As my old poker playing buddies keep saying, “there’s no bloodless way back from here.”
America is a “Mickey Mouse economy” that is technically bankrupt, according to Jochen Wermuth, the Chief Investment Officer (CIO) and managing partner at Wermuth Asset Management.
“The big evil for the IMF in Russia in 1998 was the prospect of the central bank funding government debt. The Fed is now even buying mortgage-backed securities,” he noted.
“Even before the (Troubled Asset Relief Program) and the expansion of the Fed’s balance sheet, total US public and private debt as a percentage of GDP in the US stood at 290 percent, that figure is now far higher,” Wermuth added.
“US credit risk is huge and America has two options, either default or let the currency depreciate substantially against currencies such as the yuan and the rouble,” he explained.
“Last night’s news from the Fed simply creates the right conditions for dollar weakness and a reduction in US liabilities to foreign investors and governments,” Wermuth said.
http://www.cnbc.com/id/38654017