Given recent debacles, investor confidence in US government debt might be shaky, and if eventually the market refuses to buy US government debt, financial catastrophe may ensue.
When the world loses faith in US Treasuries, interest rates on US Treasuries will have to keep going up until enough investors are found to buy them. Higher interest rates means higher interest on the national debt and thus greater federal budget deficits. That will erode confidence in US Treasuries even further.
A vicious cycle of eroding confidence and higher interest rates could lead to hyperinflation as the US government and the Fed flood the economy with more and more paper money to try keep the system solvent.
10 signs that Confidence in US Treasuries is dying & Financial Armageddon may be approaching
Peter Schiff: Commodities, Dollar, Interest Rates, Chinese Inflation, US Deficits
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