Ricky Sander is short French and Spanish debt, long options on U.S. rates, cautious on economy ~ II Mag
"Banking crises and surges in public debt help to “predict” sovereign debt crises." ~ Reinhart and Rogoff (2011) ~ IMF (pdf)
- World War I and Great Depression debt were largely resolved through outright default and restructuring.
- War II debts were often resolved through financial repression and is likely to play a big role exit strategy from the current buildup ~ R&R
A large real GDP decline forecasts debt crises ~ Levy-Yeyati and Panizza (2011) – #Japan, #France
Global economic slowdown and protests in China hurt exports in Japan, where economy is now down 3.5% year-on-year ~ BBC
Government bonds have returned 31 percent since mid-2007, with reinvested interest based on the Bank of America Merrill Lynch index, while the MSCI All-Country World Index of stocks has lost 4.2 percent with dividends
The Spillover Effects of a Downturn in China’s Real Estate Investment ~ IMF (pdf) ~ IMF (pdf)
- A 1% point slowdown in investment in China is associated with a reduction of global growth of just under 0.1%.
Not much really, other studies show less than ten percent of S&P revenues come from China. The impact on financial markets could be more different, something along the lines of the Russia default (~ 20%)
Investors are monitoring China’s seven-day REPO rate for an early crisis warning indicator from banking-sector liquidity ~ Bloomberg
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