Default We Must, Defaulting We Are

I have been saying that a US default is inevitable (in fact I think it is already happening).  Well, now  monetary and credit luminary (and lyrical, thesaurus-driven writer) James Grant of Grant's Interest Rate Observer bolsters my view.

Grant's focus is, of course, the flavor of default preferred by politicians the world over - inflation.  The truth is that the US has technically defaulted before, but has largely given that up for non-technical defaults.  In fact, you could say the US is always in a mode of continuous, albeit slow and imperceptible, default.  We are defaulting as we speak, as we must.  I think the powers that be are intent, at least for awhile, to hide/deny our inflation as best they can.  The vehemence with which the Fed and its acolytes justify Quantitative Easing by citing "low inflation" is growing by the day.  They aren't quite up to Argentina standards yet but give it time, there appear to be cracks in the dyke.

And talk about abused spouse syndrome.  Here is Grant on the US's foreign creditors:

The lighter Roosevelt dollar did service until 1971, when President Richard M. Nixon lightened it again. In fact, Nixon allowed it to float. No longer was the value of the greenback defined in law as a particular weight of gold or silver. It became what it looked like: a piece of paper.

Yet the U.S. government continued to find trusting creditors. Since the Nixon default, the public’s holdings of the federal debt have climbed from $303 billion to $11.9 trillion.

That's the abused coming back for more alright!