The Mechanics Behind a Credit Crisis

Imbalances in the global fiat credit system are enormous, with foreign ownership of dollars overhanging both foreign exchanges and securities markets. Meanwhile, Keynesian and monetarist hopes that lower interest rates can be implemented to keep things just bubbling along is blinding investors to the real risks.

It is wrongly believed by nearly everyone that lower interest rates are on the way and will stay down. Other than perhaps a minor decline being a self-fulfilling prophecy, in practice th...