Three Options (John Maudlin)

Today John Maudlin summed up the three options:

"I showed a chart a few months ago which illustrated that imports were falling, even as the trade deficit was not. This was because of the high price of oil. Oil at that time accounted for two-thirds of the trade deficit. When they tally the trade deficit for November in a few months, I think everyone will be surprised at how much the trade deficit has fallen. ... [And] a lower trade deficit means there will be fewer dollars to buy US debt, just at a time when US debt will explode. ... [for example] US government deficit, under Democratic control, is likely to be $2 trillion in 2009"

He goes on to say there are three options:
1. US citizens must save and buy that debt, or
2. rates will have to rise to attract capital, or
3. the Fed will have to monetize the debt.

I assume a severe recession, as the rest of Maudlin's newsletter portends. What does this say about the three options?

Citizens are shifting to saving (at least trying to borrow less), but high and rising unemployment will counteract this shift. Certainly I don't expect trillions of dollars to be available next year.

Rates could rise to attract capital, but that would put a corresponding damper on the economy in a serious recession. The worse the economy gets, the greater the need for debt, the higher the rates, and the worse the economy gets. It can't work.

Finally, the US Fed can monetize the debt, by printing dollars. Painless at first, but ultimately leading to inflation and a crisis of confidence in the US dollar.