News item: "Cables show China used debt holdings to press US"
Harvard history Professor Niall Ferguson says that history is not encouraging when it comes to the debt crisis: "Fiscal Fiscal Crises and Imperial ollapses: and Crises - Historical Perspectives on Current Predicament" (PDF slides, transcript here).
Specializing in economic history, Prof. Ferguson identifies the only six ways that nations can find their way out of debt crises, but he lines out the first three because only the UK accomplished them and only with the benefit of the industrial revolution, going on 200 years ago. Hence, there are really only three ways out today.
Presently, the US Congress is at no. 4, and that only very tentatively. The Fed has already been doing number 5, calling it quantitative easing, the second cycle of which will end in June. Since there is pretty much no chance of a "QE3" to follow, the fiscal pain of number 4 will increase after QE2 expires. And there is no way to ensure we don't get to step 6 to some degree no matter what we do.
As I said before, it's grimmer than you think. Related: Jeff Grundlach says that "The US Economy Is A Complete Horror."
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