Here is about the grimmest outlook I’ve seen, short of calling for WWIII from today’s Washington Post.
…Today the great uncle has reached a level of paranoia not seen since the 1930s, and the massive “shock and awe” campaign of bold rescue efforts from the world’s wealthiest countries has not calmed him down. The world financial market still thinks the numbers don’t add up.
This is primarily because of a new and fast-moving blip on the global radar screen: the growing concern that entire countries could default on their financial obligations. While Washington frets about bank failures and the potential collapse of the corporate sector, the financial market is far ahead of it. Global markets are now fixated on the economic, social, political and foreign policy shipwrecks that could be triggered if waves of country defaults sweep across the world.
In an alarming number of nations, the amount of dubious debt held by the domestic banking system dwarfs the country’s GDP. This is particularly true in such emerging capitalist economies as Hungary, Iceland, Belarus, Ukraine and Pakistan….[More]
If Entire Countries Go Broke, We’ll Go With Them
David Smick, Washington Post, October 26, 2008