By: Boris Sobolev, Resource Stock Guide
May 28, 2009
From our perspective, the main event of the month was a simultaneous selloff in the US dollar and the US bond market. USD fell by 5.6% (3.6% in the past week) and the 10-year yield rose by 10.4% since May 1.
The catalyst for such a sharp fall was the downgrade by the S&P rating agency of the UK government debt. This development led to a well justified comment by Bill Gross of Pimco that the US debt awaits the same fate.
The S&P economists see major escalations of government debts around the world in the next few years. At last they’ve seen the writing on the wall! US government debt to GDP ratio will rise from 44% in 2008 to 77% in 2013 according the analysis. Growth in government debts will occur in all of the developed world, but the fastest rate of growth will be experienced by the US and the UK. (more)