Sovereign Debt Unsafe, Default Concern Spreads to U.S., Japan, Buiter Says

Fears of a sovereign default are “manifest” in Europe and will soon spread to Japan and the U.S. as governments struggle to control deficits, according to Citigroup Inc. economists led by former Bank of England policy maker Willem Buiter.

“Despite the recent drama, we believe we have only seen the opening and second act, with the rest of the plot still evolving,” London-based Buiter and colleagues wrote in a research note published today. “There is absolutely no safe” sovereign.

“The U.S. and Japan likely cannot continue to ignore the issues of fiscal sustainability,” said the Citigroup economists, who added that it’s “only a matter of time” before the U.S. government can only fund itself through debt issuance at “significantly higher interest rates.”

Bottom line no private investor and only goverments today buy treasuries. Goverment bonds is the mother of all bubbles.

http://www.bloomberg.com/news/2011-01-07/sovereign-debt-unsafe-default-concern-spreads-to-u-s-japan-buiter-says.html