Would you lend money to Spain, Italy and the US at these ridiculously low levels? The answer is no. The World has during the past years experienced an explosion of sovereign Debt, but yields have been coming off, as a result of Central Bankers buying crap and therefore creating artificially low rates, which basically is pricing risk at totally “false” levels.
During the past weeks, people have been shocked by the equities collapse, but should they be surprised? No.
During the past year Mr Bernanke has bought close to 1 700 billion USD of Government Bonds and a 1000 billion USD of Mortgage Bonds, by expanding the balance sheet and postponing the problems the US Economy faces long term. So, would you lend your money to the US at these rates, and don’t forget the US is not AAA rated.
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