Wednesday, May 13, 2009
Niels C. Jensen, a partner with Absolute Return Partners LLP, has written an interesting essay on the need of governments around the world to issue bonds to pay for their respective bailouts.
As summarized by Nouriel Roubini, Jensen shows:
The [IMF projects that the] twelve most industrialized of the world's G20 countries will have to issue about $10 trillion worth of new bonds to cover the cost of the current crisis. However, [well-known economists] Reinhart and Rogoff estimate the true cost at $15 trillion in the best case scenario and a whopping $33 trillion - 1/3 of total global savings - in the worst case. Issuing governments may have to inflate away their debt or pay drastically higher yields if deflation does not materialize