Schoen: Economy teetering on 'fiscal cliff'

By TODAY.com staff

NBCNews.com?s economics reporter John Schoen joined us for a live Web chat Thursday to answer your questions about the ?fiscal cliff.?

Here?s one of John?s answers to questions from the live chat. (See below for the full Q&A.)

Andrew asked:

"Isn?t the effect on the average person much more dire than what federal programs might be impacted? Isn?t that a small view to take? Isn?t the real impact on the ultimate total devaluation of the dollar and the complete erosion of people?s savings?"

John replied:

"Take a deep breath, Andrew. Yes, it?s entirely possible that a deficit that spirals out of control undermines confidence so badly that investors stop buying Treasury bonds - or more likely, demand higher interest rates. Those higher rates ? in theory ? could spark a massive inflation that would erode the buying power of the dollar, wiping out savings and producing another nasty period like the 1970s."

"We?re not saying it won?t happen. But it?s not at all inevitable ? and we?re not close to that point yet. In fact, the turmoil in the rest of the world has increased demand fro Treasury bonds ? that?s why rates are so low. As bad as it may seem at the moment, the US economy is still ? by far ? the biggest and strongest in the world."

Here?s the full chat archive:

Source: http://lifeinc.today.com/_news/2012/10/11/14370211-schoen-economy-teetering-on-fiscal-cliff?lite

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