Friday, December 04, 2009

Other sovereign debt concerns

The New York Times has a graph on other countries which may be facing debt problems; the same graph shows the exposure of bond holders by country. Thanks to The Gulf Blog for the pointer. Not of course that the U.A.E. has a debt problem. It's Dubai that has the problem.

Since Dubai announced it had a problem other countries have received more scrutiny.

The Wall Street Journal reports:
Greece's finance minister promised Wednesday that the country wouldn't default on its loans as the cost of insuring its bonds soared to the highest among the 16 nations that use the euro.
...
He said speculation that Greece would not be able to pay back its borrowing was "completely unfounded" and there was "absolutely no risk to holders of government bonds."

Spreads on Greece's bonds -- the cost of insuring them against the risk of not being repaid -- overtook Ireland as the widest in the euro zone a month ago, even before markets were rocked by an announcement by Dubai's state investment company that it wanted to postpone debt payments.
...
"The battle with the markets is one that you win every day with a view to the credibility of your policy and this is what we are trying to build — credibility," he said.

5 Comments:

Blogger Seabee said...

John, a pedantic but important point. Dubai hasn't said it has a problem, in fact just the opposite.

Dubai suggests government, in the same way that it's said that 'California' has problems. In Cal's case it's true - the government issuing IOUs etc.

But Dubai (government) has now said clearly that the $26 billion restructing of debt involving two companies is commercial and nothing to do with sovereign debt.

The problem is the way it's been handled, the fact that Dubai government allowed investors to believe that the companies were guaranteed by them, the lack of transparency, the delay before any clarification whatsoever.

If Dubai has a sovereign debt problem that's a different issue from the current issue that initially had the markets and the media in a blind panic.

10:49 AM  
Anonymous monica said...

I agree. The problem has more to do with lack of transparency rather then the sovereign debt problem

7:11 PM  
Blogger Steven said...

I think that until the US govt deals with the basic structural problems in our financial system of too much debt, there cannot be a sustainable global recovery. So while the stock market can stay irrational in the shorter term, in the long run I believe it will go back to reflecting the fundamentals of our boom and bust economy. And that's why I continue to feel that for long term investors a better portfolio allocation is in cash, gold, and gold mining companies. One company I especially like is Premier Gold, which has announced several high-grade gold discoveries at its exploratory Hardrock Project in Canada. I read a good summary of these results at Premier Gold's Success at Hardrock Continues , which also discusses how its CEO has not bet the fate of the company on just one gold project, and how the gold miner still offers a lot of leverage to the gold price. I think that the Federal Reserve and Bernanke are going to continue to try to do whatever they can to avoid deflation through money printing, and I think gold will continue to be the ultimate beneficiary of this trend.

7:55 PM  
Blogger lisa said...

Debt Solutions

1:57 PM  
Blogger johndouglas said...

Well, it’s amazing. The miracle has been done. Hat’s off. Well done, as we know that “hard work always pays off”, after a long struggle with sincere effort it’s done.
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johndouglas

Day Debt

4:08 AM  

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