[BobL]

What he’s REALLY saying is that we should renounce our debts, since most of it is in dollars - so by doubling or tripling the amount in circulation, you effectively reduce the real cost of the debt. It’s a form of default. Unfortunately, you also will cause imported goods (including oil) to double or triple in price, and domestic goods to increase by varying levels (related to their amount of imported content, starting from raw materials, and including labor). Savings accounts will be worth proportionally less, as will just about everything in dollars. People’s pay will not increase much, if at all, so basically we become a third-world country. On a personal level, ask yourself how you would do if everything you spent money on, say, doubled in price.

Having said that, this country will soon have to choose a path with regard to the debt and future obligations. We will either have to default (in some way), or actually try to pay down our debt. To do so will mean budget surpluses - and that means big changes - such as raising the retirement age to 72 years old, and quickly, for example. Or huge tax increases on the poor and middle class (like a VAT), as taxing the rich just slows the economy down and negates any benefits. They could (and may) go after private retirement accounts - with the worthless promise of an annuity. Or maybe some stuff that’s even worse, but I’ll leave that to your imagination.

[nathanbedford]

Thank you for an intelligent post, remarkable for its singularity. Those who see this reflexively in political terms are missing the point.

The release of the recent Fed notes indicates the Fed agrees with Krugman, QE2 is underway. We conservatives ought to consider the why of it. It is clear that our central bankers fear a disintegration, a deflationary spiral, which can lead to the unraveling of our political as well as our economic institutions. In fact, the Fed is explicitly adopted a policy to encourage inflation, so much do they fear deflation. Far-fetched? As we speak, people are rioting in the streets of Iceland because of the effects of deflation.

Brazil and Japan explicitly have expressed opposition to our beggar our currency policy and China and South Korea and others certainly will not passively tolerate such a policy from us. In any event, the Fed is accepting the inevitable debasement of our currency, with all of the hardships that will impose, as the lesser of two evils.

The greatest immediate threat to this house of cards is the foreclosure debacle. Not only are our banks on the receiving end of a tsunami of defaults, the entire legal system foreclosure has broken down, with the result that mortgagee's cannot prove who is the lien holder of record and, since these mortgages have been sliced and diced and parceled out to innumerable investors who in turn have leveraged them fantastically with derivatives, the implications for the entire financial system, here and abroad, are devastating. Meanwhile, it will not take a genius to figure that it is pointless for him to continue to pay a mortgage for his house which is underwater when his neighbor squats in his house without paying his mortgage. The system simply disintegrates.

It is important to understand that the rioting in Iceland (rioting in Iceland!) has been precipitated by an end to mortgage payment moratorium.

There are many conservative economists who believe that QE2 is the last chance, as forlorn hope as it is. If we do not default intentionally by inflation we will default haplessly by deflation. Some argue that it is swifter and cleaner and more honest to default now and others fear the social implications.

What we are really talking about is how to commit economic euthanasia.

[jdsteel]

A viable alternative would be to allow energy companies to access the coal, oil and natural gas that we have without todays onerous restrictions. To slash wasteful government spending and to lower tax rates across the board, which will increase the income to the federal government exponentially.