No, there is a 4th option. Cut spending and taxation.
Default. It’s the in thing to do..
I dont know exactly when the road to hell started, but I have sold all my muni bond funds out of concern that defaults are coming.
Those options are pretty similar. 1.)Inflation is partial default that becomes total as it goes into hyperdrive. 2.)Radically higher taxation hogties the economy and results in reduced revenue to the government which leaves the other options which are both default. And 3.) Default is default.
Higher taxation, if further pursued when at first it does not produce the expected revenue could easily spawn a wealth tax which will throttle what is left of the economy and result in some sort of black market being the only economy.
You forgot Congressional unfunded mandates that fall on State budgets.
In addition to state legislators who like to spend just like their federal cousins.
Well, in my house we eat food like spaghetti or homemade pizza maybe 2 nights a week.
We no longer eat out very often. Maybe bi-monthly.
I no longer buy coffee at the corner convenience store, but make my own a savings of about $400 annually.
I no longer drink beer that costs $8 per six pack, but have switched over to Yuengling Lager in cans. A good brew. One sixer a week. This works out to $100 annually.
No more curbside trash pick-up, was $22 a month. I take to the dump myself at a savings of $16 each month. That gets me near $200 @ year.
I cut my son’s hair myself and have let him cut mine. We look fine, but nothing fancy. Adds up to about $300 @ year.
It is truly amazing where you may find savings when you look for them ~ or if you HAVE to because you are NOT spending someone else’s money.
If I ran my home the way these politicians run out country I would be broke, locked-up or both.
They are a disgrace!
I do not see the inflation option. States do not control monetary policy. How can a state inflate its debt? The states can pressure Congress for more funds so perhaps there is a case for indirectly causing inflation.
Raising taxes in most states has reached diminishing returns. Higher taxes will lead to less economic activity and less revenue, or at least much smaller increases than predicted (hoped for).
I look for a wave of foreclosures beginning with smaller cities and government units. The foreclosure wave will spread to major cities and even entire states. I am not sure about the impact of a default on a government unit. Will anyone buy bonds of the government unit? Will the government unit be saddled with much higher borrowing costs? Normally, I would expect this reaction from the investment communitiy. However, with the fed selling bonds at no interest, it seems that investors no longer care.
Default would be most appealing to me. They would not be able to borrow after that but they shouldn’t be borrowing anyway.