The debt downgrade and inflation prospects

US government debt is the most widely traded financial instrument in the world.  As such, there are plenty of financial analysts that understand its risks better than the analysts at Standard & Poor's.  Therefore, if US debt prices fall today, they probably would have fallen even without the downgrade, based on analyses done continually by thousands of professionals around the globe. Yes, there might be a temporary panic stoked by Big Media alarmists hoping to garner TV news ratings or website hits.  However, if that's the only reason for a price drop, professional traders will view the panic as a buying opportunity in an oversold market. Other alarmists claim that mutual fund managers are handcuffed by their own prospectuses and must sell the downgraded US debt.  But most funds hold relatively small portions of such debt and there are enough contractual loopholes that the fund managers easily can slip out of those 'cuffs.  And ironically, if panicked...(Read Full Post)