Default Is Not the End of the World

The Only Way Forward Is to Accept Reality: Default Is Not the End of the World
by Charles Hugh Smith

http://www.oftwominds.com/blogjune11/accept-reality-EU6-11.html">of two minds

The catastrophe isn't default, it's "extend and pretend."

(snip)

The Eurozone debt "crisis" is nothing but another credit cycle, in which debt expands beyond the carrying capacity of consumers and economies. Debt then contracts as uncollectable debt is written down; borrowers go bankrupt and their remaining assets are auctioned off (if they put up collateral; if not, then tough luck, lenders, you blew it and will have to suck the entire loss). Insolvent lenders are also declared bankrupt and dissolved.

There is absolutely nothing unusual about this cycle. Impaired debt is renounced and the system is purged of bad debt. Once the economy has been cleared of garbage, so to speak, then everyone can stop pretending and start dealing with reality. Businesses will be able to start up in a transparent and open market.

The world does not end. Life goes on. We were threatened and bullied in 2008 that the insolvency of the U.S. financial sector would trigger the end of civilization, but it was just another lie: life goes on.

The "doom and gloom" view (of which I am proponent, I suppose) is typically categorized by the Mainstream Media as a stubbornly negative insistence that "the world will end." While there is certainly a contingent who espouse that, in my view "doom and gloom" is not predicting the end of the world--it's just predicting the end of the Status Quo.

Read more: http://www.oftwominds.com/blogjune11/accept-reality-EU6-11.html

Is a very messy end to the current system, and it will set the entire world economy back several hundred years.

That is how the dark ages started, if you'd care to read history; the fall of the Roman empire.

Civilization can vanish; others have before it. However, this time around we will be dealing with global warming, the end of fossil fuels, and the extinction and acidification of the oceans. That will, if we are not careful, mean our end as well. Hanging on to the current system until we can see if we can find a way to deal with catastrophe is a good idea.

... that EVERY TIME a debt crisis is papered over with extend and pretend tactics, the resulting crash is that much worse.

There isn't enough money in the world to pay the absurd levels of debt and "weapon of mass destruction -- Buffet" notional derivatives that are out there.

We can kick the can for a long time, but every month we delay dealing with reality just increases the bang when the implosion finally happens, and you can check your history on that as well.

But if you want to see a resounding crash of the entire global market, just go ahead and keep the debt ceiling where it is.

And yes, I know about the implosion that is coming will kill the entire financial system. Instead of refusing to raise the debt is going to give no time to fix the system. I suggest that simply deliberately knocking the system down is not the way to go. Instead, regulate the banks and the insurance system, move to a more socialist system, promote sustainability in all things and get alarmed about the damage that is happening NOW.

This is one of the most short sighted and stupid suggestions I've ever seen, making it utterly impossible to let the American economy down easy and limit the damage. Throwing the world into a depression is NOT the answer to the problem, and it's damn selfish. Moreover, it allows the top 1% to take what assets they can steal on the way out the door.

.. that the debt limit not be raised. I'm not talking about a US sovereign default, although one is in the cards eventually, it's simple math. That default could be accomplished with inflation, which they are trying like mad to create, but it is not in anyone's interest for the US to just throw up it's hands and refuse to make good on its debts.

I've suggested however, that the banks CANNOT be bailed out, and our attempts to do so will only result in a bigger problem.

Mark my words.

People, get ready for it.

spot on, that.

The longer it's extended the worse it will be.

Good bye Middle Class and Retirees. Too many hungry people negates any sense of safety even for the ultra rich.

:puke:

... with Michelle Bachmann is idiotic.

And all that implies.

practically plagiarism :rofl:

:eyes:

He's full of shit... every noted economist in the world has yelled repeatedly that this will be a major disaster.

... between being wrong and being an idiot. He's not an idiot.

into public, sovereign debt

the banks should have been allowed to fail

and trigger similar collapses in Ireland, Portugal, and maybe Spain. Perhaps even the UK too (highly exposed to Ireland). It'd be worse than Lehman Bros. It's worth trying to find a way to share the pain without crashes in the most vulnerable areas. There are solutions between 100% default and making the Greek people take all the debt.