I haven't heard anyone else mention this but this is what I think will happen. As everyone knows, the economy runs in cycles. The last recession ended in June 2009, and so by about mid-2016, 7 years later, it will be ripe for another one.
But besides the elapsed time, there is a foreseeable cause for this, which is rising interest rates. The Federal Reserve is going to shut off the easy money about the end of 2014, when they will have a balance sheet of almost $5 trillion. They will be hesitant to expand this further. The effects of this will begin to be felt in 2016, when interest rates will return to "normal", which is about 4% for short-term rates, and 5% for long-term rates.
The rising rates will cause the new real estate bubble (especially in California) to pop. But more importantly, it will cause the bond bubble to pop. This will cause a rush out of treasury bonds, probably in to stocks or gold. The real estate bubble popping will cause another recession, like what happened in 2007.
But this time will be different. The Fed won't be there to rescue anyone, and the Treasury suddenly will be unable to borrow except at (relatively) exorbitant rates. Since the government can't raise taxes and can't borrow cheaply, it will have no choice but to cut spending, which will turn the recession into a depression.
It there anyway of avoiding this? Option A: is for the Fed to keep providing the easy money, but they probably won't do this until they see considerable pain. Option B: cut spending now, so it won't be as painful later. But this is unlikely. Option C: when the recession hits, do a stimulus package despite the cost. This might buy a year or so, but won't avoid the mess. So no, I don't think there is a way of avoiding this.
Let's just take it on the chin. Have a massive "reset" in 2017, with a debt jubilee and numerous bankruptcies, with some big banks being broken up or going under. Then with the new President, have a fresh start in 2018.
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