Bond Outlook [by bridport & cie, November 4th 2009]
| What a remarkable turn of events: the Americans, British and Irish are now saving a greater percentage of their income than the Germans! We can only cheer them on. A basic component of global rebalancing is that surplus countries like Germany (plus most of the developing world) spend more, and the deficit countries, like the three mentioned, spend less. Do not, for a moment, think that this is the result of clever government policy; rather be thankful that market forces can bring about changes for the better despite every attempt by governments to thwart them. |
| Household savings in particular, and private sector savings in general, are now playing a bigger part in financing government deficits. Do not believe however that the need for a capital inflow from abroad is much reduced in achieving a balance among private savings, government deficits and net inward foreign cash flows. The Chinese still hold the trump cards! |
| Many commentators are writing about a new bubble in government debt, and everyone is pointing out the unsustainability of such a huge government deficit as the USA’s. |