With all due respect XIII, I am more inclined to believe this scenario is what is actually occuring in the US:
"The future is beginning to look easier to predict, thanks to a Fed that responds more to Jim Cramer than to the teachings of economists.
1. Employment statistics signal an imminent recession.
2. The stock market confirms an imminent recession.
3. The Fed keeps cutting interest rates to try to prevent this recession.
4. The dollar, for all the reasons much rehearsed on this thread, continues to fall.
5. Investors and banks outside the United States stop buying U. S. government bonds.
6. The U. S. Treasury has trouble rolling over the national debt and must offer higher long term rates.
7. The higher long term rates destroy the value of long bonds issued at lower coupons.
8. Steps 4, 5, 6, and 7 repeat themselves several times.
9. The price of gold goes above $2,000 and the price of oil to $200.
10. The general level of prices in the United States accelerates, reaching 15% annualized or higher.
11. The Fed is finally forced to emulate Volcker and start raising short term rates to prevent utter destruction of the dollar.
12. All the above causes a 70% or worse decline in the equity markets.
All this leaves out possible additional suicidal, anarchic, or dictatorial actions by the government."
