Pretty soon Congress will once again have to consider raising the debt ceiling. Every year this comes up for a vote, and every year it passes. This year, with pressure from the Tea Party, some Congressman are seriously considering standing up and voting no on this to not allow the US to borrow any more. However, whenever any politicians begin questioning the system, there will be immediately backlash in the the form of an overblown fear campaign. If our government defaults on our debt, many have claimed that this will plunge the country into an even greater depression. Our senior citizens will be thrown out on the streets. Our military will go on strike. Cthulhu will invade our realm and rule in a wave of terror. But what’s even worse: the SHAME! The great super power of the world admitting it’s bankrupt? Now that just can’t happen! We’re better than those crappy European nations like Greece, Ireland, and Portugal right? All sarcasm aside, one might wonder why we even have a debt limit at all if it’s going to screw us over so badly? Well, the answer will be shocking to those few who aren’t already cynics, or those that think $14.3 trillion isn’t really that much money.
Historically speaking, the debt ceiling was created during WWI to ease public fears of government spending. Since then, it’s been raised every year without much objections, which makes a mockery of the whole notion of a ceiling in the first place. Like most government propaganda, it’s meant to dupe people into feeling like there are actual limits to our government power, when in reality it’s all a charade.
People who think it would be a terrible thing defaulting on our debt are forgetting that we already are essentially bankrupt. If you are a company that brings in $2 trillion and spends $3.6 trillion, you aren’t going to be in the market for very long. Sadly, our government is this terrible company, yet it can never go out of business because it has one thing that no one else has: a printing press (granted, there are those out there that also have these, but they are labelled “counterfeiters”). By the Fed initiating QE1 and QE2, it’s pretty much a given that no one in the free market wants to buy our debt, thus the Fed has been stepping in to create artificial demand and enabling our government to keep spending as much as it wants. In essence we are already defaulting on our debt by trying to inflate it away, and this is much more dishonest as it delays our day of reckoning and hurts more people through rising prices. By defaulting on our debt now, the dollar would immediately be shot down and our economy would suffer in the short term, but it would be the honest way of going about our business and we’d be able to recover much more quickly than prolonging it as long as we can through inflation. Our creditors would have to take a haircut and most likely never lend to us for a long time, but at least they’d pull off the US leech that’s been giving them inflated paper for their consumer goods. Global economies would have to adjust once they see the demand for their products suddenly drop due to a lack of US purchasing power. But in many emerging markets, such as China, once they let their currency increase in value and stop shipping so many products out of country, they’ll have over 1 billion Chinese consumers who could easily fill that void. Thus, the world would quickly recover, and if the US government gets out of the way then we could recover quickly as well.
Once we lose the status of having the world’s reserve currency, we’re going to be forced to go back to the basics and live within our means. If we can’t afford to have goods shipped to us, we’re going to have to start producing them once again and rebuild our manufacturing base. Hopefully by then people will realize the Federal Reserve was the enabler to our government’s addiction to debt and abolish it. By flushing away our central bank, gold and silver (and other commodity monies) will once again reign supreme as the only honest currency. People will be able to save without fear of inflation wiping out their wealth, and true capital can be built for businesses. With a healthy free market, our country can once again experience an exponential increase in living standards as goods become cheaper and more plentiful, technology improves in all areas, unemployment goes to virtually zero, and the country gets richer as a whole. This all may sound like a libertarian, free market utopia, but it’s entirely possible once we can kick off the giant monkey on our country’s back that’s the government and its addiction to spending. Defaulting on our debt may be the crisis that turns this country around and makes us rethink our political philosophy. If people see how much damage government has done and how much the unhinged free market can thrive, they’ll realize how much potential our country has to become the world’s greatest nation once again. By embracing freedom and rejecting the statism that got us into this mess, we can return to the roots that founded this country and made us the beacon of liberty that set us apart from the rest of the world.