Rubin wrote (my emphasis):
The risks of our fiscal position are serious and multiple. And while these risks become more severe over time as our debt position worsens, all of these either have begun to materialise or could do so in the near term, so we should act now.
What multiple shapes could the crisis take? Rubin writes to the Davos insiders (My emphasis):
To be specific about the risks, deficits could crowd out private investment, which could choke off a private investment recovery. Moreover, the capacity for public investment is already diminishing, and could be exacerbated by growing entitlement costs and mounting interest payments...
Most dangerously, there is a risk of disruption to our bond and currency markets from the fear of much higher interest rates due to future imbalances or from fear of inflation because of efforts to monetise our debt. The result could be significant deficit premiums on bond market interest rates, seriously impeding private investment and growth or, worse, acute bond market declines that cause an economic crisis. This could also start in the currency markets.
While the likelihood of major market disruptions is greater in the intermediate and longer term, the shorter-term risks are also real. Market psychology can change unexpectedly and dramatically – either on its own or because of some catalyst – when underlying conditions are unsound. Possible catalysts are a debt ceiling confrontation, currency market problems, and state deficits...
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