Debt Snowball
Fears Intensify That Euro Crisis Could Snowball
Excerpts:
For Europe’s banks, the problems are twofold. Short-term borrowing costs are rising, which could lead institutions to cut back on new loans and call in old ones, crimping economic growth.
At the same time, seemingly safe institutions in more solid economies like France and Germany hold vast amounts of bonds from their more shaky neighbors, like Spain, Portugal and Greece.
Investors fear that with many governments groaning under the weight of huge deficits, the debt of weaker nations that use the euro currency will have to be restructured, deeply lowering the value of their bonds. That would hit European financial institutions hard, and may ricochet through the global banking system.
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The world’s budget deficit as a percentage of gross domestic product now stands at 6 percent, up from just 0.3 percent before the financial crisis. If public debt is not lowered back to precrisis levels, the I.M.F. report said, growth in advanced economies could decline by half a percentage point annually.
Comment: Soon to roll over the US!
I was thinking at first you'd refer to something by Dave Ramsey, and instead I hear that apparently German central bankers have had something pretty potent put into their beer. I can't think of any other reason otherwise sensible German bankers (or even French) would put any euros into southern european securities.
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