Let me pose a different question:

How does a middle aged relatively well-to-do person protect himself and family against this scenario?

How does one establish assets overseas? Is leaving the country the only way?

I really don’t feel like pushing a wheelbarrow of dollars to the store trying to buy a loaf of bread. If there even is one to buy.

reg: “the road to credit failure for the US Government.”

I can only see the road to inflation and hyperinflation. What do you exactly mean by “credit failure”? Long bonds not auctioning? Well, you always can have the Fed handing in a bid.

Did I miss an article of yours discussing this ?

Point is, damn you do; damn you don’t. So what is the truth?

So let us say, the truth is as some other readers have pointed – “the game is whether USA Economy turns corner for good on the back of debt financed bailouts before America fails to get any more loan”.

Then the question is what else to be done to avoid such an Armageddon (as if the current one is not one)? Is the punishment of sever recession or even another Great Depression would avoid it? Those who advocate that such a punishment is essential (I assume that is what David is advocating); can with straight face tell us that ‘yes, then there is the land of plenty after crossing the valley of pain’? And if they are not able to predict so; why undertake ‘fear mongering’ then?

Can we say that all this ‘linear’ analysis forgets fundamentally non-economic (say political or psychological or say simply ‘following’ of Obama) possibility of Americans changing their habits or adjust life style as needed without there being essentially economic incentive only? Say Americans start going after more ‘savings’ as needed; undertake rational changes in Health Care; throw away ‘oil based lifestyle’ and wind down costly wars. Will it not help? Is it impossible?

If not, then what works? Without telling that, this whole commentary does not become credible.

When all is said and done, that really is THE question, isn’t it? The strategy being pursued is a)throw endless money at the problem, and b)deal with inflation if/when it comes.

If the US govt had an infinite supply of money, then reflation would certainly “work” – with the obvious consequences.

But it doesn’t have endless money. So I think your question is really what it all boils down to, or to put it another way, will this strategy succeed BEFORE the US maxes out it’s ability to throw more money at the problem?

Since the entire world depends on the USA’s economy, they have a vested interest in not rocking the boat, and allowing the Fed to print as much money as it wants without saying “boo”.

David, what would it take for China and other countries to stop lending to the USA? What are the circumstances that would lead that to happen? Wouldn’t they just ask for a higher rate of return rather than cut them off completely?

Shorting treasuries and/or the USD seems to be THE way to play all of this. No?

I am not the sharpest tool in the shed, so will someone please explain to me how the US government bailing out Citigroup is a GOOD thing?