Tuesday, July 31, 2012

What’s Going to Happen When the Treasury Market is Finally Shattered

David Stockman explains the developing crisis. It should be noted that "austerity" is not the only option. Default on government debt is another option, which would put the pain on those who financed the debt in the first place:


  1. I would argue that austerity is the only option. Default without austerity won't solve anything, plus the default would hopefully keep others from loaning for new spending which would force austerity.

    1. Wrong, nothing will be solved without default. Lenders have to be punished for lending to corrupt governments. Rewarding the lenders via the givernment making tax slaves on the lenders behalf will Inly make things worse.

      If defaults occur then governments will be cut off the gravy train and forced to cut spending. The "austerity" you refer to is just euphemism for tax increases enforced by harder core world wide police state.

    2. Austerity is cutting spending. Having to default was not my point. My point was that just defaulting does nothing. A debtless government would just start the spree immediately to whatever extent it can. If the lenders will no longer lend, the government will be forced to either cut spending or increase taxes. Increasing taxes will kill off the tax base.

      Either way, austerity is required regardless of the state of default. As Stockman (and Ron Paul) correctly says, you can't keep living beyond your means.

  2. If prices are falling hard, the fed can print as fast as it takes to stop it. After seeing the feds recent actions and the political will of the "leaders" in washington, I don't see how they would ever let something that they can create, be the reason for their downfall.

  3. What the Fed can (and did) create is already the cause of their downfall because they created too much of it over a long period of time. The Fed's problem is that it cannot do otherwise, because money (credit) creation is the entire reason for its existence, and is, in the end, its only (temporarily) viable policy.