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Bond Outlook January 16th

Systems failure, first cited by us last July, is now apparent and will demand months or years to repair. Contagion from the USA is looking more serious than we thought.

Bond Outlook [by bridport & cie, January 16th 2008]

Exceptionally, let us start this Weekly with a quote from an old one:

“ Moody’s says that the credit rout gives “serious reasons to worry but does not pose a systemic threat”. The Fed’s W. Poole assures that “the impact of the sub-prime problems will be contained to the real estate market and will not hurt the economy much”........We disagree.”

We wrote that on July 25th, last year. Six months later these “authorities” would, we presume, prefer not be reminded of their misplaced re-assurance. There is so much going wrong with the US economy, with its repercussions elsewhere, that for us to list once again all the problems is superfluous; every reader has read of the bank bail-outs, the likelihood of credit default swaps being supported by inadequate capital as corporate defaults rise, and the decline in US consumer spending.

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