On the heels of the big news that S & P has downgraded US Treasury bonds to a "negative" rating, Germany has announced that it believes that Greece will default on its bonds and have to restructure this summer causing an escalation in Europe's debt problems. Additionally, China's strategy of shoring up the renminbi against foreign currencies by carrying large foreign currency reserves is failing and inflation is on the rise.
Without anyone to buy government bonds, and those ratings falling, how are governments going to finance their debt?
the april 19 planet money podcast pointed out that the bond interest rate did *not* go up in spite of the downgrading of U.S. Treasury bonds suggesting, according to them, that there's a surprising apathy in response to the S&P news.
ReplyDeletewhich means that the U.S. is ok for now...