A NATIONAL debt crisis, such as the one Ireland is now suffering, tends to follow a four-stage pattern. We see these stages playing out in every episode of national bankruptcy — whether in Latin America, Asia or Western Europe. In Ireland, we are moving towards the third phase.
There is no escaping this pattern because the mathematical corollary of a housing boom is a debt bust. It is only a matter of time.
Now those suggesting that the endgame will be debt repudiation are taking the flak. But it will happen.
Let’s briefly examine the four stages of national bankruptcy.
The first phase is rapid: highly leveraged banks go bust alarmingly quickly. This leads to massive state intervention to prevent a bank run, political upheaval and inklings of just how deep the mess might become.
The second stage is a period of unusual calm. The remedial action taken by the State calms things down, banks don’t collapse, there is no run on the banks and the economy settles in to the grinding reality that falling incomes and too much debt don’t mix.
During this period, vested interests, powerful “insiders” in society, move to protect themselves. Supposedly binding agreements are signed. Likewise, the banks do deals with debtors in the hope that they can postpone the day of reckoning.
full article at source: http://www.davidmcwilliams.ie/2012/10/04/now-all-the-stages-are-set-for-bloody-battle-of-suburbs?utm_source=Website+Subscribers&utm_campaign=100ad2f1af-03102012&utm_medium=email