Don't Treasure U.S. Treasuries [inflation, more deficit spending] [U.K. possible downgrade?]

Barron's / Dow Jones ^ | 2009-05-21

[rabscuttle385]

Why U.S. Treasuries look increasingly unattractive.

BY TIERNAN RAY

OOOF!

It's a tough day for sovereign credit. Rating agency Standard and Poor's this morning lowered its outlook on the U.K.'s debt from Stable to Negative on concerns that the Kingdom's borrowing could reach 100% of its gross domestic product by 2013.

This is a potential prelude to an eventual cut in the U.K.'s triple-A rating.

The U.S. may not be as close to the U.K. at getting its credit spanked, but the U.S.'s ballooning deficits and heavy borrowing make U.S. Treasuries increasingly look unappealing.

[rabscuttle385]

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[OB1kNOb]

Foreign buyers of Treasuries are watching each other with a keen eye waiting for the first one to bolt for the exit door because they finally realize our government is bankrupt. The following panic from the rest to unload their Treasury holdings too will drive rates through the roof, collapse the bond market, devalue the dollar by half or more and cause instant high inflation as sellers scramble to adjust their prices for the dollar’s collapse.

[DrC]

“The larger threat, of whether U.S. bonds could be put on credit watch, and downgraded, like Canada in 1992, or Denmark in 1983, seems remote.”

Remarkable given the $104 trillion in entitlements debt that we face:
http://conoverc.wordpress.com/2009/05/13/119/
Perhaps the bond markets foolishly believe The One will be able to perform a fiscal miracle of the loaves and the fishes.

[DonaldC]

“Remarkable given the $104 trillion in entitlements debt that we face:”

Well, just because the gov would like to spend it does not mean we will. That is what is holding things together, the hope that somebody with common sense will come on the scene.

What a mess this country is in. What a time to have no leadership anywhere on the federal level and often state and local as well.