China Financial Markets Thu 2010-07-22 10:17 EDT

Do sovereign debt ratios matter?

Michael Pettis

...No aspect of history seems to repeat itself quite as regularly as financial history. The written history of financial crises dates back at least as far back as the reign of Tiberius, when we have very good accounts of Rome's 33 AD real estate crisis...we have only begun the period of sovereign default. The major global adjustments haven't yet taken place and until they do, we won't have seen the full consequences of the global crisis...there is no threshold debt level that indicates a country is in trouble. Many things matter when evaluating a country's creditworthiness...there are at least five important factors in determining the likelihood that a country will be suspend or renegotiate certain types of debt...With inverted debt, the value of liabilities is positively correlated with the value of assets, so that the debt burden and servicing costs decline in good times (when asset prices and earnings rise) and rise in bad times...Inverted debt structures leave a country extremely vulnerable to debt crises...

China Financial Markets; sovereign debt ratios matter.

THE PRAGMATIC CAPITALIST Sun 2009-09-20 12:29 EDT

CHINA WILL BE A BIGGER BUBBLE THAN JAPAN >> Most Recent Stories >> THE PRAGMATIC CAPITALIST

SocGen analysts Dylan Grice says the Chinese economy has many similarities to the Japanese economy before it imploded in the 90's...the real cause of Japan's deflation is probably more demographic than debt-related...Japan has been the first industrial economy to begin demographic contraction. Indeed, thanks to Deng Xiaoping's 1979 one child policy, China will soon face the same problem...Japan's experience also hints at what may be the future catalyst unleashing this frenzy: capital account liberalisation. Financial history is filled with financial liberalisations gone wrong and Japan's bubble can be traced directly to the removal of controls on international capital flows and banking in the early 1980s. Seeking a larger international role for the renminbi, China is now, albeit tentatively, embarking on a similar path. Full liberalisation, when it occurs, could be the starting gun for the biggest bubble the world has ever seen.

bigger bubble; China; Japan; pragmatic capitalists; recent story.

Tue 2008-05-20 00:00 EDT

Minyanville -

What the ETF? by Minyan Peter, Minyanville; "a broadened investor base, particularly inexperienced investors, and enhanced liquidity have been critical elements of every financial bubble in history"; "for the first time in financial history, the bubbles -- in securitized debt and commodities -- are truly global phenomena"

Minyanville.