IS SOVEREIGN DEBT THE NEW SUB PRIME?

Aaron Task

Just as many subprime borrowers were unable to make their mortgage payments in 2007 and 2008, investors now fear certain nations will be unable to pay their debts.

These are not idle concerns or only an issue for academics and institutional money managers.

Rising mortgage defaults and credit card delinquencies put many banks on the brink of bankruptcy in 2008, sending the global economy into a tailspin. Sovereign debt defaults could have even greater economic ramifications, putting America’s (and the globe’s) fragile recovery at great risk and potentially leading to geopolitical instability and social unrest.

As the strikes and rioting in Greece and Ireland last year demonstrated, the mere threat ...