Further Note

John Riley, a reader of this blog, sent me this lengthy comment, which I think is worthy to reprint.

In October of this year, almost $2 trillion (that's $2,000,000,000,000 for those that enjoy the zeroes) in ARMS and other variable interest rate loans will reset on mortgages throughout the United States. This reset will create the ultimate default wave unless the Fed cuts interest rates to reduce the impact. The ultimate "blunder" will be the result, and it's a no-win situation. Do nothing and the liquidity crisis is created over night and the Fed gets the blame. Increase interest rates and a secondary wave of defaults, those based on "prime" mortgage ARMs will be initiated. Cut interest rates almost all US Dollar based assets and equities get liquidated by overseas suckers, er shareholders, and the hyperinflationary spike begins.