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Debt Moratorium with 1%Tax? The Arctic Mouse that Roared
Backwardization of long standing may ultimately force cash settlements at premiums, increasing the demand for cash made scarce by a declining economy and money multiplier.
At the end of the day, market and economic forces are bigger than the Fed. It would not be the first US Central Bank to fail.
Some people recall gold and silver briefly hitting parabolic highs in 1980 at $850 and $50.
They then plummeted like a stone when margin requirements were increased, with Occidental Petroleum’s Armand Hammer and the Exchange Board Members some of the few lucky ones to be short.
The rising dollar might occur if we see a cotango Iceland scenario.
That could involve the failure of a second round of offshore and domestic financial institutions like AIG, Bear, Glitnir, Landsbanki, Lehman, Kaupthing, Stanford, European and even US Banks holding or selling declining US Treasury Bonds.
The inflated Euro has not been around so long that it is trusted by all.
Selling derivatives, bonds and stocks could drive a scramble for liquid paper physical dollars, pesos and pounds, as people lose faith in an overleveraged financial system and tapped out FDIC, FHA, OPIC, PBGC and SIPC, even if and especially if Congress raises the Federal Debt Ceiling one more time.
There are far more bad debts than good, as in cash, dollars.
The Fed, IMF and Treasury might be only too eager to supply enough helicopter paper dollars if they really had them, or the high speed printing presses could manage to keep ahead of defaults to keep the game going.
Any number of big international derivative banks holding derivatives and toxic assets submerging their balance sheets many times over might be candidates for a second round of face financial facts if the music stops again:
