Posted by: Michael Mandel on January 22
Back in October, when Iceland went bankrupt, I did an analysis of the overseas debt of major countries. I was surprised to see that the U.S. was in relatively good shape. But the big problem? Here’s what I wrote back then.
The biggest dangers are for the UK and Switzerland. These countries, although much bigger than Iceland, are major financial intermediaries with big external debts. What’s more, they are outside the major currency blocs, with debt denominated in foreign currencies. That means if their currency starts to devalue, their debts will become more and more onerous.
That’s what we are seeing with the UK.
I think that countries outside the major currency blocs are going to be forced to join, for self-preservation.
Michael Mandel, BW's award-winning chief economist, provides his unique perspective on the hot economic issues of the day. From globalization to the future of work to the ups and downs of the financial markets, Mandel-named 2006 economic journalist of the year by the World Leadership Forum-offers cutting edge analysis and commentary.