Another Major Shock to the World Economies?
I am not a ‘chicken-little’ or an alarmist of any kind. But, when I see disturbing developments that are going to affect our livelihood and lives, I feel like disseminating that ‘feeling.’ In the attached audio (podcast) bit I sounded an alarm and urged the listeners to take defensive mechanisms with your money and investments. If I know what to do exactly, I would tell you. I don’t know what to do. But let me lead you to some information that sheds light on what is happening now.
In this audio bit I mention about the unfolding sovereign debt crisis? Washington’s blog, a well informed source, sheds some light on this via a must read article: What Do Rising Sovereign Credit Default Swaps Mean? The following chart gives you a quick idea about the implied risk in sovereign debt, which is at record highs – in some cases higher than it was at the peak of the crisis in early 2009.
Let me end this piece with a couple of quotes from quoted text in that piece (Pay attention to the dates of these quotes]:
The scope and magnitude of the bank rescue packages also meant that significant risks had been transferred onto government balance sheets. This was particularly apparent in the market for CDS referencing sovereigns involved either in large individual bank rescues or in broad-based support packages for the financial sector, including the United States. While such CDS were thinly traded prior to the announced rescue packages, spreads widened suddenly on increased demand for credit protection, while corresponding financial sector spreads tightened. [Bank of International Settlements, aka, Central Banks’ Central Bank, December 2008]
“The idea that countries don’t go bust is a joke… The debt trap may be about to spring … for countries that have created large stimulus packages in order to stimulate their economies.” [Neil Ferguson in May 2009, A Harvard Professor of History, who – in my opinion – is much more sanguine about the economy than most ‘prominent’ economists.]
This is as far as I would like to go in sounding ‘alarm.’ This is similar to what I said back in August 2007. Consider yourself to be warned and take defensive actions.
Audio broadcast date on TeluguOne Radio: 2010-02-05
Audio language: Telugu
Link for download and smart phones: Economy update2010 Feb 5