I'm not prone to apocalyptic thinking. Life goes on for most of us no matter what unpleasant surprises come along. Here's a surprise that won't make life better for Americans. Bipartisan deficit cutting talks have broken down, and the financial markets are starting to price in the possibility of a U.S. debt default.
It didn't have to be this way. Politicians could have bit the bullet the bullet in countless ways but grandstanding for next year's elections was more important. World War I started with a similar series of strategic miscalculations. Now the global bond market will find out just how risk-free Treasuries really are. Mutual funds and state pension funds that have to sell off Treasuries in anticipation of a ratings agency downgrade will be the first dominoes in a worldwide cascade.
The long-dreaded run on the U.S. dollar is almost here. Brace yourselves.
