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Monday, April 11, 2011

Averting Catastrophe: The Looming Debt Crisis

Ah, a chance for more strutting kabuki!!  Sadly, we are about to witness a needless meltdown in the world financial climate.  Think about the potential tsunami.  So, on day one, the vote comes in.  No one wants to raise the debt ceiling.  Sadly on day two the cascade of events starts.  First, the leadership (both parties) goes on camera and says they’re opposed to increasing the debt ceiling because it would be “irresponsible.”  Ok, good so far, right?  But, as day two wears on, guys like Geithner start a scream, backed by Bernanke.   They say, rightfully, that unless the debt ceiling is raised, there are massive consequences:  we won’t be able to pay our debts (the dollar starts sliding on international money market exchanges and China’s US ambassador calls the White House to find out what is going to happen), threats of reduction in the US bond rating start a small ripple around the world.  Meanwhile the Tea Partiers are thinking, gosh, we can be heroes, so we can’t go along with some charade based upon the bond value drop.  Day three is upon us.  No answers, just more posturing and extreme ideology spouting coming from the White House and the Hill.  More calls, but many of these from Wall Street market makers and bankers.  Face is already being lost almost everywhere, and the level of public frustration at ineptitude of our government is rising steadily.  The dollar drops more.  Suddenly, no one’s making deals internationally because the currency markets have become terrifying with no handle on dollar values.  China is sweating bullets.  Commodity prices are taking frenetic swings.  Gold rises rapidly to $2000 an ounce with no end in sight.  The world’s economy stalls.  Day four and suddenly official Washington realizes that what was a meaningless debate if the ceiling were increased, has become a major global destructive force that now is too late to rein in.
This fantastic scenario probably wouldn’t happen quite this fast, but, who knows?  With the incredible interconnectedness of international finance, it might be even quicker.
This is not the time or place to have the Armageddon debate about balancing this country’s books.

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