Gaming Out a Sudden Stop: What happens if investors lose faith in America?

[LymphocyteLover]

from Paul Krugman:

I wrote a month ago about the possibility of a sudden stop for the United States. Despite growing pressure on both U.S. interest rates and the dollar, we aren’t there yet. I was, however, a disciple of the late, great Rudiger Dornbusch, whose students often quote Dornbusch’s Law:

The crisis takes a much longer time coming than you think, and then it happens much faster than you would have thought.

So a U.S. sudden stop still looks quite possible, indeed considerably more likely given the grotesquely cruel and irresponsible budget bill Republicans are trying to ram through. It doesn’t help that key players are being utterly dishonest about what they’re doing: House Republicans have been denying that the bill will increase the budget deficit, while Trump claims that “We’re not touching anything” on Medicaid, just eliminating waste, fraud and abuse (and somehow taking away health care for millions in the process.) Low-information voters may be fooled for a little while, but bond markets won’t.

But while I’ve already written about the possibility of a sudden stop, I haven’t said much about what such a stop, if it happens, would look like. So let’s game it out.

Pretty wonky economics analysis but needless to say, it's not good.
https://paulkrugman.substack.com/p/gaming-out-a-sudden-stop

This article is good too
https://paulkrugman.substack.com/p/a-liz-truss-moment-for-america