A Default at the Church Picnic

Written By Christian DeHaemer

Updated May 15, 2024

This past weekend, I found myself at a church picnic. I’m not sure there's anything more American than sitting under a pavilion at a state park with a potluck laid out on picnic tables, burgers and dogs on the grill, engaged in idle chitchat while you wait for the softball game to get organized.

It was one of those idyllic Maryland spring days with low humidity. A soft breeze blew through the massive wall of dark green foliage that edged the fields and playground.

The food was fantastic. There were Swedish meatballs and collard greens done the right way, as well as a Thai curry dish, all lined in neat rows and vying for space amongst the potato salads and pies.

It wasn’t a collegiate crowd. No one went to Wharton, but the assemblage was overrepresented by business owners. One old guy told me he had created a maintenance business for convenience stores on the East Coast, saying he didn’t want the headaches of residential. His daughters took over and expanded it into the Midwest. Another guy ran a car dealership, and a third retired after selling a landscaping business.

This is the modern equivalent of Thomas Jefferson’s yeoman farmer ideal. Old Tom had envisioned an America full of honest, independent workers as opposed to a small group of elites and a vast, unwashed mass of the poor.

For a long time, America had a thriving middle class, but starting about 50 years ago, it started getting squeezed. Some people moved up, but many more moved down… and it mostly has to do with the U.S. going into debt and defaulting on the dollar.

A quote often attributed to Alexander Fraser Tytler states: 

A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largesse from the public treasury. From that moment on, the majority always votes for the candidates promising the most benefits from the public treasury with the result that a democracy always collapses over loose fiscal policy, [which is] always followed by a dictatorship.

And so we find ourselves today in a place where the political elites are arguing over the debt ceiling. The newspapers say it is a bit of a political theater that has happened 80 times in this country, and it always ends with the shocking conclusion that, yes, the government will spend more money…

But not before it trots out some pens and sheets of paper filled with jibber-jabber for everyone to sign and the various lawmakers have their picture taken. "We have saved the country from default," they will tell each other. "We did it! You are saved."

But they didn’t do it. The definition of default is the failure to fulfill the contract to pay back a loan. Yes, you can default by simply not paying back a loan, or perhaps you stop paying the interest. Another way to default is to pay back the loan with a currency that is worth less than when the loan was made.

This is what the United States has done since it went off the gold standard in the 1970s. Inflation is a form of default, and inflation and companion debt destroy the middle class. This is because the rich don’t pay their fair share because they are the ones who write the laws. The poor don’t pay because, by definition, they have no money.

It’s the middle class that gets stuck with the bill through a weak currency and higher inflation.

But in the short term, Wall Street and the media will talk up the new debt and more spending as a win for democracy and the party will continue just a bit longer.

All the best,

Christian DeHaemer Signature

Christian DeHaemer

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Christian is the founder of Bull and Bust Report and an editor at Energy and Capital. For more on Christian, see his editor’s page.

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