George Washington has a nice piece on China’s recent insult to the credit quality of American sovereign debt, while Calculated Risk hosts a series on sovereign debt default risk worldwide, estimating the chances of default over the next five years in a really scary scenario.
Let’s hope that when the debt bombs begin to go off that Washington resists the temptation to start setting off the real bombs. The problem is, many other countries—including Japan—are likely to default before we are. That’s the bad news—it means that America participation in what I have called the Supernova of Bretton Woods II (fiat money) will not include outright American debt default and forgiveness, implying that an inflation will be necessary to depreciate the value of the debt (and we’ve got lots of consumer and business debt to inflate out, too; we’re near record levels of total debt/GDP).
In a deflationary environment like we’re in now, history shows that about the only way to get an inflation going is to go to war.
The two links above suggest to me that the risk of unprovoked or false flag “justified” attacks by the American eagle is very high right now. My research on the sinking of the South Korean submarine leads me to believe that someone other than the North Koreans did it; the North Koreans denied it, and the torpedo used was available on international black markets. the international commission was a sham. My guess is that the Israelis did it to get a war going somewhere, so they could pile on with their intensely desired bombing of Iran in a general attack on the “axis of evil.”
Resist Stupid Wars that are bankrupting our country and making us weaker as a people. Let your elected representatives know how you feel.
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