The nominal value of the paper equities that would explode if interest rates go up VASTLY exceed the Federal debt.
Read my short essay...
Ben is covering for the 2 Big 2 Fails!
If interest rates rose to a reasonable level, then all the new federal debt and all the refinanced old federal debt would become much more expensive. The interest on the debt would become so expensive that the government could longer sell new debt (except to the fed), the government’s credit rating would become such that they could not continue to function and support all those who receive payments from the government.
The scenario you’ve heard about and accepted is theoretical, but if the government stops meeting its obligations in this dependency society, we’d have a sort of anarchy will the tens of millions of people with no means of support.
I’ve heard other financial high flyers make different predictions about what might happen in your derivatives scenario, and several who admit they don’t know what would happen.