Debt and Derivatives

Contrary Investor provides some statistics, graphs, and charts showing the unsustainable growth in debt at all levels. Consumer, corporate, and government debt levels are at or near historic highs. While interest rates are low, cash flows are manageable, but if, for example, the Fed were to have its hand forced to raise interest rates to defend the currency, things would be more difficult. 

"Maybe the foreign community will be completely content to suffer yet further losses in bond values as US interest rates rise. Or maybe a meaningful trajectory of higher rates will be the straw that breaks the proverbial camels back in terms of foreign support of US fixed income markets. In 2003, foreign holdings of US debt as a percentage of the total US debt market reached a new high."

Robert Blumen

Robert Blumen is an independent software developer based in San Francisco, California