Wednesday, February 10, 2010
U.S. debt fears make Germany a safer haven, Pimco bond director says
This is an amazing statement coming from the CEO of the world's largest bond fund.
Mohammed El-Erian said, "German bonds were likely to outperform given Washington's government debt to gross domestic product ratio of more than 60%. As we stand today, we prefer to take interest rate risk like government bonds in Germany, which has much better conditions than in the United States."
El-Erian seems completely clueless when it comes to understanding the distinction between the United States--a currency issuing nation--and Germany, which is no longer a currency issuer and therefore runs a risk of default, however small that may be. The U.S. has no risk of that happening, meaning that German bonds are infinite times more risky than Treasuries. He simply doesn't understand that!!! It is unbelievable!!!
Watch credit default swaps on Germany now that they are thinking about bailing out Greece. These are likely to get hit pretty hard.
It is truly amazing to see the level of economic ignorance coming from some of the highest regarded financial people in this country. No wonder we are in such a mess!