by Karl Denninger, Market Ticker:
It’s coming folks.
I know, I know, have a happy face. There are even those who think we should be “nice” to China, and more than a few who think that Russia wanted China to dump treasuries in 2008 and blow us up. Incidentally, if they had done it, it wouldn’t have blown us up – it would have blown THEM up. How many Treasuries did The Fed buy during that time to drive down rates on purpose through QE? Another trillion would have done nothing. The threat was always toothless; if you’re scared of a shark with no teeth, well, that’s on you. However, had they done it their own debt-stoked bubble would have suffered a crippling dislocation and odds are it would have taken down all of their banks.
The truth is that we should have enforced anti-IP theft and similar laws (yes, stealing is a crime) decades ago. We should have never granted sovereign immunity to OPEC and similar after the 1970s, but we did, and we also should have revoked that during the 80s and 90s when the mistake recognized, but we did not. As a result we have a cartel acting in manners flatly illegal in the United States, and yet neither side of the aisle will introduce and pass the legislation to revoke that stupidity and then criminally charge all members of OPEC. We could do that tomorrow, and damn well should. Not doing it has enabled a monstrous bubble in the oil patch with fracking and similar, and as it has several times through the previous decades this one will burst too, and when it does it will result in a monstrous problem right here at home, including the bankruptcy of many firms and huge state budget problems centered around oil-producing states.