I know what you mean. One guy I know said something like “looks like I’ll be getting national default for my birthday…” And the response he got was:
I’m disappointed…Aren’t you supposed to be an accountant?
-
Not raising the debt ceiling is not the same thing as defaulting.
-
Let’s remember that the Treasury still rakes in quite a bit of money in revenues — it took in $617 billion (seasonally adjusted) in the first quarter of 2011. In FY 2010 the annual debt service was some $414 billion, working out to an average of about $104 billion per quarter. Although the numbers won’t be quite the same going forward, the debt service will soak up only about one-sixth of the incoming revenues.
So there is plenty of cash flow for the Treasury to honor its existing debts, if a default would really be that catastrophic. Also keep in mind that even if the debt ceiling weren’t increased, the Treasury could still roll over its debt as existing bonds matured. The only thing the Treasury couldn’t do would be to issue more debt.
Result: de-friended.
But as for your situation, there are plenty of refutations of Krugman’s “hangover theory” accusation:
(the best ones are bold)
Did Capitalism Cause the Great Depression?
The Importance of Capital Theory
Austrians Can Explain the Boom and the Bust
Hangover Theory: How Paul Krugman Has Misconceived Austrian Theory
My Reply to Krugman on Austrian Business-Cycle Theory
(Longer list here)
As for the baby sitting co-op, it’s just a terrible analogy. For one thing, the whole premise is based on a single currency, single good economy…and the single good isn’t even a necessity. In an actual economy, people will spend some money. They have to live. And even if they some how manage to not spend any money and just collect it, in a free market, there’s nothing stopping people from transacting in some other medium. And let’s just think about that situation for a minute.
Each coupon is worth an hour of someone’s time. Obviously, the original fixed number of coupons was based on the number of available hours the group had to offer. (If it wasn’t it would be quite surprising they didn’t have problems right away.) But let’s suppose you print up more coupons in hopes that people will find the current ones less valuable (i.e. make the people not as interested in “hoarding” them). But wait a minute…each coupon is worth the same amount…regardless of how many there are, each on entitles you to an hour of someone’s time. Why in the world would someone all of a sudden value an hour less than they did before? And what’s more, people were “hoarding” them so that they could redeem them all at once and get a long break, right? The whole reason the coupons worked was because the whole coupon supply represented the number of available hours. If 50 couples end up accumulating most of the coupons, they can still be assured there is enough people available to fulfill the obligation. Suppose you print up a bunch of coupons. And now all of a sudden, all 150 couples have a stash that entitles them to a full weekend of babysitting. Even supposing they find a way to communicate and coordinate and work it out taking turns, at any given time, at the minimum, every single couple has 2 days worth of coupons.
Two questions:
-
How exactly does this stop people from attempting to still save up coupons to try and get a full week off?
-
How long do you think the couples would put up with having coupons they can’t redeem on demand? (i.e. there are so many coupons floating around, there has to be actual scheduling and planning involved, and people have to basically wait their turn…whereas before, the coupons functioned like an on-demand purchase.)
As for the Depression, New Deal, and WWII, there’s plenty for that:
The Broken Window Fallacy
Keynesians and the Postwar Economic Boom
“World War II Did Not End the Great Depression”
“The Fake History of the Depression”
“I Wrote the Guide to Extend Rothbard”
lectures:
The New Deal: History, Economics, and Law### The Economics of the New Deal and World War II
Thomas E. Woods: The Truth About American History (10) (specifically “The Great Depression, World War II, and American Prosperity, Part 1 & 2”)
And of course there’s these:
