Ok, it's going to take some time to go through your post, including the long-forgotten messages I wrote when I followed Roubini and Stetser and their very good articles on imbalances more carefully [both of which I think you don't mention], and looked for financial rocks to crawl under while TEOTWAWKI lurked at my door like the night monsters of my childhood lurked under my bed.
Well, actually, having received a kick in the groin administered by a lady named Katrina, I have looked into TEOTWAWKI's open jaws already, but walked away, unscathed. As I knew that someday such a lady would knock on my door, I didn't invest in Louisiana real estate except for my residence, a good thing since I really don't have the stomach or talent for real estate.
But I'm getting diverted.
Maudlin's piece is thought provoking, interesting, and therefore worth reading and considering before discarding. It now reminds me a bit of a fat man eating chocolate cake for the nutritional value of the wheat and eggs used to make it or the last kicks of a drowning man as he tries vainly to float.
The long and the short of it is that a nation's debt is not backed by the value of its infrastructure or its citizens' assets or any other assets which the holder of the bill cannot get his grubby little hands on if the debt is not paid, as Maudlin suggests, but by the ability to pay in a currency that's worth something. And that ability is wholly dependent on the size of the debt and the nation's prospects.
But with enough debt in place, the banker becomes the debtor's partner, a simple thing I think the exporting creditors understand very well. And that is why I don't think we'll see a traumatic TEOWAWKI of the kind I think you expect. |
