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Politics : Stockman Scott's Political Debate Porch
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To: Mannie who wrote (24936)8/9/2003 5:33:38 PM
From: Rarebird  Read Replies (2) of 89467
 
If the Bush Administration proceeds blindly on its chosen course, they will eventually blow up the US financial system as well as the US Dollar. This will be delayed to the extent that other parts of the world decide that it is too dangerous NOT to fund the US deficits. The problem is that national savings are insufficient for this task. The alternative is for the rest of the world to have their Central Banks create the additional funding required out of thin air. If some of the major players (Japan and China stand first in line) do this, they could end up by blowing up their own financial systems in the process. The final choice is one in which the rest of the world finally decides that they cannot continue to fund the US deficits, so they simply stop.

If THAT happens, the US Treasury will be faced with the necessity of cutting back its deficit spending to 5.1% of US GDP (causing a huge US economic contraction), or selling this amount of debt paper to Americans, or sending it to the Fed to be monetized. Selling the debt internally would push interest rates up even faster than they are already rising. Sending it to the Fed would be the first step towards hyper-inflation. It is hard for me to adequately describe the global enormity of the stakes. The one certainty is that the Bush Administration is leading the USA, as well as the rest of the world, towards a global economic precipice of vast and assured future world wide economic calamities. The means chosen by the US cannot gain the ends sought - it's that simple.
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