Reply #23: Well, again, the trigger depends upon the large sale of Treasuries

[zipplewrath]

The intial reaction is based upon a large scale sale of treasuries merely because some investment houses want cash to purchase other securities (or commodities). It isn't clear that's what they'd sell in order to raise capital. It also then depends quite heavily upon the TBTF banks wanting to, and actually deciding to, sell off treasuries. Again, my question becomes, to buy what? I will agree there is a problem when too many dollars are chasing too few products. But right now, because it is a reserve currency, many of those dollars are in treasuries because they can't find anywhere else they want to be.

It's all possible in the qualitative sense, I just don't see how it is possible in the quantitative sense. But if irrationality gets into the markets, yes just about anything can happen. Admittedly, it's how the whole CD swap think happened, although much of that can be traced to ignorance as much as irrationality.