I agree with the Jim Jon scenario. The declines in stock and real estate prices do not mean money/wealth disappeared. It merely changed hands. Who’s hands is it going into? The US’s creditors. Many of them are suffering some write downs as the US private sector defaults, but with all the bailouts, most of the private defaults are being socialized and absorbed by the government and replaced with new government issues (treasuries and greenbacks). Who’s lending the US all this money to provide these bailouts? China, Saudi Arabia, Russia. You know, our friends. So as our “friends” continue to sit on the sidelines and suck more wealth out of America, the day will eventually come when they get off the sidelines and start divesting themselves of that sideline money. Will it go into our stock market? Doubtful. Our real estate? Only if they want to be our landlords. Into raw materials for building up their own countries’ infrastructures and looking after their own people. I think this is very very likely. China would be much better served keeping their people making TV sets but distributing them throughout China instead of sending them here so we can give them worthless IOU’s as compensation. I can not think of (and I have never heard offered) a realistic scenario in which China extends us an infinite amount of seller financing, nor can I think of (or heard offered) a realistic scenario for the US government to ever make good on its debt. So most likely, the sideline money will cause shortages and severe inflation at home when it finally, inevitably starts to move.
