What About the Default Option…?

The US has but three methods for restoring economic growth: austerity measures (as in spending cuts and tax increases), monetary expansion (as in “printing money”), or default (as in not paying back on the various bills, notes, and bonds issued by the US Treasury). The national debate regarding the merits of both austerity measures and monetary expansion is well underway in the public domain. However, the default option has still to be fully considered as an alternative to austerity or monetary expansion.

To start the discussion, consider the following advantages of defaulting on the national debt:

1. The people would enjoy a $13 trillion dollar windfall from principal reduction in the national debt that would never be paid back.
2. The people would enjoy a windfall from the $400 billion dollars a year in interest payments that would no longer be required.
3. The “banksters” would have to abandon their looting operations in Washington, DC and return to regional and local limited purpose banking in order to compete for new investments in small businesses and Main Street.
4. The government would lose its ability to borrow in the future due to zero creditworthiness and would therefore have to end deficit spending and henceforth, balance the budget.
5. Mega-banks would likely split up and reorganize into regional and local service operations in order to redirect their marketing and lending activities toward small businesses on Main Street.
6. The government would have to lay off most of the Federal workforce due to lack of money – these workers would become available to join Main Street investment activities lead by small businesses.
7. The trade deficit would be solved because foreign manufacturers would cease exporting to the US as the world would no longer accept US treasury paper as payment for goods and services. 
8. The Federal Reserve would be bankrupted and closed permanently.
9. Washington politicians would have to redirect their concerns away form Federal issues and toward regional, state, and local politics in order to stay current and involved in the reemergence of small businesses and Main Street politics.
10. Small business on Main Street would be back in business as the centerpiece of American enterprise, employment growth, capital formation, and production of goods and services.

A default on the national debt by the US is an option separate from monetary expansion and austerity measures. I encourage the public to at least consider the default option more fully as part of its discourse on methods and possible courses of action for economic recovery.

Comments welcome below...

The Capitalist System According to Banksters

I wanted to share this poster originally printed in 1911 with aspiring banksters. Anyone seeking to enter the bankster profession will find the contents philosophically instructive -- good luck!

Related Posts:

The Future of Small Business in America

More Small Businesses Needed

On Being a Woman in Post-Modern Society

This post compliments my previous entitled, On Being a Man in Post-Modern Society:

On Being a Man in Post-Modern Society

While I appreciate and acknowledge that posting the chart below may be politically incorrect, the economist in me feels duty-bound to make the post regardless.

In many ways, the story of the past 62 years has been about the realities of being a man in our emerging post-modern society...

Related Posts:

On Being a Woman in Post-Modern Society

The Rhetoric of Depression...

"There will be no interruption of our permanent prosperity." ~ Myron E Forbes, President, Pierce Arrow Motor Car Company, January 12, 1928

"I have no fear of another comparable decline." ~ Arthur W Loasby, President, Equitable Trust Company, quoted in NY Times, October 25, 1929

"In most of the cities and towns of this country, this Wall Street panic will have no effect." ~ Paul Block, President, Block newspaper chain, editorial, November 15, 1929

"I cannot help but raise a dissenting voice to statements that we are living in a fool's paradise, and that prosperity in this country must necessarily diminish and recede in the near future." ~ E H H Simmons, President, NY Stock Exchange, January 12, 1928

"Buying of sound, seasoned issues now will not be regretted." ~ E A Pearce market letter quoted in the NY Herald Tribune, October 30, 1929

"...despite its severity, we believe that the slump in stock prices will prove an intermediate movement and not the precursor of a business depression..." ~ Harvard Economic Society, November 2, 1929

"For six years American business has been diverting a substantial part of its attention, its energies and its resources on the speculative game... Now that irrelevant, alien and hazardous adventure is over." ~ Business Week, November 2, 1929

"This crash is not going to have much effect on business." ~ Arthur Reynolds, Chairman, Continental Illinois Bank of Chicago, October 24, 1929

"For the immediate future, at least, the outlook (stocks) is bright." ~ Irving Fisher, leading US economist, early 1930

"Financial storm definitely passed..." ~ Bernard Baruch, cablegram to Winston Churchill, November 15, 1929

"The end of the decline of the Stock Market will probably not be long, only a few more days at most." ~ Irving Fisher, Professor of Economics at Yale University, November 14, 1929

"Hysteria has now disappeared from Wall Street..." ~ The Times of London, November 2, 1929

"... a serious depression seems improbable..." ~ Harvard Economic Society, November 10, 1929

"Gentleman, you have come sixty days too late. The depression is over." ~ Pres Herbert Hoover, responding to a delegation requesting a public works program to help speed the recovery, June 1930

"This is the time to buy stocks." ~ R W McNeel, market analyst, NY Herald Tribune, October 30, 1929

"There may be a recession in stock prices, but not anything in the nature of a crash." ~ Irving Fisher, leading US economist, NY Times, September 5, 1929

"There is nothing in the situation to be disturbed about..." ~ Andrew Mellon, Secretary of the Treasury, February 1930

"I think the bloom is off the rose, but there is no doom and gloom." ~ Alan Nevin, Chief Economist, California Building Industry Association.

"While the crash only took place six months ago, I am convinced we have now passed through the worst ~~ and with continued unity of effort we shall rapidly recover." ~ Pres Herbert Hoover, May 1, 1930

"[1930 will be] a splendid employment year." ~ US Dept of Labor, New Year's Forecast, December 1929

"The former great periods of prosperity in America averaged eleven years. On this basis we now have three more years to go before the tailspin." ~ Stuart Chase, American economist and author, NY Herald Tribune, November 1, 1929

"The spring of 1930 marks the end of a period of grave concern... American business is steadily coming back to a normal level of prosperity." ~ Julius Barnes, head of Hoover's National Business Survey Conference, March 16, 1930

"All safe deposit boxes in banks or financial institutions have been sealed... and may only be opened in the presence of an agent of the IRS." ~ Pres Franklin D Roosevelt, 1933

"Buying of sound, seasoned issues now will not be regretted..." ~ E A Pearce market letter quoted in the NY Herald Tribune, October 30, 1929

US Trails Developed World in Jobs Recovery

The US is trailing the developed world in jobs recovery as the charts below illustrate:

For now, the US is enduring the longest period of lingering unemployment since the Great Depression. I weep for those Americans who have lost their jobs and livelihoods since the economic crisis hit in 2007...

Source: Whitehouse, M (2010, July 10), Debt, Bank Troubles Leave US Trailing in Job Growth, WSJ.com.

Related Posts:

Lingering Job Losses Worst Since World War II

Prosperity is Just Around the Corner...

As the Great Depression took hold of the US in 1929, Republican Pres Herbert Hoover comforted the nation by predicting that "prosperity was just around the corner..." In reality, the US GDP dropped throughout Hoover's presidency, and economic growth was not restored until after Hoover left office in 1933. The GDP growth rates during Hoover's presidency (1929-1933) were frightful.

Ironically, Hoover rejected monetary expansion in favor of fiscal austerity, which only seemed to worsen America's economic troubles throughout his presidency. Franklin D Roosevelt, a Democrat and author of the "new deal" for America would be elected to four straight terms as US President starting in 1933. Following Roosevelt's death in 1945, Harry S Truman, another Democrat, would go on to occupy the Oval Office until 1953.

America's New Landed Gentry...?

Government workers in the US earn significantly more in wages and benefits than their contemporaries in the private sector. Additionally, the career risks of government employment are widely viewed as none. Consider the following:

Here is my question: Are government workers the new "landed gentry" of America?

Mr and Mrs Andrews (1748-49) by Thomas Gainsborough

Comments welcome...

Proud to be an American

Best wishes to everyone, and especially those serving our nation in uniform around the world...

Blogging for Gold

Kent Thune of The Financial Philosopher offers this assessment of bloggers:

With well over 100 million blogs on the Internet today, the statistical likelihood of earning big money writing in a blog is not much better than playing the lottery. There are, however, millions of people who enjoy creating blogs and are quite confident (or delusional, depending upon the particular case) that their writing and marketing skills, combined with incredible luck and timing will enable them to strike it rich. These are the gold diggers.

Indeed, we bloggers are digging for gold…

Source: Thune, K (2010, June 30), Dig for Gold, Sell Shovels (or Neither)? The Financial Philosopher.

US Private Services Bolster Overall Exports

The chart below supplements my last at US Private Service Exports on the Rise. Clearly, US private service exports have bolstered other exports of goods and services since the economic crisis began in 2007.

While exports of private services represent only a small fraction of the total US GDP, those working in the private service sector might take comfort in these findings.

Related Posts:

US Private Service Exports on the Rise

A Simple Way to Export Private Business Services

Percentage Employed in US Continues Slide

According to the Bureau of Labor Statistics (BLS), the number of people with jobs in the US continued to slide as a percentage of the civilian noninstitutional population through June 2010. Many economists believe that reporting the number employed as a percentage of the civilian population provides a more accurate description of the current state of employment than conjecturing the number of "unemployed" in a given population. Since 2000, employment in the US has declined from 64.4% to 59.5% as a percentage of the civilian noninstitutional population.

The BLS defines the civilian noninstitutional population and employment as follows:

The civilian noninstitutional population consists of persons 16 years of age and older residing in the 50 States and the District of Columbia who are not inmates of institutions (for example, penal and mental facilities and homes for the aged) and who are not on active duty in the Armed Forces.

Employment consists of all persons who, during the reference week (the calendar week including the twelfth day of the month), (a) did any work at all (at least 1 hour) as paid employees, worked in their own business or profession or on their own farm, or worked 15 hours or more as unpaid workers in an enterprise operated by a member of the family, or (b) were not working but had jobs or businesses from which they were temporarily absent because of vacation, illness, bad weather, childcare problems, maternity or paternity leave, labor-management dispute, job training, or other family or personal reasons, whether or not they were paid for the time off or were seeking other jobs.

Source: Bureau of Labor Statistics

A Simple Way to Export Private Business Services

Follow the link below to learn about a simple way to export private business services starting right now...

For the record, I credit PayPal with successfully extending my private business practice (http://www.mckibbinusa.com/) into a global service offering. Good luck to all of my entrepreneurial colleagues around the world!

Related Posts:

US Private Service Exports on the Rise

US Private Services Bolster Overall Exports

US Private Service Exports on the Rise

The chart below extracts US exports of private services from transportation, government, and other service exports. Private services include business, professional and technical services, insurance services, and financial services. According to the Bureau of Economic Analysis (BEA), US private service exports are weathering the ongoing economic crisis with ease and are now on the rise.

Related Posts:

A Simple Way to Export Private Business Services

US Private Services Bolster Overall Exports

US Service Exports Exhibit Resilience

US exports of services other than transportation are exhibiting remarkable resilience to the effects of the economic crisis as shown below.

While most of the economic news coming out of the US these days remains gloomy, service exports excluding transportation appear to be a bright spot.