The U.S. private sector corporate debt, mainly held in risky junk bonds at approximately $1.4 trillion, is facing the daunting task of being repaid or rolled over. Loans that were made during 2005/2007 and that are now coming due. The main problem being the underlying asset collateral has no, or vastly reduced, perceived value except in the minds of those who are continuing the fantasy of mark to make believe.
Compounding this looming problem is the added sovereign debt at risk, starting with Iceland in 2008, then moving to Latvia, Ireland, Dubai in 2009, and now Greece. This wave is now rolling over Spain, Portugal, United Kingdom and continues west to a number of States within the U.S., eventually reaching Japan and the U.S. federal government.
All of whom compete with each other and private industry for credit from a fast shrinking pool of available funds. Businesses and households are facing ever expanding marginalization, in the face of increasing need for credit by the governmental sector. This will inevitably lead to higher interest rates as credit suppliers demand higher yield, for the higher rate of risk involved.
In the face of growing distrust in all fiat currencies, through ongoing debt monetization to bridge the shortfall of governmental receipts, the price of gold continues to rise. As a sign of the times, the Emirates Palace, the most luxurious hotel in Abu Dhabi, has just installed the first ATM dispensing 10 gram gold bars instead of notes. This all adds up to a very bullish market for the price of gold going forward.
