Debt Growth is Out of Control Worldwide

By on January 22, 2010

Daniel Fisher at Forbes.com has penned a very interesting article on the worldwide predicament exacerbated by the Great Recession. The growth in debt has been stunning in recent years and it promises to cause major headaches around the world. It’s so bad that entire countries could go belly-up.

Fisher writes:

Kyle Bass has bet the house against Japan–his own house, that is. The Dallas hedge fund manager (no relation to the famous Bass family of Fort Worth) is so convinced the Japanese government’s profligate spending will drive the nation to the brink of default that he financed his home with a five-year loan denominated in yen, which he hopes will be cheaper to pay back than dollars. Through his hedge fund, Hayman Advisors, Bass has also bought $6 million worth of securities that will jump in value if interest rates on ten-year Japanese government bonds, currently a minuscule 1.3%, rise to something more like ten-year Treasuries in the U.S. (a recent 3.4%). A former Bear Stearns trader, Bass turned $110 million into $700 million by betting against subprime debt in 2006. “Japan is the most asymmetric opportunity I have ever seen,” he says, “way better than subprime.”

There are many more interesting tidbits and some scary charts in the article.

Source: Forbes
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