Nearly all governments of the world are in huge debts now. As a libertarian, how do you think this debt problem shold be dealt with? I assume that the government we are talking about has fixed the budget problem, ie there is no budget deficit, but to the contrary a small surplus. (of course European governments are far from this at the moment, but let's assume that one day they achieved this - how will they deal with the existing debt then?) I can only imagine two possible ways to kill the debt. Pay it by printing money or pay it by the budget surplus, which means making the taxpayers pay it.Or is there a third way? (not paying?) I think that paying the debt with the budget surplus is unfair, because it means burdening the taxpayers (=producers) for the government's debt, and so it is the worst possible thing to do, But the alternative (printing money)is inflationary, and might hit the same people again whom we want to protect. What is the way out? Of course as libertarians we are against the state, and it migh be the best to let it crush under the load of those debt, but let's assume for a minute that we want to save it. What doo you think?
ECB has started quantitative easing to pay greece's debt
I can only imagine two possible ways to kill the debt. Pay it by printing money or pay it by the budget surplus, which means making the taxpayers pay it.
Option 2 isn't there any more. The burden is so large that it would kill any seeds of production before they even sprout. The first option is the only remaining one, hence the inevitability of inflation down the road.
Thanks fo your replies. If inflation is the only option now, is there a way to diminish its harm on the people whom we want to protect? Is there a way to direct its effects on the people whohave benefitted from the government borrowing ?
Third option:
Default.
I know it'll never happen, but I would say it's the best option. By far. Get the budget balanced (and keep it balanced) then default and start fresh. There'd be no inflation. No punishing the next generation for the current and former living above their means.
Yes, the bond holders would suffer huge losses, but the owners of all those bonds, well, I would say they have themselves to blame since they should know there is no way to be repaid in real terms. So why keep lending? Yes, it also send a horrible message that the United States does not pay its obligations, and would never be able to borrow again cheaply. (More reason to do so since the budget would have to be balanced going forward.) But I don't really care about what message it sends. I didn't want to borrow the money in the first place. The future generations who are going to be stuck repaying it certainly shouldn't.
"I would say they have themselves to blame since they should know there is no way to be repaid in real terms."
There are indexed bonds.
True.
There are about 500B in indexed bonds. I guess I can let those stay current and just default on the rest.
And since there would be no mass money printing, there'd be no inflation for the TiPS. Maybe even some good ole deflation will give those a negative interest rate!
Wonderful! "They should have known that they would never be paid in real terms", yes, the logic seems true to me. But is there a way that the Us government or any other government of the world can default? I've never heard of such a thing. This doesn't mean that it cannot happen of course but there is no example of that probably because they have the wonderful combination of printing press and gun. How can default be made legally possible?
It can't and shouldn't be paid. Repudiation = Libertarian.
Selling 80-90% of the military's weapons and some other assets, while cutting spending to reach a surplus would be a good idea.
Personally, I agree with Jefferson, for numerous reasons, when he said payment of the national debt is "a question of generosity, not of right". So I think we should pay off maybe 40% and then default on the rest.