Bass Says ‘Cluster’ of Sovereign Defaults Is Possible
President Barack Obama is seeking Congressional approval for a $3.55 trillion budget for the fiscal year starting in October that would increase spending by 32 percent, resulting in a deficit of $1.17 trillion as he seeks to kick start the economy. Treasury Secretary Timothy Geithner said costs to rescue U.S. banks may be more than the $700 billion already approved after losses and writedowns globally from the credit crisis exceeded $1.19 trillion.
The “rampant printing of currencies” won’t immediately lead to inflation as banks reduce borrowing and asset values decline, Bass, 39, wrote in the March 2 letter, a copy of which was obtained by Bloomberg News. “The greater concern is the potential inflationary time bomb that grows as governments continue to borrow, print” and stimulate economies.
The U.S. will need to issue $2.35 trillion of new Treasuries this year, and Europe will have to issue even more government debt, Bass said.
This will come in handy: