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Old 13.10.2008, 09:16
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Re: How Safe is UBS

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Recently read an analysis by a German economics professor who assumed that in a worst case scenario the US could choose to default on all treasuries held by foreigners. In the end, the rest of the world could not do much except for confiscating assets held by US companies or declaring war.
As if there isn't enough doom and gloom. I bet he's the life and soul of every party! I'd give shorter odds that an asteroid will hit the earth. Three points...sovereign credit crisis happen when governments have borrowed large amounts in foreign currencies and their own currency depreciates to such an extent that it can't afford to service those external debts. I can see his point that there will be consequences to pay for the huge borrowing levels in the US but the US only borrows in it's own currency so it can just print money for repayments. Secondly, the US has a large taxpayer universe to tap for funds. Wouldn't make them popular at home but there is certainly scope for more juice to be squeezed out. Thirdly, if it ever gets close to a default risk then foreigners would have sold out of the dollar and Treasuries on the way down so the problem would much more of a US domestic problem that it is now. If things get so bad that the world's wealthiest country defaults on it's debt then the rest of the world would be in real sh*t. Any country that relies on overseas aid would be back in the stone age. The rest of us would be eating each other to stay alive and praying for that asteroid to hit.

Last edited by Nev; 13.10.2008 at 09:31.
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