Another Downgrade for Japanese Debt

It was mere weeks ago when we got the news that the ratings agency, S&P, had downgraded Japanese debt to 'AA-'.

Now comes the news of another downgrade of the same, this time from Moody's.

Both agencies cited structural issues which will make it very challenging for Japan to deal with its chronic debt problem, which most predict will reach more than 200% of GDP later this year.

One has to wonder at what point it will be before we get an end to this unthinking, blind panic into bonds at the first whiff of a crisis anywhere around the globe.

Here is the full story from Bloomberg.

http://www.bloomberg.com/news/2011-02-22/japan-s-aa2-government-debt-rating-outlook-changed-to-negative-by-moody-s.html


Here is a chart comparing the gold price to the long bond in a gold/bond ratio. This ratio basically details in picture form which of the two so-called "safe haven" assets is performing better.

One look at the chart tells us which way Mr. Market is voting. (Hint - it ain't bonds even with this reflexive rush into them due to the current unrest in the mid-East). Ever since Quantitative Easing was announced, the paper IOU's have been lagging far behind gold in terms of preserving their holders' wealth.