What would happen if America defaults? Our prediction is that millions would be thrown out of work, housing prices would collapse, people’s savings would be wiped out, and we would be forced to retreat in war. Congress would be deadlocked, foreign governments would be calling for the establishment of a new international reserve currency, the Middle East would be in flames, Communist China and Russia would be flexing their muscles, and the unemployment rate would soar and stay above 7% for four, five, or six years or even more, and the Federal Reserve would be looking irrelevant.

If that sounds a lot like the past six years, it’s no coincidence. That’s because we are living in the midst of a default. America defaulted on the dollar in the first decade of the 21st century, and we have been seeing what a default looks like ever since. On the day that President George W. Bush was sworn in as president, the value of the dollar stood at a 265th of an ounce of gold. Then, in the years of war that followed September 11, 2001, America defaulted. It allowed the value of the dollar it issues as its unit of account to collapse to less than, at the moment, a 1,300th of an ounce of gold and, at one point, to below a 1,800th of an ounce of gold.

That’s a default. Oh, we understand that people don’t call it a default. That’s because we live in the age of fiat money. Under the law there is no definition of the dollar. If one takes a Federal Reserve note to the Treasury and asks for it to be redeemed, one gets another Federal Reserve note or metal slugs denominated in dollars or parts thereof and devoid of any specie, neither gold or silver. But the fact that people don’t call it a default doesn’t mean it isn’t a default. We made this point before, in January 2011, when an aide to President Obama, Austan Goolsbee, asserted that a default would be “unprecedented.”

There are serious observers who dispute that claim. Kenneth Rogoff and Carmen Reinhart, two distinguished economists, wrote a paper on defaults that has been widely quoted. They say it is possible to see America as a “sovereign default virgin.” But that’s only because they exclude “events such as the lowering of the gold content of the currency in 1933, or the suspension of convertibility in the nineteenth-century Civil War.” James Grant, editor of the Interest Rate Observer, alerted us a while back to the fact that the phrase “American default ” was current in the City of London after the gold devaluation of 1933. We would argue that America defaulted when, in 1971, President Nixon closed the gold window and ended the era of the Bretton Woods agreement.

In any event, there’s no shortage of voices ridiculing how silly it would be for the government to leave the debt ceiling where it is and cut spending instead of borrowing more money. Warren Buffett predicted on CNBC today that on the question of default Washington would go right up to the point of “extreme idiocy.” But in the age of default it’s getting ever harder to see him as a sage. The value of a share of Berkshire Hathaway has plunged to 129.2 ounces of gold today from 197.8 ounces of gold a decade ago. Not that it hasn’t invested in quality companies. But that’s another feature of a default. In a default, even your great sages look less wise than they once did.