As a result, the debtor countries' bond prices would collapse, interest rates would soar, and banks would be threatened with collapse.
Growth collapsed, interest rates fell to near zero, and the government and monetary authorities engaged in unorthodox policies to boost the economy – namely quantitative easing – where the central bank created new money to buy back bank assets.
The worry is that new lending may not be prudent the government recently put pressure on banks to rescue Hynix, a chip maker.While there is a risk of a banking crisis in some countries, the more immediate concern is that, where financial intermediation has collapsed, interest-rate cuts may be ineffective as a way of boosting demand (again, shades of Japan).
Not until the Premier League is crippled by a combination of collapsing worldwide interest and a global financial meltdown will such a dream become viable.
The art market is in a particularly weird place right now, between the doomsday scenario of the art bubble exploding in our face, the stock market collapsing, the interest rate shooting up, and the emerging economies being annihilated on the one hand, and on the other hand the reports of collectors splashing record amounts of money on Pollocks and de Koonings".
In September 2008, the month when US investment bank Lehman Brothers collapsed, UK interest rates were running at 5%.
Industrial production was more than a third lower in January than a year earlier; spending in the shops has collapsed; overnight interest rates are at 50% or so; the IMF has withheld the second tranche of a loan because the government in Kiev is failing to balance its budget.
Those bonds have collapsed as interest rates soared, and they're being kept alive only by the fact that the investment bankers and underwriters who have been left holding many of them face conflict of interest charges if they try to recover all they think they're owed.
But it is hard to see the gold price collapsing unless real interest rates increase sharply.
Donald Trump's populist appeals are all the more remarkable given that the modern Republican Party has been the largest beneficiary of this collapsing of class interests.
