You may have read that France is facing a variety of troubles at the moment. The most dynamic of those is the rioting taking place in Paris, but alongside that is a rise in interest rates on French debt that could meaningfully impact the country’s economic health.
In The Wall Street Journal, Joseph C. Sternberg explains France’s broken budget, its effects on the economy, and what that means for French bond markets, which are in trouble. He writes:
A third consequence may be appearing in bond markets now. Since the pension reforms failed, bondholders have been on notice that they might not be France’s senior creditors after all, as Stanford economist Hanno Lustig argues. The senior-most claimants on the French state instead are its pensioners.
This is exactly how I feel, and at the U.S. state level, I fear politics will beat out municipal bond investors as creditors. If you thought the GM/Chrysler bailouts were bad for bond holders, imagine what towns and cities run by Democratic socialist politicians will do for their municipal employees if they’re going bankrupt.
Action Line: Without strong economic growth, what’s happening in France could happen in the United States. Americans should consider that when choosing leaders for the future. When you want to talk about the future and your retirement portfolio, email me at ejsmith@yoursurvivalguy.com. And click here to subscribe to my free monthly Survive & Thrive letter.
Originally posted on Your Survival Guy.