The Next Leg Down: Sovereign Default

In case the title of this post does not clarify our position quite well enough, we would like to state, in definitive fashion, that the global economy is at best halfway through its deleveraging/bottoming process. The past week has brought with it a sharp increase in bullish sentiment, based upon the assumption that the negative economic data is slowing in the sheer intensity of decline. We are told that, historically, sharp drops are followed by sharp rebounds. Unfortunately for the professional prognosticators, the current downturn is unlike any economic reality in the post World War 2 period.

Within the current situation, there are several Countries that face a legitimate, imminent risk of collapse. We have seen this scenario unfold in Iceland, a relatively insignificant country that in this situation merely serves as a precursor for what is to come. The next leg down in the global economy will occur in conjunction with the collapse of one of the Countries that is currently at risk of collapse.We refer specifically to Hungary, Latvia, Ireland, Greece and Spain. We fully expect that two of the listed Countries will default on its sovereign debt and descend into a period of relative chaos. We have listed the Countries based upon the likelihood of a violent disruption in the Country's finances, ultimately resulting in the referenced sovereign default.

We are quite sure that the aforementioned issues are inevitable in nature, and will serve as a catalyst for a renewed sense of panic with respect to the state of the global economy. Sphere: Related Content