"...economic historian and Financial Times contributing editor Niall Ferguson argues that mushrooming sovereign debt concerns in Europe are a sign of things to come -- for the U.S. Here are a few excerpts:
I looked at the IMF numbers for gross debt-to-GDP today for developed economies -- the United States is number six. It is not that far behind Greece in terms of the size of its debt and the problem it's going to have getting back into any kind of balance in the foreseeable future.
The problem with massive deficits as a response to the recession is that, at some point, you are going to see upward movements in yields. Upward movements in long-term nominal interest rates at a time of relatively low inflation -- that spells trouble for anybody with a large burden of debt, and, of course, practically everybody in the U.S. has a large burden of debt, including...the federal government. So, although it is going to take a while to reach these shores -- I think this will play out in Europe for a while, spreading from one country to another -- at some point, people are going to look at the finances of the United States and say, you know, we really need more than 3.5 percent on a 10-year bond with numbers like these because they really aren't much better than the finances of Greece.
At some point -- and I think it is over the next six-to-12 months -- there is going to be a re-rating, a reappraisal of U.S. fiscal prospects, and that, it seems to me, will be the moment of truth..."
No comments:
Post a Comment