Assume that the U.S. government announces it is going to issue enough money in the next three days to pay off the federal debt of $31 trillion. Yes, the debt would disappear, but the dollar would lose almost its entire value.

What do you think most people would do if they knew that the value of the paper dollars they have in their wallets and the money they have in their checking and savings accounts were about to become worthless?

Over the last half century, many countries, including the Soviet Union at the end and those in Latin America, Africa and elsewhere, have experienced hyperinflation (causing the value of the money to become worthless in a matter of weeks or months).

The good news was the hyperinflation caused the real value of the debt that was held in their own currencies (not debt in foreign currencies) to almost disappear. The bad news was the citizens of the countries that experienced hyperinflation were impoverished, as were the holders of the government debt.

The U.S. government has been slowly destroying the value of the dollar through inflation ever since it created the Federal Reserve (whose job, in part, is to protect the value of the dollar) in 1913. The U.S. dollar is now worth about one-30th of its value in 1914 — which means it takes on average $30 to buy the same amount of goods and services that one dollar bought.

For some industries, such as communications and computing, productivity gains have far outstripped inflation, and so real and nominal prices of things like phone calls have dropped sharply. In contrast, the education “industry” has shown little productivity growth, and both the real and nominal cost of teaching a student to read has actually risen in many places, as has the cost of a college education.

The reason people try to acquire and hold U.S. dollars and other government fiat currencies is they view them as zero-interest bearer bonds, enabling them to buy goods and services at some future time. Traditionally, banks and other financial institutions would pay those who deposited dollars with them an interest rate higher than inflation, thus making the holding of dollars costless.

But that long-standing implicit agreement — “you hold and use my money, and in exchange pay me more than inflation” — has broken down and, worse yet, is unlikely to be reestablished.

The underlying problem is government spending and dishonest government accounting that fails to adjust for inflation, which is particularly destructive to the tax treatment of depreciation and capital gains. The political class is unwilling to reduce spending to a level that can be supported by a nondestructive level of taxation.

Approximately two-thirds of federal government spending is on so-called entitlements — e.g., Social Security, Medicare, Medicaid and so on. Every honest person with rudimentary math skills knows it is all a Ponzi scheme — based on the false assumption that people would breed rapidly and die early. For decades, the dishonest political class kept “kicking the can down the road” — which has run out.

Truth tellers get pilloried by dishonest politicians (even in their own party) and a dishonest or ignorant press for daring to speak the truth. Former President Donald Trump is running ads against Florida Gov. Ron DeSantis with the claim that Mr. DeSantis wants to increase retirement ages (which could be part of necessary reform).

So, “Mr. Trump, Mr. Biden, and the rest of you who appeal to ignorance, what is your solution?” They all have none that they dare speak; so, we are left with ever-growing deficits — meaning more inflation and economic stagnation.

This fiscal year, the U.S. is likely to have a deficit equal to 7% of gross domestic product ($1.75 trillion), on top of total debt of more than 100% of GDP. Economists long had a rule of thumb that deficits of more than 3% of GDP were not sustainable over the long run. Yet no political leader, including deficit-hawk Republicans, has a plan for the necessary level of entitlement reform.

The current big lie out of the Biden administration and the Fed is that they will bring inflation back down under 2% — which they intend to accomplish by imposing higher interest rates — which will kill any economic growth, which will then increase the cries for more spending to reduce the hardships of the recession, which will further increase the debt, until the merry-go-round collapses.

Or the administration could go full out to increase growth (more goods and services) by radically reducing regulations, including abandonment of the Green New Deal, and cutting tax impediments — but they are too cowardly to buck the know-nothing interest groups.

So, what is a person to do, knowing the dollar will buy less and less? Step 1 is to move wealth out of dollars in legal ways to ensure it is not grabbed by the various tax Gestapos.

Step 2 is to acquire real assets (copper, aluminum, nickel, oil, lithium, and other one-world-price commodities) that clever people are figuring out how to liquefy, homogenize (to make trading and barter easy), and keep secure.

Step 3 is to live as good a life as one can, while waiting for and then supporting the counterrevolution of reasonably rational people regaining control.

• Richard W. Rahn is chairman of the Institute for Global Economic Growth and MCon LLC.

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