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Web of Debt

Posted by Mark Motive on May 5, 2010 Banking, Economics Add comments
May 052010

The problem with debt defaults is the interlocking nature of holdings among sovereign nations, financial institutions and investors. It is this complexity that increases the unpredictability of financial markets. The interrelated nature of international finance and the inability to measure exposure and anticipate the reaction of a myriad of players is what causes cascading effects during market crises.

For these reasons, Greece and the rest of the PIIGS has every chance of spinning out of control. By using words like ‘containment’ government officials are attempting to talk down what they fear is a real risk. That’s their job. Remember when the sub-prime crisis was contained?

The New York Times created an amazing graphic that illustrates the interrelated nature of PIIGS debt: LINK

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Update on Trade Errors
BP Oil Spill: Conspiracy, Cost & Calculated Risk
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