I guess there will be more of this from the establishment as Dr. Paul climbs in the polls, but this one runs Congressman Paul's views through a distortion mirror at least a dozen times and comes out with these conclusions:
[Ron Paul]argues that this [a default] will mean, as the President, Wall Street and the Treasury Secretary argue, an increase in interest rates, not just for the government, but for regular Americans. The cost of car loans would go up. The cost of house loans would go up (and the values would probably come down), as would the monthly payments for people with adjustable rate mortgages. The amount small businesses pay to get loans to expand their business would go up....Nowhere does Ron Paul say that defaulting on the U.S. debt will result in higher interest rates in the private sector. In fact, getting the government out of the debt market will increase by trillions the amount that is available from the markets for the private sector.
So to summarize, here is what Ron Paul, who may yet win the biggest GOP polling test of 2011, is advocating: Less short term employment, slower economic growth, and higher costs for things that Americans buy regularly.
Interest rates are currently distorted downward by the Federal Reserve for the benefit of the banksters, and getting the Fed out of the way would likely result in the market pushing rates higher, but a U.S. government default would do nothing but result in downward pressure on private sector rates, as the lack of governement borrowing would stop the massive crowding out of the private sector now being done by government borrowing.
All the new funds available for the private sector (not sucked up as they are now by government borrowing) would, contrary to Scherer's contention, result in a booming economy built on real savings that is not subject to the volatility of the business cycle.
Scherer is also way off on his contention that a default would result in higher prices. Where he gets this theory I have no idea. There is no economist on the planet that I am aware of that contends that a U.S default would be price inflationary. Without the U.S. Treasury issuing billions in new securities monthly, the Fed would have one less reason to print new money and cause price inflation.
Scherer's Swampland attack on Ron Paul is a horror. It is the most distorted attack on Ron Paul to date. The establishment is obviously getting desperate with this kind of attack that doesn't even belong in a swamp, but in a garbage dump.