It’s almost cognitive dissonance the way the financial markets go about their business. Everyone knows that the United States is bankrupt. Everyone knows that US Treasuries are a bubble. Yet, it’s the first place everyone runs to when things start to get messy.
For now anyway…
Is it decades of Keynesian economic misinformation? The herd mentality? Constant central bank interventions? The search for a market large and liquid enough to absorb an ocean of digital money at the stroke of a key?
Does it even matter why?
Europe is just the opening act. After that Japan and China are all set to perform. But the real show is the United States. The largest economy in the history of the world and the largest debt in the history of the world. Where does that ocean of digital money go when it is running from US Treasuries and the dollar?
The real crash, as Peter Schiff reminds us, is still ahead of us:
Schiff: “We can’t cut spending fast enough in Washington. The more we cut the better…and the sooner.”
Host: “But…I mean…pragmatically that’s not going to happen. You know it’s not going to happen. I know it’s not going to happen.”
Schiff: “I know. That’s why I wrote this book. That’s why we have to brace for the impact. We are going to see a sovereign debt crisis, a currency crisis in the United States that’s going to dwarf the financial crisis of 2008.”
Is another rush to gold imminent?
Just to add to that thought, here are a couple of pearls of wisdom from CNBC’s Steve Liesman in which he argues that the US needs to take charge of the European bailout.
“The US should lead the world in creating a large pot of money available to the Europeans to recapitalize their banks. A $2 or $3 trillion fund should get the market’s attention.”
“As the TARP program showed (only when it comes to the banks) if you make enough money available quickly enough, you can stem the tide and it won’t cost you a penny.”