Ep. 35 Debt Default: Good or Bad?

15 May 2016     |     Tom Woods     |     36

You’ll never guess: Krugman contradicts himself this week, but only Bob Murphy, who knows Krugman’s columns inside and out, caught him. This week the topic is whether it’s a good idea at some point to repay the national debt at less than face value. Krugman is horrified, so maybe it’s a good idea….

Krugman Column

The Making of an Ignoramus” (May 9, 2016)

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Contra Columns

Keynesians on Treasury Default: Depends Who’s in the White House,” by Robert P. Murphy
Trump’s Right — Paying Back the National Debt with ‘Discounts’ Is Already Official Policy,” by David Stockman
Repudiating the National Debt,” by Murray N. Rothbard

Related Episode

Ep. 33 Krugman and Hamilton Sitting in a Tree

Event Mentioned

Mises Circle in Seattle, May 21, 2016

The Contra Cruise

Join us October 9-16 for an unforgettable week at sea!

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  • Brohemius Meebio-Blaps

    If the cruise goes well, you should do another one in the future, an Alaska cruise originating in Seattle. The scenery is better up there. A lot of people don’t want to go to Houston for any reason. It is to be hoped, also, that Dr. Woods will then be living in Northern Arizona or some other place out West, and he won’t have to worry about having a tornado shelter.

  • martinbrock


  • Brohemius Meebio-Blaps

    To change the subject from Krugman’s complete and utter corruption, I often hear that Capitalism depends solely on two principles: private property and contracts. This is a beautiful thought. However, doesn’t Freedom of Association belong in there also? Perhaps right in the middle? I just bring this up because we don’t have Freedom of Association in the U.S.A., and it seems to me it is foundational to any sort of free society. It is frequently implied and alluded to, but seldom advocated expressly, in Libertarian discourse. I can only imagine what it would be like to live in a truly free society, rather than in one in which citizens stumble blindly about repeating slogans about freedom when in fact they have never experienced it.

    • https://www.facebook.com/david.rogers.hunt David_Rogers_Hunt

      There is a black congressional caucus. See http://www.politico.com/story/2007/01/black-caucus-whites-not-allowed-002389 Does that count as an example of Freedom of Association?

    • LP

      I have no problem with calling out freedom of association explicitly, but it is already implicit, and limited, in private property and contracts. As the owner of a location, I may choose who is allowed at that location, and as one negotiating a contract I may choose to accept your terms or not. Of course, if I don’t own the property, my right to free association does not mean I can let anyone I want onto your property, nor may I bar anyone from entering your property simply because I am already there.

  • blackylawless

    Wow, what a stagnant pool of utter and complete ignorance and evil we see with this wingnut-O-Rama Contra-Krugman site.

    Wrong on everything. Anyway, back to reading the op-ed of someone on the right who’s sensible (Max Boot).

    I need foot bath for even dipping my toe in this crap.

    • http://www.TomWoods.com Tom Woods

      Max Boot on the right? That’s a good one.

      Yeah, I guess Contra Krugman is going to be a little strong for you if you’re a Paul Ryan fan like Max Boot. Keep on never having an anti-establishment thought in your entire life.

      • blackylawless

        Like I said, we have a backwater site here.

        Do note that one can be anti-establishment and reasonable, but for those with such predilections, they would be wise to ignore this site.

        • http://www.TomWoods.com Tom Woods

          Spoken like a true Paul Ryan supporter. We can oppose Paul Krugman, but not _that_ much!

          Ludwig von Mises? Who’s he?

          • blackylawless

            Who is LVM (and his acolytes)? Like the Marxian folk against whom they stand in opposition, they are “true believers.”

            And this isn’t a compliment.

          • http://www.TomWoods.com Tom Woods

            Whatever that means. I’m talking about specific ideas. So you consider yourself to be on the right, but you think fiscal and monetary stimulus can be good ideas? Then you’re not on the right. You think the artificial lowering of interest rates by a central bank doesn’t do damage to the economy? No wonder you like Max Boot and other fakes.

          • blackylawless

            You speak only of labels, affiliations, clubs, and rigid ideological confinement, of yours or your opponents, not of truth, truth which is attained not by lazy adherence to incomplete models and theory and which is not, and cannot, be based on foolish consistency. Seeking truth involves work, real hard work, examining how the world works, not in light of narrow and limited presupposition, but in light of an expansive consideration of all models (or theory), including those not even formulated.

            So, as to fiscal policy, or monetary policy questions, it depends on far more than some sort of silly bifurcated discussion as to their merits. There’s a far more richer and useful discussion to be had concerning what constitutes a fiscal or monetary policy than that seen here at this site. But then again, it’s futile to engage in discussions with true believers.

          • http://www.TomWoods.com Tom Woods

            You begin by making sweeping judgments about the merits of this site, even though you don’t seem to have much of a grasp of anything we discuss here. And then you accuse _me_ of speaking in terms of associations and so on and not discussing ideas. There’s a little bit of irony there.

            You then prove my point by going on to say that questions of fiscal and monetary stimulus are quite complicated and require serious study by responsible people, blah blah blah. Now of course, you are perfectly at liberty to believe in interventionist, anti-market economic ideas. But you shouldn’t be surprised when supporters of the free market oppose you. That is what you find at this site.

            This site attempts to carry on the great work of the great thinkers of the 20th century, some of whom used to be featured in and admired by magazines that now publish Max Boot. The conservative movement has drifted leftward ever since.

            There is nothing in the world that is easier than claiming to be the wise pragmatist who stands above all these childish idealists who believe in principles and who believe in absolute laws of economics. Nothing in the world is easier than that. But simply preening about, brandishing your superiority, does not constitute an argument. Bob and I have written at great length in defense of our ideas, not one of which you have challenged with any substance.

            Simply claiming that we are out of the mainstream, or “true believers,” is not an argument. Max Boot was a true believer in the idiotic, left-wing Iraq war. But in what way would I be contributing to the conversation by stating that and making it the entirety of my argument?

            The only people who predicted the 2008 financial crisis were people out of the mainstream. The mainstream, so called, has given us nothing but ruin. Why would anyone in his right mind crave acceptance from them?

          • blackylawless

            Sorry, you don’t get a free pass for your asinine views on economics because of your opposition to Boots asinine Middle East interventionist advocacy. No sir.

            The direct and only cause of our economic problems and systemic financial crises are those, in powerful positions, who hold the belief in, as you say, “absolute laws of economics,” and would deny a pragmatists (appropriate) approach to responding to reality. All evidence, in theory (other than completely discredited fringe theories) and experience manifestly shows this to be the case. To merely contemplate anything otherwise is to court insanity.

            And so it is, Mr Woods, that you and your motley band of followers in this intellectual backwater have lost all your marbles. There is no realm of reality, in any possible universe, that could even remotely accommodate your absurdities.

            There is a place for anti-establishment and anti-mainstream observation and argument, just not the kind you and your ilk have on offer.

          • http://www.TomWoods.com Tom Woods

            Translation: I know exactly zero about economics. To make myself feel better about this lack of knowledge, I will condemn people who have studied the matter and drawn informed conclusions.

            I will also continue to state none of my own views, but continue to prove Tom’s point.

          • blackylawless

            “Informed conclusions”: informed by ideological clap trap (i.e. Marxism, Austerianism). Talk about two poles of insanity, where both begin with some good observations from “the field,” but both never find the theoretical “good foot,” only the “bad foot,” to sum it all up in the terms of Brownian motion.

          • http://www.TomWoods.com Tom Woods

            As usual, name-calling and no substance. I still have no idea what your views are on anything. On the other hand, my views are considered to be suspect because they are based on principles. I suppose we might as well chuck all the sciences while we’re at it. We can just wing it!

            I’m trying to have a discussion with someone who thinks Max Boot is worth listening to, even while claiming to disagree with pretty much the only thing Max talks about, which is global intervention.

            I feel foolish, having been taken in by an obvious troll. You would think my native sense of humor would have detected this earlier. My apologies to everyone reading this that it took me so long to figure this out. I’m not usually quite this thick.

          • got_g

            what a non-sense … baloney.
            When I hear somebody call himself “pragmatist” , my bull$@#$ meter immediately detect something fishy … a person without principles, ready to accommodate anything which seems trendy . If mr. Woods is too classy ..I’m not obliged to be…

            “pragmatist”, ” your ilk”, “silly bifurcated discussion”, “predilections” … ha you are phony, sir, hipster-intellectual .

            “truth involves work, real hard work, examining how the world works” : carbon-copy , rehearsed sentences.. gimme a break 🙂 … bull#@!$ meter to the max 🙂

          • blackylawless

            Stay classy.

          • http://www.TomWoods.com Tom Woods

            Stay incoherent. Read Max Boot while opposing intervention.

            By the way, I think it is highly dogmatic of you to be so opposed to Middle East intervention. After all, there’s no principle in the world, so couldn’t it work in some circumstances? Why, we have to do the hard work of finding the truth about how the world works! We can’t make sweeping judgments!

          • blackylawless

            Like I said.

            Anyway, you and your follower’s lives are an utter waste of the short time you’ve been given, as engagement with fools like you is a waste of my time.

            Anyway, good luck getting a clue. You’ll need it.

          • got_g

            … one troll out 🙂

          • blackylawless

            Using freshwater to make things more brackish than you could imagine, here at the contra krugman backwater site.

            Keep up the great work with all of your effluent discharge.

          • got_g

            You did it again “effluent discharge” , ha ha :), you can’t stop yourself with the non-sense..

          • Brohemius Meebio-Blaps

            You’d better open a new account now. You tried to argue with Woods without advancing a single specific, substantial argument. You sound like a government press release. Are you actually Marie Harf?

          • http://www.TomWoods.com Tom Woods

            Once again, you have told us nothing.

            As far as I can see, you have zero knowledge of economics. You think of yourself as being on the right, but I don’t think you actually know who Mises is. Even Reagan and Buckley admired Mises, and remember, you crave establishment respectability, so there it is.

            We still have no idea what your views are, not that we have any expectation that they’d be especially interesting.

            What we have learned from you is that it is bad to have principles or to do work in economic theory. This is for stupid, dogmatic people. Kind of like geometry. Who needs dogmatism like the Pythagorean Theorem? Get out there with your ruler and start measuring triangles!

            I’ll send copies of my two New York Times bestselling books to anyone who can identify an economic proposition of any kind in anything this person has said.

          • blackylawless

            More wingnutonomics from ya, Tommy?

            Wow, guess what? There’s a piece of lint on my shirtsleeve.


            All gone.

          • http://www.TomWoods.com Tom Woods

            There are free books waiting for anyone who can identify any economic knowledge in anything you’ve written.

          • colton

            To know, we must know what we don’t yet know, and in knowing we must not foolishly evaluate that knowledge as correct or incorrect, but consider all knowledge equally on its merit, or lack thereof.

            I think that’s some sort of poorly phrased reference to the seen versus the unseen, applied not to transactions, but to thought. One must wonder, considering we don’t yet know what we don’t yet know, if such a person would advocate we not think at all until all possible thoughts have been considered.

          • http://www.TomWoods.com Tom Woods

            How can you waste your precious time in our comments section? You have triangles to measure, against the dogmatists.

          • http://www.TomWoods.com Tom Woods

            And he’s discovered so much about how the world works! Isn’t it breathtaking, all the knowledge he’s shared with us?

          • Brohemius Meebio-Blaps

            This is a masterpiece of empty rhetoric. 144 words and you have said nothing.

        • Brohemius Meebio-Blaps

          Blacky, you are in over your head here. You’re just making a fool of yourself. This is Don Knotts (you) against Doc Holiday (Woods). Better to retreat than to become famous for a limp brain.

    • https://www.facebook.com/david.rogers.hunt David_Rogers_Hunt

      If the following characterization by Willy Wonka is unfair,… please give us specific ideas and evidence that this is so. If one is a pragmatist, what constraints does one recognize that socially sanctioned violence must observe to still be serving the interests of a free people. If an action is universally recognized as criminal, when done by any individual,… by what process does it become moral and righteous when sanctioned by a majority? If you or I go to jail for passing counterfeit currency,… why not the banksters/plutocrats also. By what sleight of hand do legal tender laws get written making it a criminal offense for a citizen to refuse fiat currency in favor of gold and/or silver for payment of private/voluntary debts.

      Curious minds want to know. Really.

  • Ma Jun

    Good episode. However, I think for many listeners, it would have been helpful had Bob elaborated a bit more on why exactly Krugman is fooling himself when he says “well, in case of a run on treasuries, the Fed can just print money to keep short-term interest rates low”.

    Now, while this is technically correct, it is practically impossible to do that without killing the dollars external and internal value (Bob alluded to that). Instead of a short-term boost through rising exports provided by a somewhat weaker currency, the US would experience the mother of all capital flights as domestic and international creditors alike realize that the Fed intends to keep interest rates suppressed forever.

    After all, why would anyone want to lend the US government money at zero returns if the Fed has to start the presses big time thereby guaranteeing to erode the dollars purchasing power. The only reason “investors” are still holding on to treasuries at current rates is that they trust that the rapid increases in the money supply we have seen since 2008 were a temporary phenomenon necessary to stop the Great Recession. When they realize that all the future holds for them is either (much) more QE or massive haircuts on their bonds, the race to the exit begins. And it will play out faster than Krugman can say “liquidity trap”.

  • Brian Mitchell

    I’m not sure talk of choppy financial waters and people drowning in debt was your best segue into the cruise. At least, you didn’t say the bond market would become shark infested.