Analyst Dave Rosenberg is going into hibernation for a few weeks as the holidays approach, but before doing so, he took one last moment to address two growing concerns: The growing amount of U.S. debt and sovereign risk:
Breakfast With Dave: We are not sure if this is a well known “fact”, but the U.S. government has a record$2.5 trillion of its debt, including bills, bonds and notes, rolling over in 2010. That,my friends, is 35% of the outstanding level of Uncle Sam’s marketable obligations having to be refinanced in one single year. One has to wonder how the Fed is going to be able to raise interest rates in such a backdrop of massive rollovers;and if it doesn’t and the economy manages to exceed expectations or we get some inflation, how it is that the near-record steepness in the yield curve doesn’t continue in the coming year.
But very clearly, sovereign risk globally has taken over as the major potential flare-up for the coming year. Looking at the official projections for 2010, we have Japan’s government debt-to-GDP ratio hitting 227%; Italy at 120%; the U.S. and the U.K. both at 94%; Germany and France at 83%, and Canada at 79% (all levels of government). Rarely, if ever, has Canada been the one-eyed man to this extent in the land of the blind.