It’s time to renew my debt ratings again. I changed China’s status from A to B because signs have appeared that my fears of future banking problems may become true. Further, I added Brazil and Japan. The latter was somehow hard to categorize. I decided that Japan’s debt problems are huge but not unsolvable yet. As you may know from other posts on my blog, I expect huge inflation in Japan, if they don’t get their house in order soon. Formally, hyperinflation is different from default, however, in practice it is the same. So, as soon as I see signs of rising inflation in Japan, I’m ready to change their status to F.
Here’s my list of rated countries (I don’t rate all countries; alphabetical order within one rating category):
A: Australia, Denmark, Finland, New Zealand, Norway, South Korea, Sweden, Switzerland
B: Austria, Brazil, China, France, Germany, Netherlands
C: Belgium, Great Britain, Italy, Japan, Spain, USA
F: Greece, Ireland, Portugal
A: Debt financing is sustainable over the long-run, probability of default during the next 10 years is near zero.
B: Currently stable, but may become unstable, if increasing budget deficits or higher real interest rates on debt. Probability of default during the next 10 years may be higher than 10%.
C: Default may happen within the next 5 years without structural reforms that lower deficits and increase competitiveness. If you happen to live in such a country, it may be wise to park your money in another country.
F: Run as fast as you can.
Disclaimer: I am not a financial advisor. I talk lots of rubbish every day. Make up your own mind about investment strategies. These ratings are just my personal opinion, they are not a financial advice.