Hmmm.
The Federal Government is about to learn that, like Bush in 2001, their estimation of taxes coming in is way, way off. Big over estimation. That will add a lot more to the debt.
Then we will all learn about the pensions that are failing - and the government is legally obligated to cover them.
Oh, and state and local governments will have to be bailed out, as well.
Then comes the massive inflation.
Then China has to ask itself, at what point does the cost of buying Treasuries outweigh the cost of not buying them? And they realize they can't do it anymore. Off they go.
After foreign withdrawal, comes capital flight by domestic investors. This happens instantly. Investors are already set up to liquidate bond, stock and other funds to move into their foreign accounts with a phone call. They will all do so at the same time, a massive domino effect. The government will slam the door shut with capital controls, but it will be too late. Damage done. A lot of money gone. All those CEO's who caused this crisis are gone with their cash.
Then comes Sudden Stop. Credit contracts, interest rates rise, the dollar falls, and economic output drops suddenly as businesses close and unemployment spikes. Unemployment up around 30%.
That's Germany in 1930, Argentina in 2001, South Korea in 1998 and Mexico in 1995. It's no bueno.
The only difference is, the rest of the world helped out Argentina, South Korea and Mexico. Who's going to help us?
The Federal Government is about to learn that, like Bush in 2001, their estimation of taxes coming in is way, way off. Big over estimation. That will add a lot more to the debt.
Then we will all learn about the pensions that are failing - and the government is legally obligated to cover them.
Oh, and state and local governments will have to be bailed out, as well.
Then comes the massive inflation.
Then China has to ask itself, at what point does the cost of buying Treasuries outweigh the cost of not buying them? And they realize they can't do it anymore. Off they go.
After foreign withdrawal, comes capital flight by domestic investors. This happens instantly. Investors are already set up to liquidate bond, stock and other funds to move into their foreign accounts with a phone call. They will all do so at the same time, a massive domino effect. The government will slam the door shut with capital controls, but it will be too late. Damage done. A lot of money gone. All those CEO's who caused this crisis are gone with their cash.
Then comes Sudden Stop. Credit contracts, interest rates rise, the dollar falls, and economic output drops suddenly as businesses close and unemployment spikes. Unemployment up around 30%.
That's Germany in 1930, Argentina in 2001, South Korea in 1998 and Mexico in 1995. It's no bueno.
The only difference is, the rest of the world helped out Argentina, South Korea and Mexico. Who's going to help us?
VIEW 7 of 7 COMMENTS
jeremyejones:
Where are my pants?
fragilesong_:
The economy makes me want to cry.