I agree until one point - namely your constant calling on "Great depression" event i.e. "absolutely true" you predicting from this event.
We already discussed about it - since it is impossible to avoid the similarities with Great Depression.
AND of course - did not agreed.
Despite ALL similarities - there are huge differences. And if those differences are not considerate in your conclusion -they can NOT be correct.
Even if Mr. Garet Garrett - "A Bubble that Broke the World" (thank you, by the way, for book) - explain extremely good those events and all connections regarding politics, economy and strategical at that time - you refuse to see some simple things:
1. Economically - in this time both Germany and US were on the GOLD standard - which implied simpler and faster way in the deflationary spiral.
2. Politically - Germany was not only the greatest debtor at this time, but it additionally was forced to pay war reparations to the Allied countries. In mean time the CPD (Communist party of Deutschland) was very strong (actually the strongest Communist party in Europe!)... Russia was already - communist country!
3. Strategically - The "great danger" of "RED Germany" - was REAL threat! (Mr. Garrett talked repeatedly about it in his book!). Actually HE mentioned it (repeatedly!) as main reason that US forced France and England to remit war reparations and Germany's debt together with US!
All those events is impossible to blindly project on today situation!
And you exactly trying just that.
I find that you find some kind of "explanation" of your thesis that "The World will somehow pardon US debt". It is the (joking!) state of Russian finance minister in Davos something like: "If you can not handle FED - give it to us!"
I already said that this was a joke - and I think that even REAL discussion about this event - is doomed. Probability that this happened in the future is equal with - 0 (zero)!
I think that there is a one big misunderstanding in your statements about - deflation spiral.
It sounds in all your descriptions that it is "one evil" (exactly way as bankers describe it!)
Deflation is just an economic event i.e. correction of the mark.It IS necessary and good for economy
and even after short strain for citizens.
Bankers HATE deflation because they can NOT control it and earn on it.
Bankers like - inflation because they can rob the citizens easily.
BUT both deflation and inflation are just - economical "phenomena" and coming and go cyclically without government interventions.
Hyperinflation has on the other side very little to do with - economy. (even if in name you have the word "inflation")
It is pure - political event.
This is actually a governmental rob of the citizens - AND currency destruction.
In the last couple articles on your blog you giving your view :
Among world currencies, the US dollar is unique for two reasons:
1 * The dollar is the world's reserve currency, and many, many trillions of dollars are held by people, businesses and governments around the world. This effectively means that it's politically impossible to inflate the currency to reduce the debt.
2* There are hundreds of trillions of dollars in credit derivatives contracts and other structured finance securities (including mortgage-backed securities) in portfolios around the world. The values of the assets continue to be written down, reducing the amount of money (dollars) in the world.
These should be probably the "main reasons" for "impossibility" of currency destruction i.e. hyperinflation.
1 - the dollar is inflated (as all paper currencies) from the first day of its introduction. The "export" of dollar to the other countries of the World in the last 30-40 years cause unprecedented inflationary wave around whole planet... Even if we thought that 2 TRILLIONS $ is much money and that nation need years to save it (Chinese about 30 and Japanese about 50 years) - it is obvious that a bankrupt state of USA - CAN PRODUCE IT in just couple of months
!!! (Actually even bigger amount!)
So much about "political impossibility".
2 - It is possible, but lets see who has the biggest amount of those bed derivatives?
I hope that you have more correct values, but it is perhaps reasonable to suggest that at least 50% of all these are in the USA. Namely all those "products" were actually originally named "made in USA" and since USA was the biggest financial market - a conclusion that at least 50% of this garbage is hold by US billionaires and banks - could not be wrong.
It implied that the biggest impact of all those derivates will be on the USA.
On the other side, you suggest that whole planet will keep US$ as "universal reserve currency" despite a "huge production" in the last couple months (more than 2 TRILLIONS if it!)
Perhaps you have right - but I would suggest another possibility:- the other nations will accept their losses (for sure very big) AND try to cut off themselves from Titanic
Simple logic - they understand that losses are anyway huge - AND that US IS a Titanic and that only way is to try to escape from it.
On Mish side I found a very good explanation of possible scenarios:"...
Only three possible outcomes:
1. We inflate to the level of the debt, i.e. we "fulfill" debt obligations, but in mini-dollars
2. We take the hit, cleanse the system of excesses and move on. Result: deflation, bankruptcies, high unemployment, etc...
3. We disinflate veeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeery slowly, like Japan. Won't happen: the American psyche won't take 16-odd years of no growth. Different cultural mindset: you can't prick a balloon slowly here.
My guess: combination of 1 and 2. I would hope for a bias towards 2. Terrible for many, but healthier for the system long-term. Schumpeter's concept of creative destruction trumps Keynes, in my book. That's life, and progress, with all its faults and flaws.
I personally think that one more possibility appears... unfortunately:
4. US need to start - a "Great War"
(You can call it Third if you like)
I really hope - that the guys around the Obama will not persuade him to do this nonsense...On the end:
I think -considering other facts, that just those from Great Depression days - that none of these possibilities can be dismissed as impossible:
1. Civil war in US could be highly possible
2. Great World War caused by US could be highly possible.