I'm not always sure what Ron Paul means by that, and I'd appreciate better clarification. I often worry that it means defaulting on US debt, since this is what Paul seemed to want during the debt ceiling debate. I believe that would cause a lot more harm than good. Since interest rates continue to be low, even though (or maybe because, causality on this isn't always clear) the US is one of the last developed economies that hasn't dropped back into a recession, the US could borrow and spend its way out of the depression.
That doesn't mean borrow and spend forever. But it does mean doing something other like stopping the 15,000 + government layoffs happening every single month.
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| The chart is indexed, instead of based on a specific value. Pay attention to the trend. Via Matt Yglesias. |
There's a limit to this, of course. You could say that this would last until the private economy adds an average of 300,000 jobs for 6 months straight. By then, recovery should be well set in.
Like the WWII debt, which was never technically paid off, over a long enough horizon, that debt wouldn't matter too much in the long run. If you finance it at 30 years with the tiny interest rates on long-term US bonds, enough growth and moderate inflation would make it go away. As I've written before, it's debt to gdp ratio that matters most, not the nominal value.
I do believe that private debt overhand continues to be a problem and it is a big problem in many other countries. The Obama administration has tried and failed twice to bring some form of mortgage relief to borrowers. I'd be interested in seeing how Paul would manage to do that, since private debt is obviously a huge depressor on private spending right now.
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