Saturday, October 10, 2009

Finger of Instability

Epic article on the financial world by John Mauldin called Another Finer of Instability. It starts a little slow but it's really great. Give it a real chance. He compares the financial world to grains of sand, and their inherent instability.

"Can we avoid this calamity? Yes, we can wrestle the US budget deficit back under some kind of control, close to nominal GDP or on a clear trajectory to get there within a reasonable time (say, a few years). As noted above, we can run deficits close to nominal GDP almost forever. But there is no political willpower to do that now. And so, the market will at some point force the hand of the political class. That investor in St. Louis, or China or (????) will decide not to buy government debt at such low rates. The avalanche will start. And everyone will be surprised at the ferocity of the crisis. Except you, gentle reader. You have been warned."