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Strategies & Market Trends : The Residential Real Estate Crash Index
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To: TH who wrote (237298)2/2/2010 9:51:48 AM
From: PerspectiveRead Replies (3) of 306849
 
Euroland is a basket case:

seekingalpha.com

Mr. Jensen appears to think that bond investors will soon force the government hand by exacting penalty interest rates for sovereign debt. I'm still not seeing it happen, and government spending clearly will NOT stop until the bond market actually demands repayment in today's currencies, not devalued scrips.

It can play out in a couple of different ways. Either bond investors will go on strike until they feel that they are being sufficiently rewarded for the higher risk associated with sovereign debt following the credit crunch or governments will implement budget curtailments designed to bring the debt escalation under control again, but that will be detrimental to economic growth. My bet is that the latter outcome will ultimately prevail but not until the bond market forces the hand of our governments.

Question: so what in the world would change at the margin that would finally result in the end of foolishly cheap financing for government spendthrifts? Narrowing of East/West trade imbalances? A return of a real place for investment capital to flow to? Exhaustion of demand for sovereign debt? Demographic shifts? Eradication of ZIRP from the planet? A currency crisis for ZIRP currencies? Or just compounding of interest on the growing mountain of debt?

`BC
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