February 5, 2010
Global equity markets have sold off sharply to start 2010. The risk trade that worked so well last year is getting creamed. A flight to quality is underway. Investors are concerned over the sustainability of mounting debt and deficits of weaker Euro member states. I am talking about Portugal, Ireland, Italy, Greece, and Spain here-better known as the PIIGS. Today, Greece is in the crosshairs of global bond market investors. Greece’s debt and deficits are unsustainable, but there is opposition to a plan to rein in debt. Investors smell blood and have bid up yields on Greek bonds. A default is not out of the question. I hope the Obama fronted Radical Progressive Movement (RPM) is paying attention here. Obama’s grand scheme to create a European-style welfare state will lead the U.S. down the same path that Greece and other Euro member states have taken. Do we really want to follow in the footsteps of PIIGS?
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