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On the issue of public debt, Washington is experiencing a 'Tel Aviv Syndrome." That's when the news continues to be so horrible, people become numb and erase all the bad from their consciousness. Picture the shopkeeper from years back in Tel Aviv, where the previous week a bomb killed dozens of people across the street The shopkeeper opens for business as if nothing had happened.
Today the world's public and private debt exceeds an incredible 300 percent of GDR We are at risk of succumbing to an ugly, downward, global mark-tomarket in asset prices. Yet the discussion in Washington fails to reflect the immensity of the threat.
Some money managers have a theory that this mark-to-market process has been underway for some time. Stage One was the 1990s Asian crisis. Global financial markets concluded that Asia's debt was dangerously high and its banks' balance sheets not reflective of reality. Global traders pounced. Interest rates soared, equity markets plummeted, banks failed, and currencies collapsed.
Stage Two is happening in Europe today.
Stage Three will eventually hit the United States. Washington policymakers seem confident America's public debt risk is years away. They believe mat the U.S. economy, with the dollar as the reserve currency, enjoys some immunity from these concerns. The central bank, moreover, can buy bonds to keep interest...