Six Of One

Megan McArdle has written an interesting piece pushing back against the argument circulating on the Right that Obama's (and Bush's) wasteful fiscal policies are risking hyperinflation, instead supposing that we will have to endure a fiscal crisis instead. She might be right, but it looks to me like a distinction without a difference.

The next big economic bullet we have to contend with is the threat that the government's access to credit in arbitrarily large amounts will be lost or reduced. As that happens, interest rates will rise and the federal government will have to make some very difficult decisions. Megan's argument seems to operate under the assumption that when push comes to shove, the feds will choose to cut entitlement benefits rather than attempt to inflate away the debt. If that's true we have certainly not seen any movement in that direction so far. I know if I owned long term Treasury debt I would be less than reassured by Megan. Furthermore the actual bondholders don't necessarily believe her either, their problem is that they really don't have any good alternatives.