Everything is fine, right? I mean May was a great month, following a solid April - so we are out of the woods, right? Not so fast my friend, there are some hints that we could hit a second credit crisis. According to this article, some early warning signs of another global financial crisis include surging government bond yields, a slumping dollar, and the end of the bear market rally in the U.S. The most worrisome possible signal is the heavy selling of U.S. dollar-denominated assets, which could "trigger a full-blown currency crisis and usher in surging inflation." This assertion means that we should be a bit concerned that the Treasury note yields' surged to six-month highs near 3.75% this week. This move indicates that investors may be concerned about the U.S. government borrowing requirements this year.
The article notes that issuing so much debt could put off foreign central banks, who own more than a quarter of marketable U.S. Treasuries. Martin Weiss from Weiss Research notes, "We are getting into that stage which I call the 'markets revenge.'" Weiss believes that we could see a "major near-term selloff in the dollar," as the end of May saw "the beginning of the end of that goodwill period."
Other economists believe that the government may have avoided a second Great Depression by its actions to rescue financial firms and stimulate the economy. While Weiss believes that this second credit crunch will start in the United States, others believe that another "major crisis" may start outside the U.S. borders.
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