Global Interest Rates on the Up

Interest rates are headed up sharply and quite possibly in 2010. Those countries that are pursuing responsible monetary policies such as Australia will suffer less that those with irresponsible and expansionary policies but the direction of interest rates will still be the same.

As Karen maley's article from today's Business Spectator (see link) states, the most exposed Euro block countries include: Portugal, Ireland, Greece and Spain. These countries are running unsustainably large deficits that should be causing their creditors in the bond markets much concern. These nations and their irresponsible policies may well jeopardise the Euro's future.

Even these nations may well be the tips of the iceberg as larger economies such as Great Britain, the United States, and Japan are also running large deficits, expansionary monetary policies and demonstrating a deficit of political will to fix their structural problems.

Currency instability and rapidly rising interest rates may well be the consequence. A debt default by one sovereign nation may be the catalyst that sends global credit to the wall and gold into the stratosphere.

2010

"The risk that deteriorating government finances could push economies into full-fledged debt crises tops a list of threats facing the world in 2010, according to a report by the World Economic Forum"

A repricing of sovereign risk in 2010 could be the catalyst for rapidly rising interest rates on a global scale and finally put an end to the bailoutorama that has characterised the GFC to date. The question remains will the US Dollar be repriced to reflect the innate insolvency of the United States?

Welcome back for 2010....more soon.