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Morgan Stanley Says Governments Will Default, Only Question Is How

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The soveriegn defaults will be used to bring in global banking legislation & tax the first step in the NWO becuase money affects everything in life.

How else do take the next step in bringing about global governance?

thank god we rescued the banks though.

no society, but we have a nice friendly bank to store our wheelbarrows in.

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I could see the USA outright defaulting if they could get their balance of trade neutral. That would entail getting their citizens to accept a big cut in their resource-guzzling lifestyles though. But they have a massive military and a lot of resources and land so they could get self-sufficient and stick up two fingers to their creditors.

Most other Western countries will simply print, print, print.

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here we are at Bloomberg

Morgan Stanley Says Government Defaults Inevitable

By Matthew Brown - Aug 25, 2010 4:44 PM

Investors will face defaults on government bonds given the burden of aging populations and the difficulty of securing more tax revenue, according to Morgan Stanley.

“Governments will impose a loss on some of their stakeholders,” Arnaud Mares, an executive director at Morgan Stanley in London, wrote in a research report today. “The question is not whether they will renege on their promises, but rather upon which of their promises they will renege, and what form this default will take.” The sovereign-debt crisis is global “and it is not over,” the report said.

Borrowing costs for so-called peripheral euro-region nations such as Greece and Ireland surged today, resuming their ascent on concern that governments won’t be able to narrow their budget deficits. Standard & Poor’s downgraded Ireland’s credit rating yesterday on concern about the rising costs to support nationalized banks.

Mares said debt as a percentage of gross domestic product is a false indicator of an economy’s health given it doesn’t reflect governments’ available revenue and is “backward- looking.” While the U.S. government’s debt is 53 percent of GDP, one of the lowest ratios among developed nations, its debt as a percentage of revenue is 358 percent, one of the highest, the report said. Conversely, Italy has one of the highest debt- to-GDP ratios, at 116 percent, yet has a debt-to-revenue ratio of 188, Mares said.

Double Dip

“Outright sovereign default in large advanced economies remains an extremely unlikely outcome, in our view,” the report said. “But current yields and break-even inflation rates provide very little protection against the credible threat of financial oppression in any form it might take.”

Mares once worked at the U.K.’s Debt Management Office and is a former senior vice-president at credit-rating company Moody’s Investors Service.

“Note that a double-dip recession would not invalidate this conclusion,” Mares’ report said. “It would cause yet further damage to the governments’ power to tax, pushing them further in negative equity and therefore increasing the risks that debt holders suffer a larger loss eventually.”

Investors’ concern that the U.S. may fall back into recession has grown in recent weeks as U.S. economic data missed economists’ estimates. A Citigroup Inc. index of U.S. economic data surprises fell to minus 59 last week, the least since January 2009.

Credit-Default Swaps

A report from the Commerce Department today showed U.S. durable goods orders increased 0.3 percent, compared with the 3 percent median estimate of 75 economists surveyed by Bloomberg News, figures showed today in Washington. The number of unemployment claims unexpectedly shot up by 12,000 to 500,000 in the week ended Aug 14, Labor Department figures showed Aug. 19.

Yields on German and U.S. benchmark securities sank today as investors sought the safest assets. U.S. two-year Treasury yields, at a four-month high 1.18 percent on April 5, fell to a record low 0.4542 percent yesterday.

The yield on Greek debt rose to more than 900 basis points above that of Germany today, the most since the European Union and International Monetary Fund created a 750 billion-euro ($948 billion) bailout package in May. Greece’s so-called yield spread over German debt was at 932 basis points as of 2:18 p.m. in London, short of the 973 basis point record set on May 7. The Irish-German yield spread rose to a record 347 basis points, from 318 points yesterday.

Credit-default swaps that insure Irish government bonds against non-payment for five years rose 21 basis points to 331 today, the most since March 2009, according to data provider CMA. Greek swaps jumped to 921.5, the most since June, from 896.

“The conflict that opposes bondholders to other government stakeholders is more intense than ever, and their interests are no longer sufficiently well-aligned with those of influential political constituencies,” such as elderly voters and their claims on pensions and health insurance, Mares wrote.

http://www.bloomberg.com/news/2010-08-25/morgan-stanley-says-government-bond-default-is-question-of-how-not-if-.html

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Debt/GDP and Debt/Revenue (2009)         Debt/GDP (%)   Revenue/GDP (%)   Debt/revenue (%)France    77.6           48.0              161.7Germany   73.2           44.3              165.3Greece    115.1          36.9              312.2Ireland   64.0           34.1              248.4Italy     115.8          46.6              187.5Portugal  76.8           41.6              184.8Spain     53.2           34.7              153.2UK        68.1           40.2              169.2US (Fgov) 53.0           14.8              358.1

thumb_smileyvault-cute-big-smiley-animated-032.gif

I think I missed the "revenue" part of the argument previously. Looks like the debt needs to halve to be in line with Europe. How on Earth are they gonna do that?

Edited by AvidFan

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Great, at last this stuff is finally getting into the mainstream.  Off to the moon soon, got my golden ticket, have you got yours?

Follow the yellow brick road...Follow, Follow, Follow, Follow, Follow the yellow brick road. :)

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Great, at last this stuff is finally getting into the mainstream. Off to the moon soon, got my golden ticket, have you got yours?

Well mine is mostly Silver with a shimmer of Gold. May swap some over at a lower ratio, but I'm not sure I'd ever want to part with the physical unless it was really worthwhile.

I try not to talk much about the short term paper value of Gold/Silver (a la our anti Gold bug RB) but if there isn't a big smackdown tomorrow (options expiry day), things could turn a bit nasty in the coming months. Interested to hear what Bob Chapman is going to say about it this evening.

P.s It looks like RB inadvertently nailed a short term bottom again...hats off to him! :lol:

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Debt/GDP and Debt/Revenue (2009)         Debt/GDP (%)   Revenue/GDP (%)   Debt/revenue (%)France    77.6           48.0              161.7Germany   73.2           44.3              165.3Greece    115.1          36.9              312.2Ireland   64.0           34.1              248.4Italy     115.8          46.6              187.5Portugal  76.8           41.6              184.8Spain     53.2           34.7              153.2UK        68.1           40.2              169.2US (Fgov) 53.0           14.8              358.1

thumb_smileyvault-cute-big-smiley-animated-032.gif

I think I missed the "revenue" part of the argument previously. Looks like the debt needs to halve to be in line with Europe. How on Earth are they gonna do that?

Sigh...

Printy printy.

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Debt/GDP and Debt/Revenue (2009)Debt/GDP (%) Revenue/GDP (%) Debt/revenue (%)France 77.6 48.0 161.7Germany 73.2 44.3 165.3Greece 115.1 36.9 312.2Ireland 64.0 34.1 248.4Italy 115.8 46.6 187.5Portugal 76.8 41.6 184.8Spain 53.2 34.7 153.2UK 68.1 40.2 169.2US (Fgov) 53.0 14.8 358.1

thumb_smileyvault-cute-big-smiley-animated-032.gif

I think I missed the "revenue" part of the argument previously. Looks like the debt needs to halve to be in line with Europe. How on Earth are they gonna do that?

But only a slight reduction to bring them in line with Greece.

Bits of the EU are much better off than the US, but the EU will crack first - including the UK. Note the figure is for the federal government only.

Edited by okaycuckoo

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By default dothey mean missing an interest payment to the person who loaned the government money

or not repaying the capital at the end of the loan.

My take away is they think the bail out money wont be there forever.

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  • 246 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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