DRUDGE: Ron Paul: "We Will Default Because The Debt Is Unsustainable"

[Bruno]

Links to video of his entire floor speech yesterday

http://drudgereport.com/

h xxp://www.realclearpolitics.com/video/2011/07/19/ron_paul_we_will_default_because_the_debt_is_unsus tainable.html

"When a country is indebted to the degree that we’re indebted, the country always defaults. We will default because the debt is unsustainable," Rep. Ron Paul (R-TX) said on the House floor today.

"If we don’t understand this, this default will not be because we don't send out the checks. We will send out the checks. It will be defaulted on because people will get their money back, or they will get their Social Security checks and it won't buy anything."

[sailingaway]

Please go through the drudge link so he is rewarded for posting stories about Ron: http://drudgereport.com/

Left hand column near top.

[Magicman]

I'm a little confused about this system of the debt ceiling. What does it mean when you default?

[GBurr]

A default is when you can no longer pay your creditors. At one point the United States promised to pay in gold at a fixed rate. So the dollar was in fact as good as gold. This changed when FDR made the "hoarding" of gold illegal. From that point forward government refused to exchange the citizen's FRNs for gold. The government did however still allow foreign creditors to redeem in gold. This all changed in 1971. Our creditors began to call our bluff and asked to be paid in gold. The US didn't have enough gold to pay out because they had allowed too many FRNs to be printed. In 1971 the promised rate was 35 FRN for 1oz of gold. When the United States broke that promise they committed a quasi-default. While they still paid their creditors back it was in devalued FRNs. Since the United States has a printing press through the FED the United States doesn't ever have to actually stop paying the bills. Instead they will just resort to printing their way out. At that point the risk to creditors is no longer default but inflation. Creditors will not buy treasuries at 3% interest while their is 9% inflation and as a result interest prices must rise or the United States will no longer be able to find creditors other than the Federal Reserve, however if interest rates rise it will make it even harder for the United States to pay back her debt plus interest and as a result the Federal Reserve will have to print even more money to buy more treasuries which only continues the debt cycle. Eventually no one will be willing to lend money to the United States and the dollar will crash.