From BusinessInsider:
Bill Gross (Ed: Head of PIMCO, the world’s largest bond trading firm) knocks the halo off of sovereign bonds in his latest March outlook.
He highlights how sovereign debt has been struck with more bad news than corporate debt lately.
While sovereign credit used to be generally considered more secure than that of private companies, suddenly the default of nations such as Greece, the U.K., or even Japan seems on the table, while that of many strong corporates remains remote.
What’s happening, according to Mr. Gross, is that government bonds are starting to look just like corporate bonds, rather than existing on some privileged less-risky peer as in the past. Because it’s anything goes and anyone can default in the new ‘unibond’ market.
Bill Gross commented that:
Government bailouts and guarantees such as those evidenced and envisioned in Dubai and Greece, as well as those for the last 18 months with banks and large industrial corporations across the globe, suggest a more homogeneous “unicredit” type of bond market. If core sovereigns such as the U.S., Germany, U.K., and Japan “absorb” more and more credit risk, then the credit spreads and yields of these sovereigns should look more and more like the markets that they guarantee. The Kings, in other words, in the process of increasingly shedding their clothes, begin to look more and more like their subjects. Kings and serfs begin to share the same castle.
Barnaby Joyce began raising questions about the possibility of ‘default’ by nations such as the USA last year. He was roundly ridiculed by all and sundry for doing so.
Unfortunately, no one raised the point that there is more than one way that a sovereign ‘default’ can occur. Historically, the most common form of ‘default’ is simply where the sovereign nation inflates away its debts. How? By destroying the value of its own currency:
Thus there are no longer any holy bond cows left in this world.
Heck, even U.S. bonds are subject to ‘stealth-default’ risk, which is simply the eating away of bond value over time via inflation and dollar depreciation.
Barnaby is right.
Barnaby Is Right 
And when sovereign nations go bust what then?
Already in Australia we see food production inhibited by excessive costs. This is a world market, so is a world problem.
If the financial system collapses food shortages will quickly follow. The next step from there is civil unrest, then multiple civil wars, then international wars.
For 50 or more years pessimists have been talking of World War 111. There you have a recipe for it.
The world’s biggest food producer, the US, will probably take steps to ensure that US food production is maintained. So, too, perhaps, Europe. That will not be enough to avert the crisis.