Blog/Sovereign Debt Crisis
Posted Apr 15, 2015 by Martin Armstrong
Greece’s debt is now cut to CCC in preparation for an eventual default. Brussels just cannot think out of the box. There will be no solution until the thinking paradigm is changed. I previously wrote:
With the economy turning down, the pain threshold will rise. The lack of liquidity will be a huge problem if everyone in dollar debt begins to scramble to cover their dollar shorts of nearly $15 trillion+ in external dollar loans. This can send the dollar soaring and yet there will be no offers. Banks have reduced dealing lines and this entire situation is looming as a perfect storm in the months ahead.
Liquidity has collapsed and trading lines have been cut at banks in New York and London. The amount of dollar debts by non-domestic issuers has exceeded $15 trillion posing a huge risk. Should the dollar rise, there will be a serious currency panic. If they try to buy dollars to hedge the risk, they will most likely all act at once and in the scramble we can still see the dollar rally sharply.