While the term "fiscal cliff" and its use is weird, "You Fail Economics Forever" doesn't sound right.
When I helped with a little introductory talk to Bitcoin at a small meeting, I got to listen to a talk by a mathematician who simulated debt loops. He split up an economy into sectors like investment, private spending and government, and mostly just tried to keep the money flows consistent. (While that's a very simple model, it's still quite useful -- the money
must go
somewhere after all.)
The parameter space turned out to have a stable and an unstable area with respect to government debt. The simulation reproduced the effect mentioned in
mykrul's (nevermind, fail on my side) the blog post: for a while, even in the unstable area, the system can remain functional by issuing more debt or money. "Haha, we're in control anyway."
However, after some time in the unstable area, the velocity of money cycling through banks and government debt went through the roof in an exponential runaway function. That messed with money supply, and ultimately a disruptive stop of that flow blew up the investment sector and maybe a lot more -- the model wasn't really sufficient to make statements about the final result. But it didn't take a genius to tell that it looked broken.
Fun fact: if that model is close to reality, the point of no return can be long before the collapse. Once you're in the runaway area, you can only watch the train wreck in slow motion, with no options to stop it. This is politics nightmare, because politicians don't give a shit whether their decisions blow up everything a few election periods later.
