Marketwatch: Just default already and stop dragging it out

Marketwatch is out today stating the obvious with an article entitled "Massive Default Is The Best Way To Fix The Economy".  In it, the author goes on and on about how it would be a tough solution but there's no other real choice blah blah blah.  In other words, 2 pages of partial truths and no real solutions.  First, the author is correct: the problem is the debt.  It is not a U.S. problem but rather a global problem.  Second, yes default is what happens when people (and sovereigns) are allowed to get in over their heads in debt.  And yes, the author reminds us that it's just as much the lender's fault as the borrower's fault.  But then he goes into the half truth of how putting candy in front of children never led to anything good:
 "There’s no point telling people not to borrow money. They always will. I have yet to see a Wall Street executive turn down free money. I have yet to see a company in an IPO say, “Don’t give us so much money!” People like money. They will take as much as they are offered."

Well, no $hit Sherlock.  Really?  But what he conveniently does not say is "... and on the other side of the coin are banks and sovereigns who can create credit out of thin air which spends as if it were real money.  No politician or federal reserve ever said "we need less credit" or "we need less inflation"."

So what Marketwatch is really pointing out is that the fractional reserve banking system is just a fraudulent load of crap waiting to happen.  It is fraudulently beneficial on the borrowing side to leverage up because if they win then they win big and if they lose then nothing too bad happens to them.  And it is fraudulently beneficial to leverage up on the lending side because until the debt Ponzi collapses you get a percentage of every outstanding loan.  You in fact get to earn interest and fees on money you never earned in the first place.

Fractional reserve lending is a complete scam but since con men on both sides of the credit/debt coin were making money in the deal nobody wanted to shut it down.  But now that the credit is collapsing and all that is left is the debt, suddenly the right thing to do is just default.  BUT THEN WHAT?  Well, the Marketwatch article sort of leaves that open ended as in "we can just start up the scam anew after the collapse".

The sad part about this is that all of the money that is extracted from the system by the fraudulent borrowers and the fraudulent lenders has to come from someone.  But the way the shell game of transfer-the-debt is played, most people don't know that the debt from these con men is getting transferred to them.  The hard working, middle of the road conservative, middle class workers who want nothing more than to work hard, play hard, enjoy their families and to live honestly are stuck paying the bill.  Yet they don't know enough about economics to figure out that the culprit of all of this pain is fiat currency and fractional reserve lending.

So, Marketwatch is correct.  Default is coming at all levels.  But what we need to do after the default is to actually learn something from it.  We need to shut down the scam of fiat currency and fractional reserve lending so that the con men can't simply start their game up anew.  In fact, I wrote a post back in April of this year that outlined the need for a default but also added other necessary reforms to ensure that the pain which we will be feeling is not replicated some years down the road for our children and their children.

Nothing can be truly fixed until people figure out that fiat currency and fractional reserve lending are nothing more than a confidence game scam which affects everyone.