Friday, May 18, 2012

Global Bondageddon?

For some EU countries (i.e. Spain, Italy, Greece) the Doomsday Clock is ticking towards midnight!

Not the nuclear Doomsday Clock leading to global armageddon, but the Bondageddon of the financial kind. This potential outcome crosses the mind when you realize the type of political buffoons and supposed financial markets gurus who are running the show in Europe as well as here in the United States.

The terms Doomsday Clock and Bondegeddon conjure up images of a potential global financial disaster the likes of which have not been seen since the last actual global financial disaster back in 2008.

This is the one that supposedly, at least according to the pundits, has been over for a few years with the U.S. economy in some type of expansion!

But then, when you look at the 10-year bond yields for the sovereign debt of Italy, Spain and Greece, it is hard to get anything close to resembling a very warm and/or fuzzy financial feeling.

To compound things, taking a look at the 10-year yield on Japanese sovereign debt below, you realize that it's been close to a zero percent yield for a very long time and that economy is still mired in what they politely refer to as a recession.

Finally, consider the fact that the Bernanke-led Federal Reserve has the same zero percent interest rate plan for fixing or at least stabalizing the United States economy.

In the past when the Fed has pulled quantitative easing out of its hat they have gotten a euphoric stock market reaction because desperate investors are forced to take on equities risk because they have nowhere else to turn. This may not happen in the future as the idea as to why so much quantitative easing is necessary and why it is not working on the economy sinks in..

Because sometimes playing in the only game in town is a game better played by someone else.

   10-Year Yields       Current     Last Week  

Yield Source
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