A Moment of Clarity will occur

Will there come a day when the bond markets collectively realize that Treasuries will never ever be repaid—cannot be repaid? And when that day comes, when that Moment of Clarity falls on the markets, will it spark a panic?

In two previous posts, I essentially said “yes”: “Yes” to a collective Moment of Clarity, “yes” to a panic in Treasuries. I further argued that such a panic would lead—inexorably—to a flight to safety in actual, physical commodities, which would then result in a massive hyperinflation that would kill the dollar dead.

What is most important is, I do not know when such a Moment of Clarity will occur—but I have no doubt that it will occur. Inevitably, unavoidably: Treasury bonds are bound to collapse, triggering the sequence of events that I have described.

-- http://www.zerohedge.com/article/guest-post-termite-riddled-house-treasury-bonds

Update: Here is another article by the same author, Gonzalo Lira, explaining how the crash will occur - http://gonzalolira.blogspot.com/2010/08/how-hyperinflation-will-happen.html .

The first of the asset managers or TBTF banks who are out of Treasuries will look for a place to park their cash—obviously. Where will all this ready cash go?

Commodities.

By the end of that terrible day, commodites of all stripes—precious and industrial metals, oil, foodstuffs—will shoot the moon.

I think he has nailed it. The only thing I differ with him is on the timing. He thinks it will happen very soon: "I’m guessing if it doesn’t happen this fall, it’ll happen next fall, without question before the end of 2011." Whereas I think we have about 15 more years before it will happen.