THIRD, consumers -- whose spending represents fully 70% of the economy -- snap their pocketbooks shut.
FOURTH, corporate earnings and stock prices crater. As the economy hits the skids, unemployment soars.
Clearly, these events would be the coup de grâce to an economic recovery as fragile as this one is. And they would almost surely transform a Great Recession into a Great DOUBLE-DIP Recession, if not worse, plunging us into the second bear market in three years, lighting the fuse on a second explosion in unemployment, and triggering a second surge in personal and corporate bankruptcies.
Indeed, this disturbing scenario is already beginning to unfold before our very eyes -- not just in ONE major Western country, but in TEN of them!
We've known for some time that Italy and Ireland are at risk for default -- and just this week, we saw how investors' fears have caused them to begin dumping British pounds and gilts (bonds) like there's no tomorrow.
Plus, the soaring cost of Credit Default Swaps -- "insurance policies" that protect investors against default -- on the debt of Greece, Portugal, Romania, Lithuania, Latvia, Iceland and the Ukraine is a clear sign that investors believe they are also at elevated risk of default.