Knowledge Bank on the Sovereign debt crisis – 1003

1st January 1999

A good place to start for a reasonably balanced perspective on the sovereign debt crisis is the rating agencies – Moody's, Standard & Poor's and Fitch. These give a detailed explanation of any rating changes (such as why they have downgraded Spain and Portugal) and a realistic assessment of the risks for individual countries.

The FT has a dedicated section on the Eurozone crisis, which is well worth keeping a regular eye on

These are both quite technical, but give some insight into what academics are saying about the issue. This one is a hardcore blog called Market Observation and this is another one from the London School of Economics . Both are worth a look. 

If you like your opinions a little more pre-digested then take a look at this clear-eyed piece from the Economist about what the Eurozone needs to do to recover from the crisis 

Or read the perspective of Robert Peston in his BBC blog

Forbes magazine lays out the anatomy of the crisis  

The OECD economic updates provide a dispassionate, regularly updated view of the crisis

The view from the bastion of US business can be seen here on the Wall Street Journal blog 

This irreverent site, Spiked, goes out to challenge the status quo and provides an alternative take on the European crisis:

Another interesting and left-field perspective from the Market Oracle on the possible beneficiaries of the Eurozone crisis


9 thoughts on “Knowledge Bank on the Sovereign debt crisis – 1003”

  1. r mcgrath says:

    I am not a particularly moral or ethical person, but after reading your blog I definitely feel very uncomfortable.   The shenanigans  in Europe and, I think, those in the US make me wonder if the ICC are hunting the wrong people in going after Gaddafi (spelling?).

    1. James says:

      Perhaps, in the absence of getting Gaddafi, they decided to frame some important international figure, say the head of the IMF, so as to create a diversion, a good day to bury bad news… 

  2. Drf says:

    Hi Shaun,

    I hope you will not mind me pointing out that in your blog today, for someone who does not “do politics” hereon, you have written a very insightful and apt almost generic summary of the manner in which modern politicians in their downright gall deceive and mislead for their own political ends. Above all it is a matter of political ideology; they will do anything to avoid having to admit that their ideologies do not and have not worked, and worse still have led to inescapable disaster.

    As George Bernard Shaw observed, politicians are the root of all the World’s present problems! Until we can get rid of them nothing will ever be solved.

    1. Anonymous says:

      Hi Drf
      My response on this is to say that my definition of not doing politics is that I avoid party issues and avoid debates which are politically rather than economically driven. I do not give an agenda for one party as happens often elsewhere…In my view there is no monopoly on the right answers.

      However in the course of describing economics these days it is not possible to avoid from time to time agreeing with the phrase  “a plague on all your houses!”. Although perhaps not all as I am sure there are some honest and well meaning ones.

  3. James says:

    I was very amused by this article and particularly the notion that they should buy the bonds themselves. I was having a conversation with someone last year who blamed the whole of the crisis on “speculators” for driving down the price of bonds. The only way to shut him up was to ask whether he owned any of the bonds! The answer was of course no.
    More seriously, the problems with the politicians are:
    1. With very rare exceptions, they have been politicians all their lives. What on earth do they know about banks and finance?
    2. The population IS fooled by a lot of this. There was a woman on the radio yesterday (in a discussion about what debt Scotland should inherit if independent) and she said that she was worried that the National Debt for the UK had reached £20 billion. Not a month, but in total. 
    3. They are surrounded by similar types, who obviously never speak to them with the clarity of your blog.
    4. They are all fanatical believers in the Euro, which rules out devaluation. They believe in ever closer union and are therefore not going to be blown off course by a little problem like theree countries going bust because of adherence to the Euro.

    I have come to the view that their behavious is so perverse that it will end in disaster, as in a sudden snapping of one part of the system. I am afraid that I think that a better term than kicking the can down the road is “one giant Ponzi scheme”.

    1. Anonymous says:

       The politicians reflect the the people who elect them. In the UK many people blindly vote for the party their parents voted for. And the UK electoral system disenfranchises many voters. Voters in marginal electorates may affect the result, but in my electorate it makes zero difference how I vote, the tory candidate will win. George Bush got re-elected despite turning a surplus into a huge deficit.

      I am a fan of the euro and trust the ECB on inflation more than I trust the BOE – Ronald McDonald could do a better job of controlling inflation. As a result of the illegal bailout I have  changed my opinion on the UK adopting the euro. (Now against it)

      My guess is a soft default where the Greek government redeems bonds with another bond, enter the GGB 2.75% maturing in 2041. This allows the politicians to kick the can a long way down the road and retire before it matures. The banks do not need to write down their investments, whereas a 40% haircut will cause immediate large losses and possible insolvency. A European ‘lost decade’ will have different effects in different countries – some will struggle and some will continue to conservatively manage strong economies.

      As for the German voters, I hope that a mainstream party adopts a no bailout policy otherwise I fear the neo nazi parties will benefit.

      1. Anonymous says:

        OK, what you say is possible. But it will have to be repeated each year, and probably for greater amounts, as Greece clearly has no intention to reform itself and stop borrowing to sustain an impossibly high lifestyle. Same as here, in fact…
        So you can fudge the current balance sheet but that’s only a moment in time. There is the little matter of the coming years and their fudge manufacturing requirements.

        1. Anonymous says:

          The money markets are telling Greece – no more money. When the EFSF and ECB stop supplying money a crash will happen. I assume that even a soft default will exclude Greece from the money markets. It may not stop Juncker wasting taxpayers money in a deluded attempt to hold back the tide.

          It is just a question of how long the EC and politicians are allowed to continue with this expensive farce.

          1. Anonymous says:

            You say clearly and I agree that the money markets say no to Greece, so Greece does not need any soft default to be excluded by the markets. It is excluded anyway by the markets. Greece should go for a hard default, no more loans. From now on, Greeks learn to live within what they produce (no easy, poverty) and Germans, French, Brits etc, bail out their banks if they so wish or let them default too. Of course this could mean defaults for other countries and a collapse of the global ponzi sceme called capitalism and this scares many. However, the Greeks should not hesitate, default and no worries if they stay in or out of Euro. It is irrelevant, it will collapse anyway.

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