Friday, February 12, 2010

The “new sub-prime”

Cracks appear in Europe's response to Greek crisis

Q. Is sovereign debt the "new sub-prime"? A. It looks like it. Greek government bonds give you a return of almost 7 per cent – but with the risk of default. Default could spark a massive sell-off of government bonds within the eurozone and maybe further afield, representing a gigantic destruction of wealth. So Greece may be small – 3 per cent of EU GDP – but it could start something that would make sub-prime look like a tea party.

Posted by devo @ 06:41 AM (883 views)
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3 thoughts on “The “new sub-prime”

  • “People view landslides as continent corresponds with itself and nearby group of islands”. Like we didn’t know this was coming.

    Don’t hold currencies tied to resources. Don’t hold currencies tied to debt. Don’t hold currencies. Crikey. Destruction of wealth. Whatever that may have been. Wonder what’s being created. Brave new world?

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  • Why greece and not the UK:

    Greece – BD 12% Debt 110%

    UK – BD 12% Debt 75%

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  • Is this the effect of all the government [inclusive of central banks!] intervention that I point to on another thread? We increased velocity in the pool between Gov., Central Banks & Banks which lowered the market price of risk, which encouraged money to chase risk that it would not have been given no such intervention, the final [financial] effect in the chain could end up being pretty nasty; one cannot keep distorting markets, one is simply not strong enough, even if one is the unity of all governments.

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