The Soverign Debt Solution

The Solution to the Sovereign Debt Crisis

After all is said and done, this is basically what’s been happening in Europe, where countries like Spain, Greece, Ireland, Portugal, Italy and Cyprus depend on each other and the stronger members of the European Union to keep buying their bonds, burying them ever deeper in debt (to each other).

But it’s not limited to just Europe, of course. The US is in just as bad of shape as far as debt is concerned.  In all western nations, as the cartoon above adequately portrays, there seems to be a symbiotic relationship between the banks and the countries in debt.  The banks enable the governments to keep borrowing just to be able to buy more debt from other countries’ governments, which are doing the exact same thing.  The whole sovereign bond market is one giant Ponzi scheme, just waiting to capsize.

Greed, Fear, Bubbles and Market Madness

Grant Williams, of Vulpes Investment Management, provides us with a brilliant presentation explaining how greed and fear play into the making of economic bubbles.  After giving a few examples of historic bubbles of the past, Williams then goes on to describe two bubbles in the present.  Spoiler alert!

Williams presents the latter two bubbles happening today as one nearing a collapse and the other in a “sweet spot” ready to enter the hyper-inflating mania phase.