Gold set fresh all time high this week and Silver continues its rally toward its all time high of $50 as the dollar continues to be beaten down by the pessimism surrounding the fiscal crisis in the United States. S&P came out earlier this week stating that they have a negative outlook on U.S. debt and put a 33% probability on a downgrade in the next 2-3 years.
The impact of the statement from S&P is clear. The United States has long been regarded as the safe investment in the world and has been used by many as the benchmark of a true risk free rate. Recent developments have however brought that claim into question.
This chart contains a recent study by the IMF which breaks down the components of the 10 year treasury yield. The most astounding thing to notice in this chart is that credit risk began to appear in treasury bonds in 2008 and have continued to remain in the current yield at constant levels. This is a frightening data for what was once considered as the safest investment on the planet.
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