Is this the year the US defaults?

James West makes the case the USD collapse and, by extension, a bond default.
Critics argue that it just can't happen .... have they crunched the numbers?

Number one among the indicators favoring this scenario is what is happening in the U.S. Treasuries auction market.

Last Thursday, an $30 billion auction in five-year notes failed to stir the interest of traditional primary dealers. The auction itself was saved by an anonymous “indirect” bid.

Buyers are discouraged by the prospect of what is expected to amount to $2 trillion total issuance for the full year of 2009. The further out the maturities on notes, the more bearish the sentiment towards them. The only way to entice buyers is through the increase in yields.

Making a prediction

I'm gonna go on a limb here. I'm going to make a call I may end up regretting. So here goes....

The 30 Year Bond will return as the new benchmark, dethroning the current "king", the 10-year (which incidentally did the same to the 30 year about a decade back).


Russia Gets Downgraded, Increased Risk of Default

Forbes is reporting that Russia, Romania and South Korea were downgraded in sovereign ratings, Romainia to junk.

Fitch lowered South Africa's ratings outlook as part of a wider review of 17 major investment-grade emerging economies that also resulted in Romania's sovereign ratings downgrade to 'junk' status and ratings cut for Bulgaria, Hungary and Kazakhstan.

The ratings agency, which also lowered its outlook for South Korea and Malaysia, said emerging Europe was the 'most vulnerable' to the deterioration in the global financial and economic environment due to the large current account deficits and high short-term debt levels of the region's countries

Bloomberg notes a sudden spike in insuring Russia's debt and the Ruble is devalued.

Borrow Money with No Interest? Oh, that doesn't mean you little consumer!

Imagine my joy when I read the headline, Zero Rate World May Lie Ahead.

The age of free money may be at hand.

As major central banks slash interest rates with unexpected speed, benchmark borrowing costs are now below core inflation for the first time since the early 1980s, and policy makers are signaling they will go deeper.

16% of Homeowners In Big Trouble

Nearly 1 in 6 Owners 'Under Water':

The relentless slide in home prices has left nearly one in six U.S. homeowners owing more on a mortgage than the home is worth, raising the possibility of a rise in defaults -- the very misfortune that touched off the credit crisis last year.

The result of homeowners being "under water" is more pressure on an economy that is already in a downturn. No longer having equity in their homes makes people feel less rich and thus less inclined to shop at the mall.

And having more homeowners under water is likely to mean more eventual foreclosures, because it is hard for borrowers in financial trouble to refinance or sell their homes and pay off their mortgage if their debt exceeds the home's value. A foreclosed home, in turn, tends to lower the value of other homes in its neighborhood