[nostrademons]

These banking failures and mass unemployment would come right as interest rates are spiking. They also go hand in hand with banks dumping Treasury Bills for liquidity, which would cause a sharp decline in T-bill prices and a rise in T-bill rates.

The government finances its operations by issuing T-bills. If nobody is willing to buy T-bills, the government can't get cash to pay government employees, including the FBI, CIA, military, etc. It's unlikely that people are going to continue working if they don't get paid. Historically, governments that don't pay their soldiers, police, intelligence forces don't remain governments for long.

[JohnFen]

Perhaps we have different definitions of "civilization-ending". Even if what you describe here actually happened, I wouldn't characterize that as a civilization-ending event. it would just be the passing of another nation. Civilization would continue, just as it has when nations have fallen in history.

Although, I do need to add, while your scenario is technically possible, I do think it's vanishingly unlikely. The US has been down that road before and survived, as have many others.

[nostrademons]

I was torn on what to call it - debated using the term "state failure", which I think is more accurate but few people truly know what that means. Basically, I'm referring to an event that breaks our conceptions of what it means to be "civilized" - basically, that you follow laws, adhere to contracts, respect government authority, have a well-defined political process, pay with a stable currency, can count on your personal property rights and past savings being respected, etc.

You can have civilization-ending events that don't involve everyone dying - the fall of the Soviet Union in 1991 was one. It was still hugely disruptive to everyone who lived in the Eastern Bloc. The U.S. Civil War is another one, though plenty of people died then too. It's not the end of all civilization, just the civilization we're in.

[JohnFen]

OK, I understand better now. We do define "civilization-ending" (and perhaps even "civilization") very, very differently. Fair enough! I appreciate your explanation, thank you.

[athinggoingon]

> The government finances its operations by issuing T-bills. If nobody is willing to buy T-bills, the government can't get cash to pay government employees, including the FBI, CIA, military, etc.

If nobody is willing to buy T-bills, the Fed will just monetize the debt, which is something they have been doing since 2008.

There's a reason the Fed's balance sheet is now around 8 trillion dollars.

[p10_user]

Will banks dump that many short term t bills to cause a problem? Short term t bills are very popular- I’m sure some b2b loans could be settled with a t bill as payment. As long as the us govt is still good for the interest payments I think plenty will be happy with that arrangement, reducing need to convert so much into cash.