n the first place and – like persons declaring bankruptcy – a new paradigm in which credit and debt are NOT central to functioning may be the order of the day.

      Second, the debts are denominated in Federal Reserve Notes (Dollars) which we are in the process of using in a de facto sovereign debt repudiation via inflating the debts away. As Greenspan has said before Congress: We can guarantee [debts] will be paid, we cannot guarantee that they will be paid in dollars that are worth anything.

      Further, the ‘people’ do not owe creditors money, the nation does. These are different entities. Do you expect the Fed, China or Bundesbank to arrive at your front door looking the 120k your family owes? No, they will continue to implement strategies to keep you and I as debt serfs for obligations we had no choice in creating.

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  2. thetinfoilhatsociety 03/03/2013 / 12:49 PM

    Privatization??? Hell no. We have no business giving free money to private corporations. Repudiation? Of course — if we want a model for effective repudiation, we need look no further than Iceland. I’ve been following that story (which NEVER gets mainstream press, BTW) since the beginning. Iceland has a growing, healthy economy, with no austerity, and they not only repudiated their debt (incurred by unscrupulous officials hand in hand with privatized money) but are trying and JAILING those involved.

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