All Posts Tagged With: "government debt"

A government bond is really a promise that the government will steal enough money to pay the interest and principle. Investors don’t doubt its willingness. They doubt its ability.

The growth of the current financial bubble is easily seen in the growth of the total debt, as a proportion of the size of the economy: simply track the ratio of total-debt to GDP.

Napier’s discussion of cycles in stock market valuation is based on the work of Yale Professor Robert Shiller, and his now-famous “Shiller P/E ratio.”

But as we’ve said before, the rally in the U.S. dollar and in U.S. sovereign debt is driven more by a preference for short-term liquidity than anything else. You can tell this is true because for longer-dated bonds, demand is weak. No one wants to lend to the Nation State for 30 years anymore.

Another day, another country looks to be heading towards bankruptcy.

Greece was last night downgraded by ratings agency Fitch from A- to BBB+ and was placed on negative credit watch. That means there could be more downgrades to come.

The Greek budget deficit is currently 12% of GDP.

Let’s see, in the 1980s Japan’s corporate leaders thought they were going to take over the world. Investors thought so too. They expanded. They wheeled. They dealed. Prices shot up and they all thought they were geniuses.

And that assumes there is no big increase in interest rates…and that the economy recovers as planned. If either of those things fails to happen, the situation will degrade fast.

The importance is dependent on your perspective. Those people who are not borrowing money to spend are thus suffering the pangs of a lowering of their lifestyle, which depended on borrowing money to spend;