After the 2008 worldwide financial panic crisis, people are obsessed with the probabilities of sovereign default. Yesterday it was pointed out that Greece is very near of the breaking point, today it is Spain (the Bolsa de Madrid fell 2%). According to the CMA Sovereign Risk Monitor, at least ten other countries are in risk: Venezuela, Ucrania y Argentina (over 50% probability of default), Pakistán, Dubai y Letonia (30%); Island (23,4%); Lituania (19,3%); California (18,4%) y Rumanía (17,2%). This uncertainties and risks offer beautiful opportunities for speculation. I would like to have time, free time, to study these situations. but I am working like a mule.
Illustration: A Republic of Haiti Bond. It has a collector worth of 100 dollars. Never paid back a cent.
9 comments:
At that time when I was more stupid than I am now, in the 80s and 90s you could scare me with stories like these. For as long as I can remember Greece, Mexico and all the banana republics have been careening from one crisis to another . The solutions have always been the same, tighten the budget, cut waste, diversify exports, and get Gen Galtieri, Mobutu, Batista, Marcos, Suharto and Sergeant Samuel Doe to ease up on their percentages. And invariably for just as long the prescriptions either don't work or stoke a massive reaction that leaves the people worse off than before. Well meaning interference on behalf of nations lacking the political culture of the West is often fatal. I have come to the conclusion that the solution to all these crises is quite simply to let them sort themselves out.
California would have the sovereign rating of Argentina had it not been part of the US Empire. It appears that the glory days of high technology innovation that produced Boeing, JPL and HP are over. This is to be expected in a state whose sense of reality is so skewed that it has not approved a single new energy project for decades. Essentially one has a bunch of Chinese and Indians stuck for dear life in the communications and computer sector holding the fort while the Mexican and black gang bangers rule the inner cities. The middle class whites flee to the suburbs, the rich Sierra Club whites wouldn't have it any other way.
I think that California is the bell weather of where the USA will mostly be, in a few years from now.
It all comes down to a ratio game: the number of competent, ethical people to the number of incompetent and/or unethical people. California has tipped over in the wrong direction. All the financial problems are just a symptom of this one basic fact.
Anon.
Anon.
Ivan,
I dont remember suggesting that these countries should be saved from default. I meant that the investors in sovereign bonds are not the smartest of the bunch, as the success of the Haiti bonds illustrates. And Argentinian bonds. And Bolivian bonds. And Ecuatorian bonds. And so on. These investors have no idea of what Haiti is, where it is, who is its Central Banker and what language they speak there. Since I think I am nearer to reality than most people buying bonds, I think I could make some money in that market. My experience in Argentina forced me to be attentive to how things are in reality, although I much prefer - as everybody else - to live in a world of pink illusions.
J I hope you make money hand over fist, as your readers; we will be able to enjoy it vicariously. As you have money enough to consider the bond markets, it is no surprise that you have some angst about your day job.
Illustration: A Republic of Haiti Bond. It has a collector worth of 100 dollars. Never paid back a cent.
Look at all those coupons: none of them clipped! I don't think that you can even get an actual bond certificate with coupons anymore.
Quod Est Demostrandum.
"This uncertainties and risks offer beautiful opportunities for speculation."
Pretty sad that that is what it boils down to... "speculate" rather than produce or invest in production.
BTW, for those criticizing California, the technology of California still moves its economy and a big chunk of the US economy. Actually I wonder who would suffer most if CA would decide to split from the US... maybe all those states that live out of the federal taxes that CA provides. Actually all the problem of California boils down to the Enron fiasco and the people that decided to "speculate" (once more that word!) on real-estate.
Salutes from California (actually Boston at the time).
The word "speculate" means "to see". The idea is to see the future with more clarity than the other fellow and to prepare for it. If one sees a famine coming and prepares grain reserves (as Joseph of the Bible did), he is doing a public service and it is only just that he is rewarded.
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