Tags: Global | Economic | Collapse

International Business Times: Global Economic Collapse Looms in 2012

By    |   Monday, 21 Nov 2011 01:52 PM

Europe, and maybe Japan and the U nited States, face a recession in 2012 due to a full-blown bond market crisis, experts warn.

Michael Pento, president of Pento Portfolio Strategies, warned of that implosion of sovereign bond markets in research commentary, according to the International Business Times.

Sovereign bond interest rates of both Italy and Spain are approaching 7 percent, a level generally seen as unstable. Unless those rates subside, Italy and Spain will suffer the fate of Greece, which needed a eurozone bailout and had to implement severe austerity measures. Greece remains mired in a deep recession
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If that happens to Spain and Italy, the interconnected European economy will collapse, Pento predicted.

"Many investors continue to overlook the profound ramifications of having the largest economy on the planet fall into a steep recession,” stated Pento, according to the IBT.

The researcher also fears Japan and the US might also suffer sovereign debt crisis.

"History is replete with examples that indicate once a nation reaches a debt to GDP ratio of between 90-100 percent, two pernicious conditions begin to appear,” he said, according to the IBT.

Government debt sucks capital away from the private sector, draining away economic growth, and bond investors start fearing that the country will be unable to repay its debt, he explained. Bond markets then demand higher interest rates, prompting a downward spiral of debt unsustainability.

As of the end of 2010, the U.S. had a GDP ratio of 94 percent, Japan had a 220 percent ration, and Italy 119 percent. Countries with high debt levels, Pento predicts, will default or print more money to pay their bills.

Nouriel Roubini, an economist at New York University also predicting a global recession.

"The question is not whether or if there is going to be a double dip, but whether it's going to be mild or severe with another financial crisis," Roubini told CNBC last month. "The answer on that depends on the eurozone."

A recession could begin in within the next quarter or two, he said.

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Europe, and maybe Japan and the U nited States, face a recession in 2012 due to a full-blown bond market crisis, experts warn. Michael Pento, president of Pento Portfolio Strategies, warned of that implosion of sovereign bond markets in research commentary, according to...
Global,Economic,Collapse
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2011-52-21
Monday, 21 Nov 2011 01:52 PM
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