Two of the articles above focus on a potential emerging-markets debt crisis.

This would be the third emerging-markets debt crisis in 35 years. The first in this sequence was 1982–85 and was centered in Latin America. The second was 1997–98 and was centered in South Asia and Russia. (This sequence omits the Mexican Tequila Crisis of 1994 that was confined to one country and was quickly bailed out by the U.S.) The third crisis has already started in Venezuela and Argentina and will likely spread to Turkey and Ukraine before affecting the entire financial system.

Through all of these crises, the one port in a storm is the U.S. Treasury market. Investors have 100% confidence that the U.S. never has and never will default on its debt. But this article shows that confidence may be misplaced.

The U.S. actually did miss principal and interest payments on Treasury debt in 1979. The amounts were relatively small compared with total outstanding debt, and the missed payments were made up to investors shortly thereafter. The Treasury blamed a back-office glitch and uncertainty created by Congress. But a default is a default.

The U.S. debt burden is much greater today and congressional dysfunction is worse than ever. Computer systems are highly vulnerable, not to old-fashioned “glitches,” but to 21-century hacks and malicious cyberwarfare. In fact, there is only one asset class that has never defaulted in history — gold.

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