Last week made implicit what has long been implicit, we, as individuals, as a country, and as a society are going to have our standard of living cut. This will hurt. There will be less inequality, not because the lower 90% will be getting more, but because the upper 10% will be getting less.
We are going to have to tax ourselves more to pay off the immense debt which has now been socialized, and upgrade our long-neglected infrastructure. We can no longer borrow to support our standard of living.
No one wants to hear this, and no politician can afford to say it.
The solution? Voila -- set off inflation.
Unlike other countries, such as Argentina, that found themselves in our situation, our debts are in our own currency. We can inflate it. Ron Paul has made this point. Gerald P. O'Driscoll Jr. of the Cato Institute has amplified on it in a WSJ article.
In his famous treatise, "The Wealth of Nations," Adam Smith noted there had never been a "single instance" of sovereign debts having been repaid once "accumulated to a certain degree." We may have reached Smith's threshold.
In one fell swoop, inflation will repudiate out debt, drive our real wages and pensions down, and send taxpayers into higher income brackets, all with no explicit action on the part of government or employers.
Wear a hard hat!
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