$5 Trillion In Sovereign Debt Issuance!
I just finished reading John Mauldin’s weekly newsletter. He has a very interesting graph that I’m reproducing below.
This year there’s an expected $5.3 Trillion dollars in new sovereign debt issuance! He asks a great question – where is this money going to come from? Most of this money is going to bank bailouts and increased government spending. The resulting decrease in imports and increase in government spending will of course make our GDP look rosier than it actually is. So there’s a good chance we’ll hear news reports of the economy improving even though there’s absolutely no improvement whatsoever!
So even though I’m concerned that the US is printing money hand over fist, it seems everyone is just doing the same thing. Unfortunately, we’re “winning”. I still think we’ll see hyperinflation during this cycle and even though the USD may not weaken against foreign currencies, it should depreciate against real assets like gold and silver, and towards the tail-end of the cycle maybe real estate too. I strongly doubt we’ll see any sort of quick recovery any time soon. And if you want to read an entertaining article on why you should short the US, proceed on to Ahlgren Multiverse.
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July 19th, 2009 at 9:50 am
I think you are right that the U.S. will just keep printing money. It has always been the way they used to get out of these situations.
July 22nd, 2009 at 6:25 am
It’s basic economics. Sustainable growth is 1-3% and you do whatever it takes to hit it. Whether it be increasing the relative money supply to match the precieved underlying value of the assets or contract to crush growth. The value of gold is the same value in stocks or money. It’s on the precieved value of its use, money itself is just an illusion.
August 1st, 2009 at 3:02 am
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