world is running out of capital. We cannot take it for granted that
the global bond markets will prove deep enough to fund the $6 trillion
or so needed for the Obama fiscal package, US-European bank bail-outs,
and ballooning deficits almost everywhere.
capital is forthcoming, a clutch of countries will prove unable
to roll over their debts at a bearable cost. Those that cannot print
money to tide them through, either because they no longer have a
national currency (Ireland, Club Med), or because they borrowed
abroad (East Europe), run the biggest risk of default.
whisper that some governments are buying their own debt through
proxies at bond auctions to keep up illusions – not to be confused
with transparent buying by central banks under quantitative easing.
This cannot continue for long.
said every European bond auction is turning into an "event
risk". Britain too finds itself some way down the AAA pecking
order as it tries to sell £220bn of Gilts this year to irascible
investors, astonished by 5pc deficits into the middle of the next
US hedge fund
Hayman Advisers is betting on the biggest wave of state bankruptcies
and restructurings since 1934. The worst profiles are almost all
in Europe — the epicentre of leverage, and denial. As the IMF said
last week, Europe’s banks have written down 17pc of their losses
— American banks have swallowed half.