Thursday, September 20, 2012

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Government Default: Yes or No? by Gary North at Tea Party Economist Reprinted with Permission It is not often that readers get a clear-cut choice between two forecasts. Most forecasts have wiggle room. Not the following. 1. The United States government will default. 2. The United States government will not default. I hold the first position. John T. Harvey holds the second. He wrote a piece for Forbes defending his position: "It Is Impossible For The US To Default". I regard this as the most fundamental economic issue facing the U.S. government. I regard it as the most fundamental economic issue facing Americans under age 60. Mr. Harvey begins. With so many economic, political, and social problems facing us today, there is little point in focusing attention on something that is not one. The false fear of which I speak is the chance of US debt default. There is no need to speculate on what that likelihood is, I can give you the exact number: there is 0% chance that the US will be forced to default on the debt. That is the kind of forthrightness that I appreciate. Here is my response. With so many economic, political, and social problems facing us today, it is crucial that we focus attention on something that is both catastrophic and inescapable. The fear of which I speak is the chance of U.S. debt default. There is no need to speculate on what that likelihood is, I can give you the exact number: there is 100% chance that the U.S. will be forced to default on the debt. UNFUNDED LIABILITIES Why do I believe this? Because I believe in the analysis supplied by Professor Lawrence Kotlikoff of Boston University. Each year, he analyzes the statistics produced by the Congressional Budget Office on the present value – not future...