Playing Chicken with Lunatics.

When we talk about the question of the debt ceiling, make no mistake.  A full on default would be unprecedented.  A nation that has never done it before would default on it’s debt– it’s promise to pay.

Before we go any further, remember one thing– those dollars in your pocket?  They ain’t backed by gold, they’re backed by the “full faith and credit” of the United States.  If the US defaults on one debt– well a dollar is just a debt of another kind.  Remember that.

The truth is that nobody can really say how bad this thing would get.  AT the very least it would increase our interest rates, likely a fair amount which means that all of you with mortgages, loans, and other such examples of involvement in our economy would pay more– as would those buying goods that were now more expensive.

But that isn’t the worst problem.

The worst problem is nobody knows how bad it could get.  We could, if the right set of bad circumstances break, be looking at a full scale depression a’la the 1930’s with the US contagion striking down economies from China to Brazil, especially given the very weak state of the worlds economy to begin with.  This would lead to more world disorder, both economic and of the shooting variety and it’s an open question of what could be done, because at that point it’d be a cold day in hell before anyone trusted– or loaned to the US again.

The Republicans know this.  And so the question must be asked– why are they pushing for it?  Why have proposals that were never problematic before become deal breakers?

There is perhaps a simple answer.  If you hate the beast (government), and wish to destroy it, then your logical objective is to engage in behavior that insures it will be destroyed, and destroyed in such a way that it cannot be reconstituted.  A debt default, will have the immediate effect of forever constraining spending– and if the people suddenly decide they want those programs, or that this was a bad idea, and vote every Republican out?  Well, it won’t matter, because the world (and investors) have very long memories for being stiffed.

As frightening as it seems, more and more we seem to be heading to a situation where the debt ceiling will not be raised, because only one party is actually negotiating.

The other just wants to see Rome burn.


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