Here is a Bloomberg article about the cost of insuring US debt.
(emphasis mine)
World According to TARP No Laughing Matter for U.S.
By Abigail Moses and Shannon D. Harrington
Oct. 29 (Bloomberg) -- The financial crisis exacerbated by credit derivatives is costing so much to fix that speculators are now using those same instruments to bet on governments as the price tag for bailing out banks approaches $3 trillion.
The cost to hedge against losses on $10 million of Treasuries is about $40,000 annually for 10 years, up from $1,000 in the first half of 2007, based on CMA Datavision prices. The equivalent for German bunds has risen to more than $36,000 from $2,000, while it has jumped to $64,000 from $3,000 for U.K. gilts.
My reaction: Deleveraging in credit default swaps (CDS) market will drive up governments' borrowing costs for the same reasons that it will drive up corporate loan rates. Worse still, the rising costs of insuring against government defaults will undermine faith in paper currencies. After all, the CDS market is telling us that 10-year treasury note has become 40 times more risky since the beginning of 2007.
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On a separate note, here are some interesting articles I didn't get around to blogging:
Europe on the brink of currency crisis meltdown
Run on gold in Dubai as investors shun stocks and property
Anatomy of Financial Disaster -The Next Stop
Flying Bankers and the crisis
Russia begins to refuse credit cards in worsening global financial crisis
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Hey Eric
New here. Got pointed to your site via Stevequayle.com. Can you give us a little more about your background. Are you from the Austrian or Chicago school? Are you a Ron Paul admirer, and do you frequent Lewrockwell.com or mises.org? What are your thoughts on the Monetary Reform Act proposed at TheMoneyMasters.com?
"Can you give us a little more about your background?"
I studied as a government major at Cornell Universality before switching and graduating as an accounting major from Fairfield University. Since last September, I have been closely following the credit crisis based on the belief that there is no better way to understand how the economy and financial system work then to watch them fall apart.
Are you from the Austrian or Chicago school?
I was never completely comfortable with either school of economics. However, I don't believe faulty economic theories are to blame for our current crisis. The root of today's current problems is that America spent and consumed too much. Any nation that lacks fiscal discipline will run itself into the ground eventually, irrespective of whatever economic theories it champions.
Are you a Ron Paul admirer?
I am not a Ron Paul admirer, although I do agree with him on many economic issues.
Do you frequent Lewrockwell.com or mises.org?
Not really, sorry. Simply tracking developments in the economy is difficult enough without worrying about politics and solutions.
"What are your thoughts on the Monetary Reform Act proposed at TheMoneyMasters.com?"
The Monetary Reform Act proposed at TheMoneyMasters.com sounds interesting in theory, but trying to implement it would wreck the economy. Even if it could be implemented, it is so harmful for vested interests in the current system that it politically stands to chance of passing congress. Finally, I believe the current financial order needs to collapse and be discredited before we start of building up again. We need clarity about government interventions in the credit/stock markets and the COMEX before we decide on a new economic system.
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