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Follow up to Skitz’s post yesterday:
Together, FM and FM own $5.4 trillion in outstanding mortgage debt. Marginal Revolution imagines what would happen if the Feds didn’t take over the mega-creditors.
- Foreign investment would cease like the $300 billion investment from China plus soveriegn wealth funds, central banks, and average-Joe investors.
- The dollar would fall 30-40 percent in a week.
- There would be a payment system gridlock.
- Margin calls at clearinghouses would go unmet.
- The Dow would shed half its value unless it was shutdown.
- The FDIC would activate but at a loss of the central bank.
- Unemployment would climb to double digits.
- Many Americans wouldn’t have access to their savings.
- The deficit would go through the roof. (Further through the roof we’ve already shattered.)
Bottom line is…. SCARY.
Thanks to Tyler Cowen for putting it into perspective.
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