Door #2

Guest Post: This Country Defaulted Long Ago | ZeroHedge: "“There is no means of avoiding a final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion or later as a final and total catastrophe of the currency system involved.” – Ludwig von Mises

The final collapse of our credit expansion boom approaches. We have a choice over the next week. We could voluntarily abandon further credit expansion by voting for a Balanced Budget Amendment to the Constitution or we can raise the debt ceiling, pretend to cut spending far in the future, and allow our currency system to experience a catastrophic final collapse.

We’ll take what’s behind door #2 Johnny. The vested interests in Washington DC and Wall Street only care about power and wealth. They will never abandon credit expansion. It’s their drug. They must have it. They are addicted to it. They will keep injecting it into our system until they overdose America."

Among other things, he points out that Nixon's closing of the gold window was the final straw in un-tethering the dollar from all sanity.

Ron Paul pointed out earlier this week that to the non-brainwashed we have defaulted three times already in the last 100 years: FDR's devaluation and gold confiscation, Congress reneging on silver certificates and Nixon's closing of the gold window.

Paul rightfully argues that we should just go ahead and default now because doing it later will just be worse:

The alternative to defaulting now is to keep increasing the debt ceiling, keep spending like a drunken sailor, and hope that the default comes after we die. A future default won’t take the form of a missed payment, but rather will come through hyperinflation. The already incestuous relationship between the Federal Reserve and the Treasury will grow even closer as the Fed begins to purchase debt directly from the Treasury and monetizes debt on a scale that makes QE2 look like a drop in the bucket. Imagine the societal breakdown of Weimar Germany, but in a country five times as large. That is what we face if we do not come to terms with our debt problem immediately.

Default will be painful, but it is all but inevitable for a country as heavily indebted as the U.S. Just as pumping money into the system to combat a recession only ensures an unsustainable economic boom and a future recession worse than the first, so too does continuously raising the debt ceiling only forestall the day of reckoning and ensure that, when it comes, it will be cataclysmic.

We have a choice: default now and take our medicine, or put it off as long as possible, when the effects will be much worse.

But the politicos are hard-wired for Door #2, thanks very much...