Saturday, November 15, 2008

I'd rather stiff the Chinese than sell the National Parks

According to Barron's, the price of CDSes on T-Bills has doubled -- though T-Bills remain AAA. At first glance, it seems ontologically impossible for our government to default on its debt, since the federal reserve can participate in treasury auctions and create the money that could be used to repay the debt. However, if we must choose between hyper-inflation and stagnation -- and if interest payments consume a greater portion of federal revenue than the rest of the budget, if the presence of the United States Government in credit markets is squeezing out business-building competitors, and if we reach the point where the rest of the budget is less than the tax revenue, it might make economic, logical and political sense for the Federal Government to start fresh.

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