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NBCNews.com’s economics reporter John Schoen joined us for a live Web chat Thursday to answer your questions about the “fiscal cliff.”
Here’s one of John’s answers to questions from the live chat. (See below for the full Q&A.)
Andrew asked:
"Isn’t the effect on the average person much more dire than what federal programs might be impacted? Isn’t that a small view to take? Isn’t the real impact on the ultimate total devaluation of the dollar and the complete erosion of people’s savings?"
John replied:
"Take a deep breath, Andrew. Yes, it’s entirely possible that a deficit that spirals out of control undermines confidence so badly that investors stop buying Treasury bonds - or more likely, demand higher interest rates. Those higher rates – in theory – could spark a massive inflation that would erode the buying power of the dollar, wiping out savings and producing another nasty period like the 1970s."
"We’re not saying it won’t happen. But it’s not at all inevitable – and we’re not close to that point yet. In fact, the turmoil in the rest of the world has increased demand fro Treasury bonds – that’s why rates are so low. As bad as it may seem at the moment, the US economy is still – by far – the biggest and strongest in the world."
Here’s the full chat archive:
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the most significant effect will be the nationwide riots from the cut off of domestic programs, fuelled by the brain-dead "cut all programs 8%" language, preventing steering the budget cuts to one or two white elephants.
Hello folks, now move along nothing to see here! The bond bubble and the debt bubble are much more docile then the housing bubble, move along!
If you thought the Greece riots were "crazy" just wait until the global markets decide not to lend us any money and NO social security, NO Medicare, NO welfare, NO unemployment insurance, and NO grants are available.
The riots in the U.S. will make Greece riots look like a day at Disney World. And the sad part is the vast majority of the citizens of this country have no idea how close to an economic collapse we are. I am just glad I saw this coming 8 years ago and started stocking up on ammunition as well as silver and copper bars and bullion.
Because if our economy collapses our financial markets collapse with it. I am prepared - are you?
Refreshing interview that sounded pretty realistic. Far cry from the chicken little speeches we have grown accustomed to.
All is well, all is well. Listen to the violins to remain calm. Women and children first in the life rafts. The stock market will keep gaining 200+ points a week......
the only reason things aren't done in D.C. is because the GOP refuses to cooperate, denies doing it, because thats the way its always been.
John: Wake up and smell the coffee. Our economy is on the verge of collapse because for decades (both parties) we are afraid to say "no" to the citizens of this country. You want free stuff? Okay - here it is..... But no plan to pay for it.
This is not a GOP thing OR a Democrat thing: This is a GOP AND Democrat thing. Don't make our economic collapse political - it is not. We have become accustomed to spending more than we have but the "Day of Reckoning" is here.
We MUST start spending less than we have and if we don't decide as a country to do that then the global financial markets will decide that shortly and not lend us any more money. And THAT is when our country and economy collapses.
So take your head out of the sand and start yelling at BOTH parties.
And the dems idea of compromise? Do everything we want,anything less is obstructionism
But that is a false confidence. Financial markets can "turn on a dime" and all it takes is for global markets to no longer trust the dollar and an economic collapse can occur within months. And our government is currently doing nothing to fix it.
All I can say is "hold on tight" because the economy is a lot more fragile than people want to believe and it won't take much to collapse it.
So who do you guys think will win the LSU-South Carolina game tomorrow?