Monty Pelerin's World

Economics, Finance and Politics Through The Prism of Classical Liberalism

Train Wreck on the Way

There is little doubt in my mind that we are heading for a train wreck. The timing and catalyst that trigger this reaction are much more difficult to determine. The potential catalysts are many, any one of which would trigger the wreck. A dollar crisis or a Treasury fund-raising crisis (likely to appear simultaneously) are probable. Or, it could come via an unexpected, virulent outbreak of inflation from all the dry tinder the Fed has injected into the system. Just the opposite of that, a deflationary collapse, could occur although I think this scenario less likely. (It is likely that the real economy will continue to decline, however, perhaps even violently.)

Or, it could come, once again, from the financial sector. Banks and other financial institutions are nowhere near healthy. The housing crisis hasn’t ended and bank collateral against mortgages continues to deflate. We do not know how bad this

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