[quote=CA renter]Let’s assume we go along with the above bailout (FDIC, MM funds, SIPC, PBGC, etc.) and let the rest fall.
What do you two think the consenquences will be? Who, exactly, will be hurt, and for how long?[/quote]
I think if this is handled correctly, we do a “Half Japan.” A couple of years of deep recession followed by 5 years or so of “below trend” real GDP growth as the ratio of debt-to-GDP drops.
If it’s handled incorrectly we get “Japan 2.0” which is something on the order of exactly what Japan when through in the 90s. Long recession, low growth, followed by recession, followed by low growth, etc. for a dozen years. We can’t get out of our own way.
We don’t have to go down the Japan 2.0 road because our bubbles (property and stock), although large, were small (as a % of GDP) compared to the Japanese property and stock market bubbles (which also both occurred at the same time). Also, I think our economic system, despite its many flaws, is better able to cope with these problems than was Japan’s. But, of course, I could be wrong.
