Here’s a fantastic chart from Moody’s, courtesy of David Goldman, showing the ratings trajectory of various Western developed countries.
Basically, Switzerland is the only country not to be racing headlong into the purple — non-AAA — zone.
Under US government projections, debt service will exceed 10% of GDP by 2013, which means that by one measure the US will move out of AAA territory. But the UK, Germany and France will be headed in the same direction.
If I am correct that economic weakness continues unabated through the next couple of years, the situation will be considerable worse than the Moody’s graph suggests, and governments will have difficulty funding themselves at today’s extremely low interest rates.
This should be good for the dollar, and good for gold.
Alternatives to the dollar will start to look worse, and alternatives to currencies (namely gold) will start to look better.