Yesterday I presented my forthcoming budget policy paper, The Long-Term U.S. Fiscal Gap: Is the Main Problem Generational Inequity? [to be posted on SSRN & linked here shortly], at Loyola Los Angeles.
Ted Seto offered excellent comments in which he showed, to my surprise, that I am not at the most pessimistic end of the spectrum concerning where U.S. budget policy is headed over the next 10+ years. He suggests that I add to my "doomsday scenario" (the ugly mess if the U.S. tiptoes too close to outright default) both (a) the collapse/replacement of the dollar as the worldwide reserve currency, clearly to our detriment and to that of other countries as well if a good replacement currency (such as the Euro) doesn't seamlessly emerge, and (b) the geopolitical consequences of economic troubles that might lead to the rise of extremist political regimes in hard-hit countries around the world, a la what happened in the Great Depression, only now with widespread nuclear weapons.
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