Lifeboats

clipped from prudentbear.com Eighty-five percent of international trade is in the world’s reserve currency – the U.S. dollar. Foreigners buy 80% of U.S. Treasury bills.  To keep its factories churning, China and other exporters buy U.S. dollars – effectively providing goods on credit.  All this is of vast benefit to the United States but could change.  The tipping point may come in 2010 from the mundane issuance of government bonds.  New government spending programs and the downturn in tax revenues will require many governments massively to expand bond issues to cover their debt. This will mean: (1.) Downward pressure on bond prices (higher yields), and (2) sufficient supply of non U.S. government bonds that big money can shift from U.S. assets.   A lot of parked investment money will be looking for a good home.  How much more exposure to U.S. debt – and “victim” psychology – will investors want?  These eight factors are a formidable combination to overcome. Lifeboats anybody?