Friday, 22 May 2009
The cherries of wrath
...What will indeed happen can best be described as erosion. It may move pretty fast, but in the beginning it will be destructive only locally, in communities that can no longer issue debt because the federal government won't let them. The California government recently threatened exactly that: to take property tax revenues away from lower governments in order to fill the holes in its own budget. We’ll see lots of that, in many shapes and forms.
Come the end of summer, many if not most bets are off, and we will see a lot of defaults and misery, some in expected, others in completely unforeseen places. But the demise of credit ratings for entire major industrial nations is far too early a call: they simply have many resources that are as yet untapped, if only it's your property taxes, sales taxes, whatever it takes, that now run your towns. Illegal, you say? Who makes the law?
In the fall of 2009, there'll be no more green shoots. They'll be needed just to feed people. And the big fall will start, for sure. But for the main implosions of whole nations, you’ll have to wait till next year. Just as well.