(The first part of this report is based on email received from economics analyst Monty Agarwal via firstname.lastname@example.org)
If history teaches us anything, it's that when even ONE major government defaults on its debts, economic chaos follows. The crisis unfolds in four quick steps:
FIRST, since a sovereign debt default would inevitably cause ALL bonds to crash, investors stampede for the bond market exits, dumping as much as they can as fast as they can.
SECOND, as the bond market reels, interest rates skyrocket and credit tightens. The rates on 30-year fixed-rate mortgages, auto loans and other long-term debts soar. Rates tied to short-term money markets -- on credit cards and variable mortgages -- follow.