Nations likely to default on soverign debt in the next few years.

Discussion in 'Current Affairs, News and Analysis' started by Wordsmith, Mar 30, 2011.

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  1. Wordsmith

    Wordsmith LE Book Reviewer

    Found this reference on the Viable Opposition blog (which I always find interesting).

    Viable Opposition: Fiscal Space and Fiscal Path - How long before sovereign debt reaches crisis levels?

    This particular blog references a US think tank's paper on which nations are most likely to default on sovereign debt in the next few years. As well as the usual suspects (Greece, Ireland, Portugal, etc), it suggests that the US is no longer a good financial risk. To quote from Viable Opposition:

    Now if America ends up in the financial shit, that will be interesting.

  2. Chances of USA and China having at it?
  3. **** that!

    Not very intellectual-but there you go...
  4. BuggerAll

    BuggerAll LE Reviewer Book Reviewer

    Do you mean 'interesting' as in the Chinese curse: 'May you live in interesting times'? Or is there a sense of schadenfreude in your 'interesting'?

    I hope it's not correct because it's always been the case that when the US sneezes the rest of us catch cold. Further for all it's faults the US is the best hope for peace and progress in the world and a US that is struggling at home will not be out there promoting that.
  5. I imagine the Chinese would be far too busy trying to maintain control in their own country as they seem to have invested every penny they've made in the last ten years into American debt so if the Yankees can't pay doesn't look good for the emerging Chinese middle class. Would also devastate the fragile EU economics if the IMF went belly up and they couldn't get any more loans.
    Seems a bit far fetched so hopefully shouldn't come to pass but will make for interesting times if it does.
  6. Capitalism at work: if the US found itself in a position whereby it was techically bankrupt - that is, other countries called in various loans - then Uncle Sam, in turn, would be obliged to do the same. I believe the mere suggestion of that would cause the rest of the world to emit the mother of all botty coughs.

    ...............the real fear of which was hinted at recently viz Japan calling in ALL of its international debt to fund the recovery process. If that was the case, certain smaller-to-medium sized countries would be unable to honour such debt.
  7. The big dilemma for the PRC government is that they're accumulation overseas capital far faster than they can invest it. They've been buying up raw materials and investing in non-US foreign debt for a while, for no better reason than they don't want their capital surplus to disappear like fairy-dust overnight for lack of anything concrete to sink it into.

    The Japanese catastrophe is likely to boost a number of economies round East and South-East Asia - provided the initial investment in infrastructure can be made. Japanese manufacturing firms are putting out feelers to Taiwan, Korea and China while the Taiwanese electronics industry are already repositioning themselves upstream to take up the slack in e.g. silicon wafer production. This should (fingers crossed) trickle down to European and North American suppliers of manufacturing machinery at least in the short to medium term. It's an ill wind that blows somebody some good.

    Longer term? Well, the future belongs to those who invest in worthwhile R&D and the associated infrastructure. That certainly ain't gonna be Blighty, I can tell you.

  8. Yes, but whats your take on the near hysterical fear of the Chinese in some sections of the US political body and a refusal by many to accept that the focus of political and economic power is now shifting to the far side of the Pacific? Failing empires and wounded pride have started more than one war in the past.
  9. I was thinking of this January's Pew survey on attitudes toward China within the US population. Oddly enough, most of them think China is already the No.1 economic power - despite this not being supported by the economic data. LINK. I'm not sure the US public feel they have any dog in an 'Imperial handover' fight, particularly when their lords and masters have served them so poorly of late.

    Professional armed forces smacking Afghanistan and Libya around are one already-dubiously-popular thing, and that's when there's no harm being inflicted on US territory. How many of them would be willing to support the sort of war-economy/mass conscription/bombs-falling-on-Pleasantville scenario that a major war would involve? I'm betting not many without some sort of Marco Polo Bridge incident laid at the PRC's door to soften public opinion up.

  10. I was thinking some sort of bellicose willy waving by the US Pac Fleet that gets a bit too exciting when China demonstrates its new found technical capabilities.

    China seems to have made it abundantly clear it regards the South China Sea as its personal bailiwick and I suspect the US will at some point feel the need to test their resolve.
  11. Interesting post on Old Holborn's blog today. He claims to have a mate running quite a large business in one of the "fiscally challenged" Eurozone countries. Presumably Portugal.

    His mate says he was called to a meeting with that country's Inland Revenue to be told:-

    1) The government is bankrupt and without the cash to pay civil servants or welfare benefits from next month.

    2) Could he possibly make next month's tax payments a few weeks early?

    3) He can't have the VAT refund that he's entitled to because the government is skint.

    Apparently, this unnamed corner of Europe will go bankrupt next month unless the Germans bail them out.

    Now, it could be that OH has been smoking more than just Old Holborn. Then again, maybe not.
  12. Well, accidents do happen but I doubt the US will be given any excuse to start waving the naval stick about. For one thing, the PRC realise they stand every chance of things working out in their favour re trade and resource exploitation agreements if they bide their time and for another they're really not in the market for the kinds of expensive overseas deployments that'd be required to hold on to anything gained by force of arms. They might have a load of gelt sloshing around but not enough to fund that and the sort of development their interior needs.

    As to Taiwan, not going to be a problem for the forseeable. President Ma's played a weak hand damned well, IMO, and it looks like he'll get a second term.
  13. Ah Taiwan!

    China has invested a lot of political capital in the reunification of the homeland, the US seems to have invested just as much in ensuring them 'pesky Chinese' don't get their way.
    It will be interesting to se how that one eventually plays out but my money's on Beijing.
  14. Wot carrots said. Whatever problems the rise of China might pose for Uncle Sam, it's obvious that the UK and Europe are becoming increasingly irrelevant in the world of the 21st century.

    Actually the situation doesn't look too bad for Merrie Old England, according to HSBC:
  15. The problem that always seems to send Uncle Sam cross-eyed is that 'them pesky Chinese' are on both sides of the Strait. It's a curious situation that makes perfect sense when you think about it in Chinese - there's only one China and they both agreed on that. :grin:

    As President of the Republic of China, Ma's well aware of his responsibilities toward the provinces of the 'Mainland Area'.