The Early Signs
Early tangible signs are emerging of a repricing in the both the US dollar and the British pound resulting from the active debasement of their currencies. As the link to the above article suggests markets are beginning to accept that the US dollar, in particular, is not adequately priced for sovereign risk.
In this blog I have restarted time-and-time again the inevitable consequences of US government deficits, and now with "quantitiative easing" the debasement of the US dollar has virtually moved into the sphere of the deliberate.
Progressively the US will have to pay more and more to foreign holders of its Treasury notes. Interest rates will now progressively start to rise and sentiment decline to a new nadir. The chance of a rapid collapse in sentiment and a run on the dollar remains real.
In this blog I have restarted time-and-time again the inevitable consequences of US government deficits, and now with "quantitiative easing" the debasement of the US dollar has virtually moved into the sphere of the deliberate.
Progressively the US will have to pay more and more to foreign holders of its Treasury notes. Interest rates will now progressively start to rise and sentiment decline to a new nadir. The chance of a rapid collapse in sentiment and a run on the dollar remains real.
posted by Peter at 12:52 pm
1 Comments:
http://www.businessspectator.com.au/bs.nsf/Article/The-price-of-panic-pd20090525-SCSSG?OpenDocument&src=sph
A very astute article from Mr. Kohler. The consequence of government borrowings not being financed is significantly higher interest rates in debtor nations.
You will probably read a few headlines like "US Bond Prices in Freefall" or "US Interest Rates Set to Rise". Then one day you will wake up, like they did in Iceland, to find your variable mortgage rate is now 16.7% p.a.
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