“If an accelerating outflow of funds now held by foreigners inside the US were to start, it is a near certainty that at some point in this accelerating outflow, the US would act to institute a version of FOREIGN EXCHANGE CONTROLS. In effect, these would prohibit funds owned by foreigners from leaving the US. For all those who had lent to the US, that would be a global catastrophe.
The recent freeze-up in the global interbank payments system would be small potatoes in comparison because the flow of money across the world’s borders would also start to freeze up. Many smaller nations in this bind would promptly institute their own national versions of foreign exchange controls and some of them would simply seize American assets inside their borders and sell them in their own local markets, using the proceeds from the sale to compensate their nationals from the losses they had suffered from having their money blocked by the US. International trade and air travel would come to a shuddering halt. Factories beyond number would be standing still because required foreign components would not be arriving. Economically, most nations would be thrown backwards to function upon the productive means presently existing inside their own borders. Deep recessions and outright depressions would follow.”