Posted on 04/10/2011 6:16:20 PM PDT by SeekAndFind
In his latest GREED & FEAR report, CLSA's Chris Wood argues that the biggest risk to the global economy is, quite simply, a US sovereign debt crisis.
So far the market isn't showing any signs of worry, as Wood admits.
Here's how you'll know there's trouble:
This is why in GREED & fear’s view the biggest systemic risk in the world is now a US sovereign-debt crisis, which would likely mean the end of the US dollar as the world’s reserve currency. The sign that this risk is becoming real will be when the US Treasury bond market starts to trade on supply dynamics, in terms of the amount of bond issuance, as opposed to the perception of the health of the economy. It should be stressed that, for now at least, GREED & fear’s view remains that the Treasury bond market is trading on investors’ view of the economy. The rise in the 10-year Treasury yield from a low of 2.38% in October 2010 to a high of 3.74% in February reflected growing cyclical optimism on the US and coincided, logically, with the rally in US equities. Conversely, the 57bp decline in the 10-year Treasury yield from early February to mid March reflected renewed risk aversion and a stalling of the stock market’s advance.
Obviously, Wood doesn't buy the idea that since the US controls its own money, it can't be compared to the Eurozone periphery.
Still, as last year’s crisis in Euroland’s periphery sovereign bond markets showed, when supply concerns finally hit a government bond market the reaction can be violent. The reality is that America is more clearly than ever on the path to a sovereign-debt crisis.
(Excerpt) Read more at businessinsider.com ...
The Gelding Old Party is worthless. Socialist lite.
We can all see this disaster coming from a mile away.
Be prepared.....
OUCH! I get the point however.
I understand the perception of health, but not the other.
Explain, please?
After the Fed stops buying US bonds with the Monopoly money it is printing (June or so?) Will there be enough demand from other buyers to take up the slack. If not, then interest rates will head where everyone knows they need to go.(up!) 2008 all over again.
I had the same question about "supply dynamics." I do happen to believe that our rates are low because compared to other gov't issued bonds, the US appears to be relatively safe (healthy). But this is not a perception of the health of the ecnomy -- it is a perception of the relative health of the economy.
One bad headline away from collapse.
Given the amount of debt to be issued, the Fed has to print more money so Treasuries (new and rolled over) can be purchased. If they do not call it QE3, it will be called something else. Nevertheless, it is printing money. The music plays, the game goes on.
The Bond Market plus another CRUDE AWAKENING - WE DO NOT HAVE A PLAN!
Yeh it doesn’t take a rocket scientist to look around and figure out this is not going to end well. All the folks who follow their instincts and stock up will make it through the crash.
Yeah, just imagine if we had another major terrorist attack right now. Very vulnerable.
You mean Gelded Oldtimer’s Party, don’t you? And yes, I’m looking at you John McCain!
True!
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