Tuesday, July 12, 2011

The US Will Default Sooner or Later -- Why Not Now?

There is little question that the US is headed for an ultimate default on its sovereign debt. This is almost guaranteed to take place within less than 20 years. So why not simply do it now while the debt is relatively small. Defaulting on 14.5 Trillion is a whole lot better than defaulting on $ 40 trillion, which is probably where we will be in fifteen to twenty years.

Yes, it will be painful. Yes, it will be disruptive. But why create three times the problem for our children and our grandchildren. Why not deal with it now?

Simply default and then make the necessary adjustments. The markets will force a rationality on government that the politicians are not likely to ever be able to do.

A default now is a whole lot better solution than a much, much bigger default in fifteen years.