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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory

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To: Crusader who wrote (37119)	7/27/2005 3:24:57 PM
From: futures speculator	Read Replies (2) of 110194

I think the third alternative is the best one. Let the piper be paid! OK, let's think about this scenario for a minute: A deflationary depression in US, where asset prices will drop by 50% (conservatively). Dow 5000. Most US financial institutions will go bankrupt. And many households will become debt-slaves. How do you think the Federal tax revenues are going to be? How is the state going to pay interest to the foreign holders of the accumulated debt? If all the income will be spent to pay the debt, how will the state fund healthcare, education etc? Remember we're talking about US "living beyond its means" for a couple of decades (most of the excess was during the last 5-6yr). Spending freely, but postponing the bill for the next generation. In my country, Greece, the foreign-held debt was denominated in foreign currecy, so it couldn't get inflated away. And we pay the piper. US controls the currency, in which its own debt is denominated. And I think (along with many others, Buffet said so many times in public articles) it's almost certain it will inflate away part of those debts.

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