Hank Paulson’s Emergency Plan

BusinessPolicyHank Paulson’s Emergency PlanByNathan Lewis,Contributor.Forbes contributors publish independent expert analyses and insights. I write about economic policy for the 21st century.Follow AuthorMay 15, 2026, 08:34am EDT--:-- / --:--This voice experience is generated by AI. Learn more.This voice experience is generated by AI. Learn more.Former US Treasury Secretary Hank Paulson speaks during the Semafor World Economy 2026 conference in Washington, DC, on April 14, 2026. (Photo by SAUL LOEB / AFP via Getty Images)AFP via Getty ImagesHank Paulson, former CEO of Goldman Sachs, and US Treasury Secretary during the 2008 Financial Crisis, is a serious fellow. So, when Mr. Paulson shows up in Washington DC and tells people that the US Treasury needs an emergency “break the glass” plan if market demand for US Treasury bonds collapses, maybe you should take it seriously.During the 2008 Crisis, Paulson bailed out the broader economy (and his old employer, by backing the liabilities of the failed AIG) basically by leaning hard on the Federal Government’s credit. A gigantic amount of Treasury bonds were issued, and the resultant mountain of cash made all the booboos better. The Federal Government’s debt/GDP was about 64% going into the crisis, so this was possible. Besides, the Federal Reserve ended up buying a lot of the bonds, eventually. It was all a big card shuffle, covered up with what amounted to “printing money.”The macro investor Ray Dalio, in his recent book How Countries Go Broke (2025), found a recurring pattern in countries that get into debt crises. First, there is some kind of private-sector debt crisis, which is patched over by public debt. Government debt/GDP rises to unsustainable levels, and then the government effectively goes bust. I say “effectively” because governments usually don’t go bust the way an individual or corporation does, by failing to make the payments. Rather, if the debt is denominated in a currency that the government itself contro...